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

In the previous decade, China has built a solid foundation to support its AI economy and made considerable contributions to AI globally. Stanford University's AI Index, which examines AI advancements worldwide across numerous metrics in research, advancement, and economy, ranks China amongst the top 3 countries for global 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 study, for example, 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 private financial 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 business typically fall under one of 5 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 companies. Traditional market business serve consumers straight by establishing and embracing AI in internal improvement, new-product launch, and customer care. Vertical-specific AI business establish software application and options for particular domain usage cases. AI core tech suppliers supply access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to establish AI systems. Hardware companies offer the hardware facilities to support AI need in calculating power and storage. Today, AI adoption is high in China in finance, retail, and high tech, which together account for more than one-third of the country's AI market (see sidebar "5 types of AI companies in China").3 iResearch, iResearch serial marketing research on China's AI market III, December 2020. In tech, for example, leaders Alibaba and ByteDance, both family names in China, have become understood for their highly tailored AI-driven customer apps. In fact, the majority of the AI applications that have been widely adopted in China to date have remained in consumer-facing industries, moved by the world's largest internet consumer base and the ability to engage with customers in new ways to increase customer commitment, revenue, 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 professionals within McKinsey and throughout markets, along with substantial analysis of McKinsey market evaluations in Europe, the United States, Asia, and China particularly between October and November 2021. In performing our analysis, we looked outside of industrial sectors, such as finance and retail, where there are already fully grown AI use cases and clear adoption. In emerging sectors with the highest value-creation capacity, we concentrated on the domains where AI applications are currently in market-entry stages and might have an out of proportion effect by 2030. Applications in these sectors that either remain in the early-exploration phase 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 decade, our research suggests that there is significant chance for AI development in brand-new sectors in China, consisting of some where development and R&D costs have generally lagged global counterparts: automobile, transport, and logistics