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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 foundation to support its AI economy and made considerable contributions to AI worldwide. Stanford University's AI Index, which examines AI developments worldwide across various metrics in research, advancement, and economy, ranks China amongst the top three nations 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, for instance, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In economic investment, China accounted for 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 investment in AI by geographical location, 2013-21."

Five kinds of AI companies in China

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

Hyperscalers establish end-to-end AI technology ability and team up within the ecosystem to serve both business-to-business and business-to-consumer companies. Traditional market companies serve consumers straight by establishing and embracing AI in internal change, new-product launch, and consumer services. Vertical-specific AI business develop software and options for specific domain use cases. AI core tech providers offer access to computer vision, natural-language processing, voice recognition, and artificial intelligence abilities 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 finance, retail, and high tech, which together represent more than one-third of the country'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 family names in China, have actually become known for their highly tailored AI-driven customer apps. In fact, most of the AI applications that have actually been commonly adopted in China to date have actually remained in consumer-facing industries, propelled by the world's largest internet consumer base and the ability to engage with consumers in new methods to increase client commitment, income, and market appraisals.

So what's next for AI in China?

About the research

This research is based upon field interviews with more than 50 experts within McKinsey and throughout 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 beyond industrial sectors, such as financing and retail, where there are already mature AI use cases and clear adoption. In emerging sectors with the greatest value-creation potential, we focused on the domains where AI applications are presently in market-entry stages and might have an out of proportion 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 study.

In the coming decade, our research study suggests that there is tremendous chance for AI growth in new sectors in China, including some where development and R&D spending have typically lagged worldwide counterparts: automotive, transportation, and logistics