The most important trend of our era! Fu Peng explains the opportunities, challenges, and investment logic under the Sino-US AI wave [Fu Peng Talks 7]

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The Most Important Theme of the Era: Opportunities, Challenges, and Investment Logic under the China-US AI Wave

>>These are the author's views only; click the video above to watch! This video was recorded on September 28, 2025.

Recently, I have also been frequently participating in all kinds of forums and summits related to science and technology. In this episode of Fu Peng Speaks, we focus on current total factor productivity improvement, discussing its leading role and related views for the next phase of the global AI era, from a macro perspective.

In fact, over the past year or more, I have always closely followed the progress of science and technology, especially the development of the artificial intelligence industry chain, paying attention to both China and the United States. I have shared many insights on this before, and although this macro perspective was partially touched on last time, this episode further elaborates for comprehensive understanding. It is important to emphasize that when discussing total factor productivity (TFP), the scope is not limited to science and technology, but also includes institutional changes as a key component.

From the root, the current situation stems from what I define as the “chaotic state”—TFP stagnates, institutions become inert, and the contradictions between productive forces and relations of production become increasingly prominent. As previously mentioned, after WWII, the world experienced two waves of TFP stagnation: the first in the US from the 1970s to the early 1980s; the second starting with the burst of the internet bubble in the early 21st century, lasting until about 2015. Both periods lasted about 15 years and were times of global economic adjustment.

It is beyond doubt that core technology is always the primary productive force. The improvement of TFP inevitably accompanies technological progress, as increased technological productivity drives transformations in productive relations. In our view, combining transformations in productive relations with institutional change releases tremendous development dividends.

The chart on the left shows China’s TFP situation. From the late 1970s to early 1980s, China seized a historical opportunity, taking reform and opening-up as a key milestone, and by 2002 joined the WTO, completing early-stage productive accumulation. This accumulation depended not just on technology, but on basic industries and talent reserves—technological progress requires both.

From the first batch of university graduates after the restoration of the national college entrance exam, to element-driven reforms (including land market reform, stimulating market vitality, organizational adjustments), and then to business level changes (from state-owned enterprises to the large-scale development of private enterprises), these measures significantly influenced resource allocation and hence TFP change.

From today’s perspective, institutional change and resource allocation efficiency have a pronounced impact on TFP. Of the contributions, technology accounts for about 40%, resource allocation efficiency about 30%, while organizational and managerial innovation also play important roles.

China's WTO accession in 2002 was crucial for TFP improvement. Entry allowed China’s achievements in institutional reform, marketization, and resource allocation efficiency to be realized and interact with global technological trends. Historically, since the late 1960s, personal computers began to appear and be used in laboratories, and internet technology took shape, mainly serving military applications. From the 1960s to the 1980s these technologies expanded from research sectors to personal use, and by the early 1980s, the personal PC era began—DOS systems emerged, then Windows, marking a shift from hardware to software innovation, and eventually internet application adoption, culminating in the internet bubble. This evolution formed a tech wave with IT at the core and PCs as the vehicle.

Many Chinese tech and internet companies’ development paths closely relate to this wave. Many began in the early 1990s, braved late 1990s market tests, and grew into today’s industry giants—showing the era’s powerful impact on business fate.

In today’s “chaotic state,” another feature emerges: as productivity cannot further improve, the main contradiction shifts to creation vs distribution. All manner of distributional and production relation conflicts intensify—breaking the stalemate requires a re-adjustment of all factors.

Taking Japan in the chart (red lines) as an example: after WWII, Japan enjoyed rapid economic growth—during US TFP stagnation, Japan achieved TFP release via demographic dividends, tech advances, organizational innovation, and management. However, since the 1990s, Japan’s TFP stagnated for a long stretch, with slight recent recovery. This is more due to US new productivity driving Japanese changes, and Japan’s resource allocations in response to demographics; recovery will likely still lag the US.

For China, real estate burdens for households recently affected TFP improvement, causing fluctuation and exposing more contradictions in distribution and production relations. Thus, China too must use technological progress, plus institutional, organizational, and managerial innovation to further raise resource allocation efficiency and thus reach a new TFP upswing.

Historically, “chaotic state” phases often precede tech breakthroughs. For example, the late 1960s to early 1980s (15-year central cycles, focusing on the 1970s/80s) were when old order, productivity, and productive relations stagnated and new ones began to sprout—a key stage of transition.

If you overlay TFP change with gold prices, you’ll see a clear link: From 1980 to 2000 (when TFP improved), gold prices were in a holding pattern; rising TFP correlates to gold peaks and retreats, while “chaotic” phases come with big gold volatility.

In the early 21st century, after the internet bubble burst, US productivity shifted overseas and China became a main recipient. At the same time, global TFP under the dollar system stagnated—spurring the next gold price surge.

In recent years, on the surface US TFP seems to be rising. From Google’s 2015 AI push to now—almost a decade—this is like the early 10-year PC adoption period for computing, with a new cycle from hardware to software breakthroughs, and coming internet industry boom.

Following this logic, AI will also go through upstream R&D, midstream industry landing, to downstream application spread, integrating “AI+” models and hardware upgrades. In theory, if TFP uptrend is certain, gold prices should decline.

But the “chaotic state” isn’t over, especially as the US and China contest at the level of global production relations, so gold prices haven’t reflected the latent TFP changes yet. As these relationships adjust, this could change. Regardless, all signs and analysis indicate we’re at a transformative TFP moment—I am quite certain of that.

For this reason, I always believe "chaotic state" periods are favorable for macro trading—the range for macro strategies is relatively large; but once TFP uptrend is clear, investment returns shift from chaos-driven volatility to certain productivity growth sectors.

Looking back at 1980–2000, many established hedge funds sought trades in unstable markets during regime and productivity relation uncertainty; when US TFP uptrend was evident, the best gains were in new productivity-related sectors—investing in Apple, Microsoft, etc., then yielded rich rewards. Whether America will now enter such a growth phase with global AI, I tend to be optimistic.

China is also closely following the trend. If it seizes AI opportunities while leveraging its organization and management advantages, it too might enter a new TFP uptrend. Then, investment strategies could reference the 2000–2012/2013 playbook: focus on assets with long-term growth, capturing era-defining opportunities.

Thus, in investment, keep a top-down logic, recognize the uniqueness of this historical stage, and avoid missing TFP transformation opportunities. In my view, the impact of AI breakthroughs like ChatGPT are as significant as the personal PC explosion—heralding a key new productivity transition: Too early or too late is not ideal, timing is everything.

At the start of 2023, the world entered an AI acceleration phase; through 2025 we remain in a key period, making now a "just right" allocation window. All investors should keep learning and analyzing, closely tracking tech change and the times. These are my additional thoughts on TFP, for your reference and based on my own research, shared for discussion.

Risk Warning and DisclaimerThe market involves risks; invest cautiously. This piece does not constitute individual investment advice, nor does it consider individual users’ specific investment goals, financial circumstances, or needs. Users should consider whether any opinions, views, or conclusions herein suit their own situation. Invest accordingly at your own risk. ```