AI boomtowns worsen divide in China’s split-screen economy In Hefei, the heart of China’s memory-chip industry, factories can barely keep up with the world’s appetite for AI hardware. In Changchun, the rust-belt home of gasoline-powered carmaking, officials admitted to “unprecedented” difficulties — a phrase later removed after drawing social media attention. The two cities capture the split-screen economy emerging from the global AI boom. A handful of tech hubs delivered their biggest share of China’s growth in at least two decades in the first half, according to Nomura Holdings Inc., while the rest of the country slowed to the bottom edge of Beijing’s full-year target. At the epicenter of the AI transformation in China are cities like Hefei, the capital of the eastern Anhui province and home to memory chip giant CXMT Corp. But even inside the boomtowns, little of the windfall is reaching households. Retail sales are shrinking in several of them, undercut by automation and temporary labor in the very factories driving the surge. “The fruits of AI-driven growth are mainly reaped by a few ‘smart’ cities,” Nomura economists Jing Wang and Ting Lu said in a note on Wednesday. As that’s “unlikely to offset mounting growth headwinds across the rest of the country, we believe Beijing will likely step up policy efforts in the second half.” The blistering performance shows both the promise and peril of AI for growth, especially as regions reliant on older industries quickly cede ground and a prolonged property downturn goes unresolved. For China, the outsize burden borne by a select few in powering the economy of the entire country is also a risk as major trading partners like the US curb their imports of advanced technology and equipment. Propelled by a global spending bonanza on artificial intelligence during the first half of