AI poses uneven opportunities and risks across APAC cities

Investment and expansion in professional services have propelled Asia’s major cities into the ranks of the world’s most influential economic hubs. Since 2000, gross value added in these sectors has grown on average by 7.9% each year across all our Asia Pacific cities, boosting incomes and living standards. AI advances have the potential to reinforce these trends, but there are also clear risks ahead.

Cities that cater to AI-related demand have seen robust gains. Reputation, strategic policies, and a skilled and abundant workforce have supported Asia’s specialisation in producing the electronic components needed for AI systems. With AI-related exports set to boom across Asia this year, we expect strong manufacturing growth for key cities such as Hsinchu (Taiwan), Georgetown (Malaysia), and Hai Phong (Vietnam).

As AI adoption rates rise, service-centric cities will be the key beneficiaries, reinforcing the strength of the region’s major hubs like Singapore, Beijing, and Tokyo. This is because service sectors like IT and finance are the most likely to receive productivity and income gains, given their ability to leverage the technology.

However, city-level labour market responses will be complex. Although we do not expect widespread job losses from AI adoption, there will be greater exposure for specific low value-added occupations in ICT and administrative activities, which heightens the risk for outsourcing economies like Manila and Bengaluru. Developments are also likely to widen regional inequalities as more rural and industrial regions fall behind.