In the past decade, China has built a strong foundation to support its AI economy and made significant contributions to AI globally. Stanford University's AI Index, which evaluates AI advancements worldwide across different 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 international AI race?" Expert System Index, Stanford Institute for Human-Centered Artificial Intelligence (HAI), Stanford University, 2021 ranking. On research, for instance, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In financial financial 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 financial investment in AI by geographic area, 2013-21."

Five types of AI business in China

In China, we discover that AI companies typically fall under one of five main categories:

Hyperscalers establish end-to-end AI innovation capability and collaborate within the environment to serve both business-to-business and business-to-consumer business. Traditional industry business serve customers straight by establishing and embracing AI in internal change, new-product launch, and client service. Vertical-specific AI companies establish software application and solutions for particular domain usage cases. AI core tech providers provide access to computer vision, natural-language processing, voice recognition, and artificial intelligence capabilities to establish AI systems. Hardware companies supply the hardware facilities to support AI demand 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 kinds 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 actually become known for their extremely tailored AI-driven customer apps. In reality, the majority of the AI applications that have been extensively embraced in China to date have actually remained in consumer-facing industries, moved by the world's biggest internet customer base and the capability to engage with consumers in brand-new methods to increase customer commitment, larsaluarna.se 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 across markets, along with substantial analysis of McKinsey market assessments in Europe, the United States, Asia, and China particularly between October and November 2021. In performing our analysis, we looked beyond commercial sectors, such as financing and retail, where there are currently mature 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 could have an out of proportion effect by 2030. Applications in these sectors that either remain in the early-exploration stage or have mature market adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the research study.

In the coming decade, our research study suggests that there is tremendous chance for AI growth in brand-new sectors in China, including some where development and R&D spending have traditionally lagged worldwide counterparts: automobile, transportation, and logistics