HSBC Analyst Says AI Will Expand, Not Replace, China's Software Market

HSBC analyst Yiran Liu argues that China's artificial intelligence model developers are unlikely to displace the country's enterprise software vendors, according to the South China Morning Post. Liu told SCMP that AI model firms lack the industry know-how and enterprise experience required to serve corporate customers directly, making collaboration with legacy software providers the more probable outcome.

The Core Thesis

Liu's argument, as reported by SCMP, centres on a structural difference between the Chinese and US markets. China's software-as-a-service sector is less developed than its American counterpart, and Liu says that gap changes the competitive dynamic between AI model builders and application vendors.

In the US, a narrative has taken hold that capable foundation models will absorb functionality historically sold as standalone software — compressing the application layer and pulling enterprise spend toward a smaller number of model providers. Liu's view, per SCMP, is that this framing does not map cleanly onto China.

Instead, Liu expects model companies and legacy software firms to serve Chinese enterprises "in tandem," according to the SCMP report. The reasoning is that enterprise deployments require workflow integration, vertical-specific data handling, and implementation expertise that model vendors have not built.

Why China Looks Different

SCMP reports Liu's position that China's SaaS market has room to grow alongside improving AI capabilities, rather than being cannibalised by them. The implication is that AI acts as an accelerant on an under-penetrated market rather than a substitute for it.

China's less developed software-as-a-service market stands to gain even as AI models continue to improve, with the most likely outcome being a collaborative approach where model companies and legacy software firms serve enterprises in tandem, said Yiran Liu.

The full SCMP article references additional HSBC research framing, though specific market-sizing figures from Liu's note were not reproduced in the excerpt available to DeepBrief. Readers seeking the underlying HSBC projections should consult the original SCMP piece and, where accessible, HSBC's published research.

Context: The "AI Kills Software" Debate

Liu's comments land in the middle of an active debate over whether foundation model providers will compete with or complement application software vendors. That debate has shaped strategic moves across the AI stack, including personnel decisions at model labs — OpenAI recently folded its AI science unit into Codex following the departure of Kevin Weil, a reorganisation that consolidated product and research functions closer to its developer tooling business.

The competitive question also shapes how model providers approach vertical markets. Anthropic's recent appointment of a Novartis executive to its board signalled a push into healthcare — a sector where domain expertise has historically been held by specialist software vendors rather than horizontal platform companies. Liu's thesis, as reported by SCMP, suggests that in China the balance between horizontal model capability and vertical software know-how tilts differently than in the US.

What Remains Unverified

DeepBrief has not independently confirmed Liu's specific market-sizing claims or the full scope of the HSBC research note. The SCMP report is currently the only public rendering of Liu's thesis available to DeepBrief, and the desk was unable to obtain direct comment from China-based enterprise software firms or independent China tech analysts before publication.

Key open questions include: the specific HSBC estimates for China SaaS market size and growth; whether Liu's note distinguishes between general-purpose AI models and vertical-specific AI applications; and how the thesis accounts for Chinese model developers such as those backed by major cloud platforms that have begun building their own enterprise sales motions.

DeepBrief has contacted Chinese enterprise software vendors for comment on Liu's framing and will update this story if additional sources corroborate or contest the HSBC view.