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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 constructed a strong structure to support its AI economy and made significant contributions to AI worldwide. Stanford University's AI Index, which examines AI developments around the world across different metrics in research study, advancement, and economy, ranks China amongst the top three nations for global AI vibrancy.1"Global AI Vibrancy Tool: Who's leading the worldwide AI race?" Expert System Index, Stanford Institute for Human-Centered Artificial Intelligence (HAI), Stanford University, 2021 ranking. On research, for example, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In financial financial investment, China accounted for nearly one-fifth of worldwide private 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 types of AI companies in China

In China, we discover that AI companies typically fall under among five main categories:

Hyperscalers develop end-to-end AI innovation ability and team up within the community to serve both business-to-business and business-to-consumer business. Traditional market companies serve clients straight by establishing and embracing AI in internal improvement, new-product launch, and consumer services. Vertical-specific AI companies establish software and solutions for specific domain usage cases. AI core tech service providers supply access to computer system vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities 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 country's AI market (see sidebar "5 kinds of AI business 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 understood for their highly tailored AI-driven consumer apps. In fact, the majority of the AI applications that have actually been extensively adopted in China to date have actually remained in consumer-facing industries, moved by the world's largest web customer base and the capability to engage with customers in new ways to increase customer commitment, earnings, 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 experts within McKinsey and across industries, together with extensive 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 could have a disproportionate impact by 2030. Applications in these sectors that either remain in the early-exploration stage or have fully grown industry adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the research study.

In the coming years, our research shows that there is incredible opportunity for AI growth in brand-new sectors in China, including some where development and R&D costs have generally lagged worldwide equivalents: automobile, transportation, and logistics