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

In the past decade, China has developed a strong structure to support its AI economy and made considerable contributions to AI globally. Stanford University's AI Index, which assesses AI developments around the world across different metrics in research, development, and economy, ranks China amongst the top three countries for international 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 financial investment, China accounted for almost one-fifth of global personal 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 area, 2013-21."

Five kinds of AI companies in China

In China, we find that AI companies generally fall under among 5 main categories:

Hyperscalers develop end-to-end AI innovation capability and work together within the environment to serve both business-to-business and business-to-consumer business. Traditional market business serve consumers straight by developing and adopting AI in internal transformation, new-product launch, and customer support. Vertical-specific AI companies establish software application and services for specific domain usage cases. AI core tech companies provide access to computer system vision, natural-language processing, voice acknowledgment, and artificial intelligence abilities to establish 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 financing, retail, and high tech, which together account for more than one-third of the nation's AI market (see sidebar "5 kinds of AI companies 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 home names in China, have actually ended up being understood for their extremely tailored AI-driven customer apps. In fact, the majority of the AI applications that have been commonly embraced in China to date have remained in consumer-facing industries, moved by the world's biggest internet customer base and the ability to engage with consumers in brand-new methods to increase client commitment, income, and market appraisals.

So what's next for AI in China?

About the research

This research study is based upon field interviews with more than 50 experts within McKinsey and across markets, together with substantial analysis of McKinsey market assessments in Europe, the United States, Asia, and China specifically 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 greatest value-creation potential, we focused on the domains where AI applications are presently in market-entry phases and could have an out of proportion 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 function of the study.

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