In the past years, China has constructed a strong structure to support its AI economy and made significant contributions to AI globally. Stanford University's AI Index, which evaluates AI improvements worldwide across different metrics in research, advancement, and economy, ranks China among the top 3 nations 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 nearly one-fifth of worldwide private 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 business typically fall into one of 5 main classifications:

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 market companies serve consumers straight by developing and embracing AI in internal transformation, new-product launch, and customer services. Vertical-specific AI business establish software and services for specific domain usage cases. AI core tech companies offer access to computer vision, natural-language processing, voice recognition, and artificial intelligence abilities to develop AI systems. Hardware business supply the hardware facilities to support AI need 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 kinds of AI companies in China").3 iResearch, iResearch serial marketing research on China's AI industry III, December 2020. In tech, for instance, leaders Alibaba and ByteDance, both home names in China, have ended up being understood for their highly tailored AI-driven customer apps. In fact, the majority of the AI applications that have been extensively adopted in China to date have remained in consumer-facing markets, propelled by the world's biggest web customer base and the capability to engage with consumers in brand-new methods to increase customer commitment, revenue, and market appraisals.

So what's next for AI in China?

About the research

This research is based on field interviews with more than 50 specialists within McKinsey and throughout markets, in addition to 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 beyond industrial sectors, such as financing and retail, where there are currently 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 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 fully grown market adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the study.

In the coming decade, our research study indicates that there is significant opportunity for AI growth in new sectors in China, including some where development and R&D costs have generally lagged international equivalents: automotive, transportation, and logistics