Abstract: As Artificial Intelligence (AI) is remodelling the core competitiveness for Chinese manufacturing industry, there is an increasing concern about a substitution for low-skilled labor.This study provides evidence on how AI affects the patterns of skill demands, measured by the share of low-skilled staff in Chinese manufacturing firms. Employing panel data on Chinese firms listed on the SSE, SZSE, and NEEQ over 2011-2017, the introduction of AI is treated as a quasi-natural experiment and use a robust DID model to estimate the effects of AI on patterns in the relative demand for low-skilled labor. AI firms are defined by investigating the AI production and application scenarios in manufacturing and select AI firms based on policy support, industry application, R&D output, and market recognition. The timing of the initial introduction of AI is defined based on firm-level information. In addition, using a PSM model, the control group whose skill patterns follow the parallel trend assumption is developed.
The empirical analysis results demonstrate that AI has significant influences on skill demands. First, AI significantly decreases the share of employment of low-skilled labor, which means a small portion of the low-skilled potential employment has been substituted by AI. Second,the negative effect of AI on the share of employment of low-skilled labor has dynamic heterogeneity, and the effect tends to rise over time. Third, AI creates the employment of low-skilled labor through capital accumulation and income expansion while finally urges to decrease the low-skilled share through cutting down marginal output of low-skilled labor.
Finally, several possible directions for future studies can be extended in two aspects:First, due to the limitations of the data sources, the range of sample observations is only seven years, and data from a longer period can be used to verify the long-term casual effects in further research. Second, the mechanisms related to different forms of AI introduction and firm-level skill premium can be analyzed.

Key words: Artificial Intelligence, technological change, low-skilled labor, Difference-In-Difference, Chinese manufacturing industry