Artificial Intelligence and Economic Growth in China: An Empirical Analysis Using Vector Autoregression

Abstract

With the rapid development of technology, artificial intelligence (AI) has become a key force driving the new round of technological revolution and industrial transformation, profoundly impacting the global economic landscape.  This study aims to reveal the dynamic relationship among China's Gross Domestic Product (LNGDP), effective invention patents in high-tech industries (LNNVI), and R&D expenditure in high-tech industries (LNRDE) through empirical analysis, in order to provide valuable references for policymakers to promote high-quality economic development in China. The study adopts the Vector Autoregression (VAR) model to systematically analyze the public data released by the National Bureau of Statistics of China. LNGDP is selected as the indicator of economic growth, LNNVI and LNRDE as the indicators reflecting the development of the AI industry. Statistical methods such as variance decomposition and impulse response function are used to explore the interactions among these variables. The study finds that China's R&D expenditure in high-tech industries increased from 29.213 billion yuan in 2004 to 650.77 billion yuan in 2022, an increase of about 22 times. The number of effective invention patents increased from 4,535 in 2004 to 809,824 in 2022, an increase of about 178 times. There is a significant positive correlation among LNGDP, LNNVI, and LNRDE, indicating that economic growth and the development of high-tech industries are mutually reinforcing. There is a strong positive correlation between R&D investment and the number of effective invention patents, and the increase in R&D investment directly drives the output of innovation results. The impulse response of LNGDP to LNNVI and LNRDE changes over time, showing the long-term cumulative effect of R&D investment and patent output on economic growth. This study reveals the close link between economic growth and high-tech industries, especially the AI industry. Specifically, economic growth promotes innovation activities and R&D investment in high-tech industries, and the increase in R&D investment further drives patent output, which ultimately has a positive impact on economic growth. Furthermore, the study also finds the long-term cumulative effect of R&D investment and patent output on economic growth. Based on these findings, the study proposes policy recommendations, including increasing support for high-tech industries, strengthening intellectual property protection, improving the efficiency of R&D investment conversion, optimizing the industrial structure layout, enhancing talent cultivation and introduction, promoting international science and technology cooperation and exchange, and focusing on long-term effects, to jointly promote China's economic development towards high-quality growth.