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# Understanding the AI Boom Through Asian Economies (podcast)!
- URL: https://bilal-hafeez-notes.ghost.io/understanding-the-ai-boom-through-asian-economies-podcast/
- Published: 2026-10-10T10:34:41.000Z
- Updated: 2026-10-10T10:34:41.000Z
- Author: Bilal Hafeez

It's rare that I find someone who can weave a macro story with the micro (**AI**) so well, but **Paul Cavey** does it when talking about **Taiwan**, **Korea**, **China** and **Japan** in my latest podcast chat. You can listen/watch here (and summary below|):

[Apple](https://podcasts.apple.com/gb/podcast/ep-379-paul-cavey-on-east-asias-ai-tech-boom-semiconductor/id1502904619?i=1000794028647&ref=bilal-hafeez-notes.ghost.io) \- [Spotify](https://open.spotify.com/episode/1P1LslfMzTPbSoBoW5iOIy?ref=bilal-hafeez-notes.ghost.io) \- [YouTube](https://youtu.be/P09bnOMZF1A?si=vWBo1vfff9gxMHzH&ref=bilal-hafeez-notes.ghost.io) 

**Summary:** Paul, a Taipei-based China and Asia economist, says AI-related hardware demand now drives the macro picture in Taiwan, Korea, Japan and China. In Taiwan it shows up as volume (double-digit real GDP growth). In Korea it shows up as price (a large terms-of-trade gain from memory chip prices and nominal GDP growth near 30%). He argues policy has not yet responded in proportion: Taiwan's rates are negative in real terms, the Bank of Korea expects only one more hike, and the Bank of Japan stays cautious. In China the tech and export sectors are strong while property, retail sales and the credit impulse stay weak, and Chinese government bond yields keep falling.

**Key facts:**

- Taiwan: semiconductors and AI supply chain goods are about 60 to 70% of exports (his figure). Policy rate is 2%, 10-year yield about 2%, inflation a little over 2%. The central bank has not hiked since 2024 and calls policy "leaning tight".
- Taiwan: unemployment and wage growth are at 25-year extremes (wages around 3%). The tech sector is about 10% of employment, against about 1% in Korea. The currency has traded between 28 and 33 per dollar for 30 years and is now mid-range, with the current account surplus near 25% of GDP.
- Korea: chip exports are 20% or more of total exports. Nominal GDP growth is projected near 30% year on year in Q3 against real growth near 4%. Memory export prices are up about 200% year on year, and the current account surplus is 26% of GDP. The Bank of Korea has hiked and its dot plot signals one more hike in the next six months.
- Japan: manufacturing sentiment has improved over the last six months because of AI-related demand. Government revenue is up at a double-digit rate this fiscal year. The three fiscal events under the Takaichi government did not change the official path of a narrowing deficit. Pensions have been cut in real terms, which weakens household demand.
- Japan: the Bank of Japan's core inflation measure (excluding subsidies) has been above target for 52 of the last 55 months. Paul expects one hike per quarter and sees 50 basis point or back-to-back hikes as unlikely. He links yen weakness near 160 to a risk of higher inflation expectations.
- China: property starts are down 85% from the peak, and the pace of decline has picked up again this year. The fall in the credit impulse comes from government bond issuance, and retail sales weakness comes from autos. Industrial production growth is about 5%, and chip exports are growing faster than chip imports.
- China: Paul sees no evidence that the "involution" campaign has changed auto margins or output prices. He sees no real monetary easing since May last year, yet yields keep falling, so he calls the market narrative incoherent.
- Taiwan's government debt is projected below 20% of GDP by the end of next year, which he says makes its balance sheet among the strongest globally.

**Action points:**

- Track Taiwan's central bank at its next meeting for any move from "leaning tight" language toward a rate hike, and watch whether Taiwan's PPI and wage data keep rising.
- Track Korea's dollar exchange rate and the Bank of Korea's next hike against the one-hike dot plot.
- Check the next Japanese budget for a fourth fiscal event that departs from the narrowing deficit path.