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

In the past decade, China has built a solid foundation to support its AI economy and made substantial contributions to AI internationally. Stanford University's AI Index, which evaluates AI advancements worldwide across various metrics in research, development, and economy, ranks China among the top three countries 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 study, for example, China produced about one-third of both AI journal papers and AI citations worldwide in 2021. In economic investment, China represented nearly one-fifth of worldwide personal 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 investment in AI by geographical area, 2013-21."

Five types of AI companies in China

In China, we find that AI companies normally fall under one of five main categories:

Hyperscalers develop end-to-end AI technology capability and work together within the environment to serve both business-to-business and business-to-consumer business. Traditional industry companies serve consumers straight by developing and adopting AI in internal change, new-product launch, and customer care. Vertical-specific AI business develop software application and options for particular domain usage cases. AI core tech service providers supply access to computer vision, natural-language processing, voice recognition, and artificial intelligence abilities to establish AI systems. Hardware companies provide 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 example, leaders Alibaba and ByteDance, both household names in China, have actually ended up being known for their extremely tailored AI-driven customer apps. In truth, many of the AI applications that have actually been widely adopted in China to date have remained in consumer-facing markets, propelled by the world's biggest internet customer base and the ability to engage with customers in new methods to increase consumer loyalty, earnings, and market appraisals.

So what's next for AI in China?

About the research study

This research is based upon field interviews with more than 50 professionals within McKinsey and across markets, together with comprehensive analysis of McKinsey market evaluations in Europe, the United States, Asia, and China particularly in between October and November 2021. In performing our analysis, we looked outside of industrial sectors, such as financing and retail, where there are currently mature AI usage cases and clear adoption. In emerging sectors with the highest value-creation potential, we concentrated on the domains where AI applications are currently in market-entry phases 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 decade, our research study shows that there is incredible chance for AI growth in new sectors in China, including some where development and R&D costs have actually generally lagged global counterparts: automobile, transport, and logistics