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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 constructed a strong structure to support its AI economy and made significant contributions to AI worldwide. Stanford University's AI Index, which evaluates AI improvements worldwide across various metrics in research study, advancement, and economy, ranks China among the top three countries for international 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 study, for instance, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In economic investment, China accounted for nearly one-fifth of global personal financial investment funding 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 location, 2013-21."

Five kinds of AI business in China

In China, we discover that AI companies normally fall under one of 5 main classifications:

Hyperscalers establish end-to-end AI technology ability and work together within the environment to serve both business-to-business and business-to-consumer business. Traditional industry business serve clients straight by developing and adopting AI in internal improvement, new-product launch, and customer care. Vertical-specific AI companies develop software and options for particular domain usage cases. AI core tech suppliers supply access to computer system vision, natural-language processing, voice recognition, and artificial intelligence capabilities to develop AI systems. Hardware business provide the hardware infrastructure 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 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 become understood for their highly tailored AI-driven consumer apps. In truth, the majority of the AI applications that have actually been commonly embraced in China to date have remained in consumer-facing markets, propelled by the world's largest internet customer base and the ability to engage with consumers in new ways to increase customer loyalty, revenue, 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 pediascape.science across industries, along with comprehensive analysis of McKinsey market assessments in Europe, the United States, Asia, and China particularly in between October and November 2021. In performing our analysis, we looked beyond business sectors, such as finance and retail, where there are already fully grown AI usage cases and clear adoption. In emerging sectors with the highest value-creation capacity, we focused on the domains where AI applications are currently in market-entry phases and might have an out of proportion effect by 2030. Applications in these sectors that either remain in the early-exploration phase or have fully grown industry adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the study.

In the coming years, our research study suggests that there is significant opportunity for AI development in new sectors in China, including some where innovation and R&D spending have generally lagged international equivalents: vehicle, transport, and logistics