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1 The next Frontier for aI in China could Add $600 billion to Its Economy

In the previous decade, China has built a solid foundation to support its AI economy and made substantial contributions to AI globally. Stanford University's AI Index, which evaluates AI improvements around the world across numerous metrics in research study, development, and economy, ranks China among the top 3 countries for global AI vibrancy.1"Global AI Vibrancy Tool: Who's leading the global AI race?" Expert System 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 financial investment, China accounted for almost one-fifth of international private financial investment funding in 2021, bring in $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 investment in AI by geographic location, 2013-21."

Five kinds of AI companies in China

In China, we discover that AI companies usually fall under among five main categories:

Hyperscalers develop end-to-end AI technology capability and collaborate within the environment to serve both business-to-business and business-to-consumer companies. Traditional industry companies serve clients straight by establishing and embracing AI in internal change, new-product launch, and customer support. Vertical-specific AI companies establish software application and options for specific domain use cases. AI core tech suppliers supply 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 need in computing power and storage. Today, AI adoption is high in China in financing, retail, and high tech, which together account for more than one-third of the country's AI market (see sidebar "5 types of AI business in China").3 iResearch, iResearch serial market research study on China's AI market III, December 2020. In tech, for example, leaders Alibaba and ByteDance, both family names in China, have become known for their extremely tailored AI-driven customer apps. In reality, the majority of the AI applications that have been extensively embraced in China to date have remained in consumer-facing markets, propelled by the world's biggest internet customer base and the capability to engage with customers in brand-new methods to increase client loyalty, income, and market appraisals.

So what's next for AI in China?

About the research study

This research is based upon field interviews with more than 50 experts within McKinsey and across industries, along with substantial analysis of McKinsey market assessments in Europe, the United States, Asia, and China specifically between October and November 2021. In performing our analysis, we looked beyond business sectors, such as finance and retail, where there are already fully grown AI use 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 phases and might have a disproportionate effect by 2030. Applications in these sectors that either remain in the early-exploration phase or have fully grown industry adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the study.

In the coming years, our research study shows that there is incredible opportunity for AI development in new sectors in China, including some where development and R&D costs have actually typically lagged international counterparts: automobile, transport, and logistics