In the previous decade, China has built a strong foundation to support its AI economy and made substantial contributions to AI internationally. Stanford University's AI Index, which assesses AI developments worldwide across numerous metrics in research, advancement, and economy, ranks China among the top three nations for international 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 papers and AI citations worldwide in 2021. In economic investment, China accounted for nearly one-fifth of global personal financial investment financing in 2021, attracting $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 typically fall under one of 5 main classifications:
Hyperscalers establish end-to-end AI technology ability and team up within the community to serve both business-to-business and business-to-consumer business.
Traditional market business serve consumers straight by developing and embracing AI in internal improvement, new-product launch, and customer support.
Vertical-specific AI companies establish software and services for specific domain use cases.
AI core tech companies provide access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence abilities to develop AI systems.
Hardware companies supply the hardware facilities to support AI need 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 nation's AI market (see sidebar "5 types of AI business in China").3 iResearch, iResearch serial marketing research on China's AI market III, December 2020. In tech, for instance, leaders Alibaba and ByteDance, both family names in China, have actually become known for their extremely tailored AI-driven customer apps. In fact, the majority of the AI applications that have been widely embraced in China to date have actually remained in consumer-facing markets, moved by the world's largest internet consumer base and the ability to engage with consumers in new methods to increase customer 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 specifically between October and November 2021. In performing our analysis, we looked beyond business sectors, such as finance and retail, where there are currently mature AI usage cases and clear adoption. In emerging sectors with the greatest value-creation capacity, we focused on the domains where AI applications are presently in market-entry phases and might have a disproportionate impact by 2030. Applications in these sectors that either remain in the early-exploration stage or have mature industry adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the research study.
In the coming years, our research suggests that there is incredible opportunity for AI development in new sectors in China, including some where innovation and R&D costs have typically lagged international equivalents: automotive, transport, and logistics
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The next Frontier for aI in China could Add $600 billion to Its Economy
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