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In the previous decade, China has built a strong foundation to support its AI economy and made significant contributions to AI internationally. Stanford University's AI Index, which examines AI advancements worldwide throughout different metrics in research study, development, and economy, ranks China amongst the top three nations for global 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 instance, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In financial investment, China accounted for almost one-fifth of international private financial 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 geographical location, 2013-21."

Five kinds of AI companies in China

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

Hyperscalers establish end-to-end AI technology ability and team up within the ecosystem to serve both business-to-business and business-to-consumer companies. Traditional industry companies serve clients straight by establishing and embracing AI in internal transformation, new-product launch, and surgiteams.com client service. Vertical-specific AI companies develop software application and services for specific domain use cases. AI core tech companies supply access to computer vision, natural-language processing, voice recognition, and artificial intelligence capabilities to develop AI systems. Hardware business provide 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 marketing research on China's AI industry III, December 2020. In tech, for example, leaders Alibaba and ByteDance, both household names in China, have become known for their highly tailored AI-driven customer apps. In truth, many of the AI applications that have actually been extensively adopted in China to date have actually remained in consumer-facing industries, moved by the world's largest web consumer base and the capability to engage with consumers in brand-new ways to increase customer loyalty, revenue, and market appraisals.

So what's next for AI in China?

About the research

This research is based upon field interviews with more than 50 professionals within McKinsey and throughout industries, in addition to extensive analysis of McKinsey market assessments in Europe, the United States, Asia, and China specifically between October and November 2021. In performing our analysis, we looked outside of industrial sectors, such as financing and retail, where there are currently mature AI usage cases and clear adoption. In emerging sectors with the greatest value-creation potential, we focused on the domains where AI applications are presently in market-entry stages and might have a disproportionate 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 study.

In the coming years, our research suggests that there is significant opportunity for AI development in brand-new sectors in China, including some where innovation and R&D costs have actually typically lagged global equivalents: automotive, transport, and logistics