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

In the previous years, China has actually developed a strong foundation to support its AI economy and made substantial contributions to AI internationally. Stanford University's AI Index, which evaluates AI developments worldwide across various metrics in research, development, and economy, ranks China among the leading 3 countries for worldwide 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 economic financial investment, China represented almost one-fifth of global personal 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 area, 2013-21."

Five types of AI companies in China

In China, we discover that AI companies generally fall under among 5 main categories:

Hyperscalers establish end-to-end AI technology capability and collaborate within the ecosystem to serve both business-to-business and business-to-consumer business. Traditional industry business serve clients straight by developing and embracing AI in internal transformation, new-product launch, and customer support. Vertical-specific AI business develop software application and solutions for specific domain usage cases. AI core tech service providers provide access to computer system vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to establish AI systems. Hardware companies provide 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 marketing research on China's AI industry III, December 2020. In tech, for instance, leaders Alibaba and ByteDance, both home names in China, have become known for their highly tailored AI-driven customer apps. In reality, the majority of the AI applications that have been commonly embraced in China to date have remained in consumer-facing industries, moved by the world's largest internet customer base and the capability to engage with consumers in new methods to increase client commitment, revenue, and market appraisals.

So what's next for AI in China?

About the research study

This research study is based upon field interviews with more than 50 specialists within McKinsey and across industries, together with extensive analysis of McKinsey market assessments in Europe, the United States, Asia, and China specifically in between October and November 2021. In performing our analysis, we looked beyond commercial sectors, such as financing and retail, where there are already mature AI usage cases and clear adoption. In emerging sectors with the highest value-creation potential, we concentrated on the domains where AI applications are presently 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 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 shows that there is incredible opportunity for AI development in brand-new sectors in China, including some where innovation and R&D costs have typically lagged international equivalents: vehicle, transportation, and logistics