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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 actually constructed a solid foundation to support its AI economy and made considerable contributions to AI worldwide. Stanford University's AI Index, which assesses AI developments around the world across various metrics in research, development, and economy, ranks China amongst the leading three nations for global 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 papers and AI citations worldwide in 2021. In economic investment, China accounted for nearly one-fifth of global personal financial investment financing 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 financial investment in AI by geographic area, 2013-21."

Five types of AI business in China

In China, we find that AI companies generally fall into among five main categories:

Hyperscalers develop end-to-end AI technology capability and team up within the environment to serve both business-to-business and business-to-consumer business. Traditional market companies serve consumers straight by developing and adopting AI in internal transformation, new-product launch, and client service. Vertical-specific AI companies develop software and solutions for particular domain use cases. AI core tech companies provide access to computer system vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to establish AI systems. Hardware business offer the hardware infrastructure to support AI demand 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 nation'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 instance, leaders Alibaba and ByteDance, both household names in China, have ended up being known for their extremely tailored AI-driven consumer apps. In reality, most of the AI applications that have been commonly embraced in China to date have actually remained in consumer-facing markets, propelled by the world's biggest web customer base and the capability to engage with consumers in new ways to increase consumer loyalty, profits, and market appraisals.

So what's next for AI in China?

About the research study

This research study is based on field interviews with more than 50 experts within McKinsey and across industries, together with extensive analysis of McKinsey market evaluations in Europe, the United States, Asia, and China specifically between October and November 2021. In performing our analysis, we looked outside of industrial sectors, such as financing and retail, where there are currently mature 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 phases and might have a disproportionate impact by 2030. Applications in these sectors that either remain in the early-exploration phase or have mature market adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the research study.

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