At the 30th anniversary celebration of Huatai Insurance on August 29, 2026, Dr. Fred Hu, founder of Primavera Capital, delivered a keynote speech titled "Macroeconomic Outlook: Analyzing Industry Trends and Identifying Market Opportunities in the Global Context." In his address, Dr. Hu noted that while China faces short-term pressures from consumption weakness, deflationary trends, and real estate headwinds, its manufacturing sector, export capabilities, and innovation capacity remain robust. Meanwhile, the US economy maintains resilience supported by AI investment and consumer spending, yet grapples with inflation, fiscal debt concerns, and constraints in AI infrastructure development. Ultimately, he argued, what will truly determine long-term competitiveness between China and the US extends beyond technology itself—it hinges on whether capital markets can sustain massive funding flows for the AI revolution.
Regarding China's economic outlook, Dr. Hu emphasized that innovation capacity matters more than short-term data fluctuations. He pointed out that China's PCT international patent applications had already surpassed both the US and EU to rank first globally before 2018. According to WIPO's 2025 Global Innovation Clusters ranking, China boasts 24 city clusters among the world's top 100, with the Guangdong-Hong Kong-Macao Greater Bay Area ranking first, while Beijing and the Yangtze River Delta secured top-ten positions—making China the country with the most innovative city clusters worldwide. "Despite prominent short-term supply-demand imbalances, the long-term growth prospects driven by innovation capacity remain promising," Dr. Hu stated.
Over the long term, Dr. Hu believes the most transformative force reshaping the global economic landscape is the new wave of technological revolution powered by AI. Under this paradigm shift, the world economy may simultaneously experience both "de-globalization" and "AI-driven globalization"—trade systems becoming increasingly fragmented while AI investment continues to expand dramatically. "If we extend our time horizon to five or ten years, the AI revolution emerges as the most critical economic variable."
Dr. Hu explained that this AI revolution fundamentally represents machine intelligence beginning to replace certain human cognitive functions, potentially driving fixed-asset investment on a scale exceeding previous major technological revolutions. AI has evolved beyond mere chatbots—it continues to demonstrate growing capabilities across mathematics, physics, law, medicine, and programming. "AI represents a transformation in factors of production," he noted, "which implies the potential for productivity gains could be exceptionally significant."
However, AI faces a fundamental question: where will the capital come from? Generative AI follows the Scaling Law—more data, larger models, and greater computing power yield enhanced capabilities—making it an inherently capital-intensive industry requiring vast quantities of chips, data centers, electricity, land, and infrastructure. Dr. Hu consequently raised a critical proposition: for China to remain competitive in the global AI race, its financial system must accommodate the enormous capital demands of the AI industry.
AI competition requires massive capital expenditure supported by diversified financing channels including equities, VC/PE, bonds, and private credit. The financial system itself has thus become a pivotal component in the US-China AI rivalry. Dr. Hu predicts that the future AI competition will not merely be a contest of algorithms and chips, but fundamentally a competition in capital formation capability.