In the previous decade, China has actually developed a solid structure to support its AI economy and made significant contributions to AI internationally. Stanford University's AI Index, which evaluates AI developments worldwide throughout 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 study, for example, China produced about one-third of both AI journal papers and AI citations worldwide in 2021. In economic financial investment, China accounted for nearly one-fifth of global personal investment financing 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 kinds of AI companies in China

In China, we find that AI business generally fall into one of five main categories:

Hyperscalers establish end-to-end AI innovation capability and work together within the community to serve both business-to-business and business-to-consumer companies. Traditional market business serve customers straight by establishing and embracing AI in internal improvement, new-product launch, and client services. Vertical-specific AI companies develop software and solutions for specific domain usage cases. AI core tech providers supply access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence abilities to establish AI systems. Hardware companies supply the hardware infrastructure to support AI demand in computing 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 market research on China's AI industry III, December 2020. In tech, for instance, leaders Alibaba and ByteDance, both home names in China, have become understood for their highly tailored AI-driven consumer apps. In fact, many of the AI applications that have been commonly embraced in China to date have remained in consumer-facing markets, propelled by the world's largest web consumer base and the capability to engage with customers in brand-new ways to increase customer loyalty, profits, 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 professionals within McKinsey and across markets, along with substantial 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 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 presently in market-entry stages 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 industry adoption, such as manufacturing-operations optimization, were not the focus for the purpose 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 typically lagged international equivalents: vehicle, transport, and logistics