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

In the previous decade, China has actually built a strong structure to support its AI economy and made significant contributions to AI globally. Stanford University's AI Index, which assesses AI advancements around the world across different metrics in research, development, and economy, ranks China among the top 3 nations for worldwide 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 instance, China produced about one-third of both AI journal papers and AI citations worldwide in 2021. In economic investment, China accounted for almost one-fifth of global 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 investment in AI by geographical area, 2013-21."

Five types of AI companies in China

In China, we discover that AI business generally fall under one of 5 main categories:

Hyperscalers establish end-to-end AI innovation ability and collaborate within the environment to serve both business-to-business and business-to-consumer companies. Traditional market business serve consumers straight by establishing and embracing AI in internal change, new-product launch, and customer support. Vertical-specific AI companies establish software application and services for particular domain usage cases. AI core tech suppliers offer access to computer system vision, natural-language processing, voice acknowledgment, and artificial intelligence abilities to develop AI systems. Hardware business offer the hardware infrastructure to support AI demand 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 kinds of AI companies in China").3 iResearch, iResearch serial marketing research on China's AI industry III, December 2020. In tech, for example, leaders Alibaba and ByteDance, both family names in China, have actually become known for their extremely tailored AI-driven consumer apps. In fact, the majority of the AI applications that have actually been widely embraced in China to date have actually remained in consumer-facing industries, moved by the world's largest internet consumer base and the ability to engage with customers in new ways to increase client loyalty, revenue, 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 professionals within McKinsey and across markets, along with extensive analysis of McKinsey market evaluations in Europe, the United States, Asia, and China particularly between October and November 2021. In performing our analysis, we looked outside of business 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 potential, we concentrated on the domains where AI applications are presently in market-entry stages and could 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 study.

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