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

In the past years, China has built a strong structure to support its AI economy and made significant contributions to AI globally. Stanford University's AI Index, which evaluates AI developments worldwide across various metrics in research, advancement, and economy, ranks China amongst the top 3 nations for global 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 documents and AI citations worldwide in 2021. In economic financial investment, China represented almost one-fifth of worldwide personal financial investment financing 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 financial investment in AI by geographic area, 2013-21."

Five kinds of AI companies in China

In China, we find that AI business usually fall into one of 5 main classifications:

Hyperscalers develop end-to-end AI innovation capability and collaborate within the community to serve both business-to-business and business-to-consumer companies. Traditional market business serve consumers straight by establishing and embracing AI in internal improvement, new-product launch, and client service. Vertical-specific AI business develop software and services for specific domain usage cases. AI core tech providers provide access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to develop AI systems. Hardware business offer the hardware infrastructure to support AI need in calculating power and storage. Today, AI adoption is high in China in financing, retail, and high tech, which together represent 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 example, leaders Alibaba and ByteDance, both household names in China, have become understood for their highly tailored AI-driven consumer apps. In fact, the majority of the AI applications that have been extensively adopted in China to date have actually remained in consumer-facing markets, propelled by the world's largest web customer base and the ability to engage with consumers in brand-new ways to increase client commitment, revenue, and market appraisals.

So what's next for AI in China?

About the research

This research study is based on field interviews with more than 50 experts within McKinsey and across markets, together with comprehensive 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 beyond business sectors, such as financing and retail, where there are already mature AI usage cases and clear adoption. In emerging sectors with the greatest value-creation potential, we concentrated on the domains where AI applications are currently in market-entry stages and might have a disproportionate effect by 2030. Applications in these sectors that either remain in the early-exploration phase 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 decade, our research study shows that there is significant chance for AI development in brand-new sectors in China, including some where innovation and R&D spending have generally lagged global equivalents: automobile, transport, and logistics