Can AI save aging East Asian economies?

A woman looks at her newborn baby in Langfang, Hebei province, China, March 6. AFP-Yonhap

HONG KONG — Declining fertility rates have long been viewed as a drag on economic growth, but the outlook may not be entirely bleak for Asian economies such as China, Korea and Japan, analysts said.

Demographic pressure is accelerating investment in robotics and artificial intelligence (AI) in these rapidly aging yet technologically advanced countries, helping offset labor shortages and sustain productivity even as populations shrink, they argued.

Analysts at Bank of America (BofA) Global Research said China, Korea and Japan could witness tech-driven growth despite their aging populations. The commitment of these countries to AI and automation is likely to intensify as they face shrinking labor pools and rising wage pressures, according to a Feb. 24 report on low fertility rates in Asia.

“The region’s deep semiconductor, tech hardware and machinery ecosystems make deployment faster and cheaper than other regions,” the report’s authors said, noting that China and Korea were already at the forefront of developing and adopting cutting-edge technologies.

Korea boasts the world’s highest robot density, with about 1,012 industrial robots per 10,000 manufacturing workers. China has 470 and Japan 419, far above the global average of 162, according to 2024 data from the International Federation of Robotics.

Louis Kuijs, Asia-Pacific chief economist at S&P Global Ratings, said the governments of China, Korea and Singapore have been most proactive in adopting and applying AI and robotics across the economy.

Japan was likely to see an accelerated rollout given the pronounced decline in its working population and growing reluctance to embrace foreign workers, he added.

Once the main drivers of global population growth, Asia has seen its fertility rates fall below replacement levels sooner than many expected.

By 2050, about 37 percent of Japan’s population and nearly 40 percent of Korea’s are expected to be aged 65 or older, according to BofA Global Research, with China’s share potentially reaching 31 percent. By contrast, the share of elderly people is projected to be about 23 percent in the United States and 15 percent in India.

Robotic arms transfer copper plates at a factory in Yingtan, Jiangxi province, China, Jan. 21. Xinhua-Yonhap

Concerned about slower growth and a loss of economic dynamism, governments across the region have rolled out policy packages and allocated substantial fiscal resources to raise fertility rates.

But the long-held belief that labor is the primary driver of economic growth is facing growing scrutiny, as technological advances weaken the link between economic output and workforce size, analysts said. Beyond automating routine tasks, AI and robotics are augmenting human capabilities and boosting productivity.

In a February 2025 report, the Bank of Korea warned that a shrinking workforce driven by low birthrates and rapid aging could reduce the country’s gross domestic product by 16.5 percent between 2023 and 2050. Wider AI adoption, however, could limit the decline to 5.9 percent under the best-case scenario.

Still, the shift toward automation could produce uneven outcomes, analysts cautioned.

“AI can offset some of the drag from low fertility and demographics, but not all,” said Eugene Lee, an economist at investment group CLSA. It would not fully address demographic pressures, he added, because other growth drivers beyond labor were likely to be affected.

Consumption, for instance, would slow as the number of households declined, Lee said. Fiscal policy would also come under strain as governments face rising pension obligations and health care costs.

Another concern is that wage growth for most workers could lag, Lee said, as technological gains often accrue to capital owners and skilled professionals while entry-level workers are particularly vulnerable to replacement.

Governments could mitigate some of the disruption through targeted job training and workforce upskilling, Lee added.

Kuijs at S&P Global Ratings said market opinions were divided, but the long-term impact of technological change remained uncertain.

“If you look at the past 250 years, in broad brush terms the experience with technological change has been closer to the optimistic scenario,” Kuijs said. “However, there tends to be short-term economic friction and pain because people who are crowded out of employment by technology do not always find decent new jobs.”