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

In the past years, China has actually developed a solid foundation to support its AI economy and made substantial contributions to AI globally. Stanford University's AI Index, which assesses AI advancements worldwide across different metrics in research study, advancement, and economy, ranks China amongst the leading three countries for international AI vibrancy.1"Global AI Vibrancy Tool: Who's leading the global AI race?" Expert System Index, Stanford Institute for Human-Centered Artificial Intelligence (HAI), Stanford University, 2021 ranking. On research study, for instance, China produced about one-third of both AI journal papers and AI citations worldwide in 2021. In economic investment, China accounted for nearly one-fifth of international private investment funding 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 geographic area, 2013-21."

Five types of AI business in China

In China, we discover that AI companies generally fall under among 5 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 companies. Traditional industry companies serve clients straight by establishing and adopting AI in internal improvement, new-product launch, and client service. Vertical-specific AI companies establish software and services for specific domain use cases. AI core tech suppliers offer access to computer system vision, natural-language processing, voice recognition, and artificial intelligence abilities to develop AI systems. Hardware companies offer the hardware infrastructure 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 nation'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 understood for their extremely tailored AI-driven consumer apps. In fact, many of the AI applications that have been widely embraced in China to date have actually remained in consumer-facing industries, propelled by the world's largest web consumer base and the ability to engage with consumers in new ways to increase consumer loyalty, earnings, 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 professionals within McKinsey and throughout markets, in addition to comprehensive analysis of McKinsey market assessments in Europe, setiathome.berkeley.edu the United States, Asia, and China specifically in between October and November 2021. In performing our analysis, we looked outside of industrial sectors, such as financing and retail, where there are already mature AI use cases and clear adoption. In emerging sectors with the highest value-creation potential, we concentrated on the domains where AI applications are presently in market-entry stages and could have an out of proportion impact 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 research study.

In the coming decade, our research study suggests that there is significant opportunity for AI growth in brand-new sectors in China, including some where innovation and R&D costs have generally lagged worldwide equivalents: automotive, transport, and logistics