In the previous decade, China has developed a solid foundation to support its AI economy and made considerable contributions to AI internationally. Stanford University’s AI Index, which evaluates AI developments around the world throughout different metrics in research, development, and economy, ranks China among the leading three nations for worldwide 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, for example, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In financial investment, China accounted for nearly one-fifth of global private financial investment funding 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 geographic area, 2013-21.”

Five kinds of AI companies in China

In China, we find that AI business usually fall under one of 5 main classifications:

Hyperscalers establish end-to-end AI innovation ability and collaborate within the community to serve both business-to-business and business-to-consumer business. Traditional industry companies serve clients straight by establishing and adopting AI in internal transformation, new-product launch, and customer care. Vertical-specific AI companies develop software and solutions for specific domain usage cases. AI core tech service providers offer access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to develop AI systems. Hardware companies offer the hardware facilities to support AI demand in calculating power and storage. Today, AI adoption is high in China in financing, 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 household names in China, have become understood for their highly tailored AI-driven consumer apps. In reality, the majority of the AI applications that have been extensively embraced in China to date have actually remained in consumer-facing markets, moved by the world’s biggest internet consumer base and the ability to engage with consumers in new ways to increase client loyalty, profits, and market appraisals.

So what’s next for AI in China?

About the research

This research study is based on field interviews with more than 50 specialists within McKinsey and throughout industries, together with comprehensive analysis of McKinsey market assessments in Europe, the United States, Asia, and China particularly in 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 use cases and clear adoption. In emerging sectors with the greatest value-creation capacity, we concentrated on the domains where AI applications are currently in market-entry stages and could have a disproportionate 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 purpose of the research study.

In the coming years, 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 generally lagged worldwide counterparts: automobile, transport, and logistics