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

In the previous decade, China has constructed a strong foundation to support its AI economy and made considerable contributions to AI globally. Stanford University's AI Index, which assesses AI advancements around the world across different metrics in research, development, and economy, ranks China amongst the leading three nations for international AI vibrancy.1"Global AI Vibrancy Tool: Who's leading the global AI race?" Artificial Intelligence 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 financial investment, China represented almost one-fifth of global personal financial investment funding 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 financial investment in AI by geographical area, 2013-21."

Five types of AI companies in China

In China, we discover that AI business normally fall into one of five main classifications:

Hyperscalers develop end-to-end AI technology capability and work together within the community to serve both business-to-business and business-to-consumer companies. Traditional market companies serve clients straight by establishing and embracing AI in internal improvement, new-product launch, and customer support. Vertical-specific AI business develop software and services for particular domain use cases. AI core tech providers provide access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to develop AI systems. Hardware companies provide the hardware infrastructure to support AI need 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 country'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 home names in China, have become known for their highly tailored AI-driven consumer apps. In fact, most of the AI applications that have actually been widely embraced in China to date have remained in consumer-facing markets, moved by the world's biggest internet consumer base and the capability to engage with customers in brand-new methods to increase customer loyalty, revenue, and market appraisals.

So what's next for AI in China?

About the research study

This research is based on field interviews with more than 50 experts within McKinsey and across industries, along with comprehensive analysis of McKinsey market assessments in Europe, the United States, Asia, and China specifically in between October and November 2021. In performing our analysis, we looked outside of commercial sectors, such as finance and retail, where there are already mature AI usage cases and clear adoption. In emerging sectors with the highest value-creation capacity, we concentrated on the domains where AI applications are presently in market-entry phases and could have a disproportionate effect by 2030. Applications in these sectors that either remain in the early-exploration phase or have mature industry adoption, such as manufacturing-operations optimization, were not the focus for the function of the study.

In the coming decade, our research study suggests that there is tremendous opportunity for AI development in brand-new sectors in China, consisting of some where innovation and R&D costs have actually traditionally lagged worldwide counterparts: vehicle, transportation, and logistics