Investing.com --Taiwan is emerging as the biggest domestic beneficiary of Asia's artificial intelligence export boom, followed by South Korea, as stronger technology demand boosts economic activity, government revenues and investment, according to Bank of America.
The bank said AI-related exports have become a major growth driver for Taiwan, South Korea and China, although the economic benefits are spreading unevenly across the three markets.
Year-to-date exports have increased 57% year over year in South Korea, 44% in Taiwan and 21% in China, according to BofA's analysis.
Despite South Korea recording the strongest export growth, Taiwan is expected to experience the largest domestic spillover effects.
BofA attributed the differences to the relative size of each economy's technology sector, production capacity constraints and broader economic conditions.
Taiwan's substantial exposure to technology manufacturing means stronger external demand can translate into wider domestic economic gains.
South Korea also stands to benefit significantly, with the export expansion supporting domestic activity and government finances.
China is benefiting from stronger technology exports, but weaker domestic demand and economic headwinds are limiting the broader impact.
The differences are also shaping fiscal policy across the region.
BofA said rising exports have increased government tax revenues in all three economies, creating opportunities for additional public spending.
In Taiwan and South Korea, higher fiscal receipts are helping finance transfers and investment, providing another channel through which export growth supports domestic demand.
China has not experienced a comparable spending boost, partly reflecting financial constraints facing local governments.
The uneven economic effects are expected to produce different monetary policy responses.
In Taiwan and South Korea, stronger domestic demand and positive output gaps are adding to inflationary pressures, supporting the case for further interest rate increases.
China faces a different outlook, with softer domestic demand pointing toward additional monetary easing.
BofA's assessment suggests Taiwan and South Korea are positioned to capture stronger economy-wide benefits from the AI boom, with China's gains remaining more concentrated amid domestic challenges.
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