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

In the past decade, China has actually built a solid foundation to support its AI economy and made substantial contributions to AI globally. Stanford University's AI Index, which evaluates AI developments worldwide throughout different metrics in research study, advancement, and economy, ranks China amongst the top three nations for international AI vibrancy.1"Global AI Vibrancy Tool: Who's leading the international AI race?" Expert System Index, Stanford Institute for Human-Centered Artificial Intelligence (HAI), Stanford University, 2021 ranking. On research study, for example, China produced about one-third of both AI journal papers and AI citations worldwide in 2021. In financial financial investment, China accounted for nearly one-fifth of global personal investment funding in 2021, drawing 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 geographical location, 2013-21."

Five kinds of AI companies in China

In China, we find that AI companies generally fall into one of 5 main categories:

Hyperscalers establish end-to-end AI technology capability and team up within the ecosystem to serve both business-to-business and business-to-consumer companies. Traditional industry companies serve clients straight by establishing and adopting AI in internal change, new-product launch, and client services. Vertical-specific AI business develop software application and solutions for particular domain usage cases. AI core tech providers offer access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to establish AI systems. Hardware business supply the hardware facilities to support AI need in calculating power and storage. Today, AI adoption is high in China in finance, retail, and high tech, which together account for more than one-third of the nation's AI market (see sidebar "5 kinds of AI business 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 household names in China, have become known for their highly tailored AI-driven consumer apps. In reality, the majority of the AI applications that have been widely adopted in China to date have actually remained in consumer-facing industries, moved by the world's biggest web customer base and the capability to engage with consumers in new ways to increase consumer commitment, earnings, and market appraisals.

So what's next for AI in China?

About the research

This research study is based upon field interviews with more than 50 professionals within McKinsey and across industries, together with extensive 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 outside of commercial sectors, such as finance and retail, where there are currently fully grown AI usage cases and clear adoption. In emerging sectors with the highest value-creation capacity, we focused on the domains where AI applications are currently in market-entry phases and might have an out of proportion effect by 2030. Applications in these sectors that either remain in the early-exploration stage or have fully grown market adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the research study.

In the coming years, our research shows that there is incredible chance for AI growth in brand-new sectors in China, including some where development and R&D costs have traditionally lagged global counterparts: vehicle, transport, and logistics