1 The next Frontier for aI in China could Add $600 billion to Its Economy
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In the past decade, China has actually developed a strong structure to support its AI economy and made considerable contributions to AI globally. Stanford University's AI Index, which assesses AI advancements around the world throughout different metrics in research study, development, and economy, ranks China amongst the top 3 countries for worldwide AI vibrancy.1"Global AI Vibrancy Tool: Who's leading the worldwide AI race?" Artificial Intelligence Index, Stanford Institute for Human-Centered Artificial Intelligence (HAI), Stanford University, 2021 ranking. On research, for example, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In economic investment, China represented almost one-fifth of worldwide private investment financing in 2021, attracting $17 billion for AI start-ups.2 Daniel Zhang et al., Artificial Intelligence Index report 2022, Stanford Institute for Human-Centered Artificial Intelligence (HAI), Stanford University, March 2022, Figure 4.2.6, "Private financial investment in AI by geographical location, 2013-21."

Five kinds of AI companies in China

In China, we discover that AI business typically fall into one of five main classifications:

Hyperscalers establish end-to-end AI technology ability and collaborate within the ecosystem to serve both business-to-business and business-to-consumer business. Traditional industry companies serve clients straight by establishing and adopting AI in internal improvement, new-product launch, and customer care. Vertical-specific AI business establish software application and services for particular domain use cases. AI core tech service providers offer access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence abilities to establish AI systems. Hardware companies provide the hardware facilities to support AI demand in calculating power and storage. Today, AI adoption is high in China in finance, retail, and high tech, which together represent more than one-third of the nation's AI market (see sidebar "5 types of AI companies in China").3 iResearch, iResearch serial marketing research on China's AI market III, December 2020. In tech, for example, leaders Alibaba and ByteDance, both home names in China, have become understood for their extremely tailored AI-driven customer apps. In truth, the majority of the AI applications that have been extensively embraced in China to date have remained in consumer-facing industries, propelled by the world's largest web customer base and the ability to engage with customers in new methods to increase customer commitment, profits, and market appraisals.

So what's next for AI in China?

About the research study

This research is based on field interviews with more than 50 experts within McKinsey and across markets, along with substantial analysis of McKinsey market evaluations in Europe, the United States, Asia, and China particularly between October and November 2021. In performing our analysis, we looked beyond business sectors, such as financing and retail, where there are already fully grown AI usage cases and clear adoption. In emerging sectors with the greatest value-creation potential, we focused on the domains where AI applications are currently in market-entry stages and might have an out of proportion impact by 2030. Applications in these sectors that either remain in the early-exploration stage or have mature industry adoption, such as manufacturing-operations optimization, were not the focus for the function of the study.

In the coming years, our research study shows that there is significant opportunity for AI growth in new sectors in China, including some where development and R&D spending have actually generally lagged global counterparts: automotive, transportation, and logistics