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

In the previous years, China has built a strong foundation to support its AI economy and made substantial contributions to AI internationally. Stanford University's AI Index, which evaluates AI developments around the world throughout various metrics in research study, advancement, and economy, ranks China among the leading three nations for worldwide AI vibrancy.1"Global AI Vibrancy Tool: Who's leading the worldwide AI race?" Artificial Intelligence 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 economic investment, China accounted for nearly one-fifth of global private financial investment funding in 2021, drawing 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 financial investment in AI by geographic area, 2013-21."

Five types of AI business in China

In China, we discover that AI companies generally fall under one of five main categories:

Hyperscalers establish end-to-end AI innovation capability and collaborate within the ecosystem to serve both business-to-business and business-to-consumer business. Traditional market business serve clients straight by establishing and embracing AI in internal improvement, new-product launch, and customer services. Vertical-specific AI companies establish software and services for specific domain usage cases. AI core tech suppliers provide access to computer system vision, natural-language processing, voice acknowledgment, and artificial intelligence abilities to develop AI systems. Hardware business supply the hardware infrastructure to support AI demand in computing power and storage. Today, AI adoption is high in China in financing, retail, and high tech, which together account for more than one-third of the nation's AI market (see sidebar "5 types of AI companies in China").3 iResearch, iResearch serial market research on China's AI market 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 customer apps. In truth, most of the AI applications that have been commonly adopted in China to date have remained in consumer-facing industries, moved by the world's biggest internet customer base and the capability to engage with customers in new methods to increase client commitment, income, 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 specialists within McKinsey and throughout industries, together with extensive analysis of McKinsey market assessments 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 financing and retail, where there are already fully grown AI usage cases and clear adoption. In emerging sectors with the greatest value-creation capacity, we focused on the domains where AI applications are currently in market-entry stages and could have a disproportionate effect 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 study shows that there is significant opportunity for AI growth in new sectors in China, consisting of some where innovation and R&D costs have actually generally lagged worldwide equivalents: automotive, transport, and logistics