In the past years, China has built a solid structure to support its AI economy and made considerable contributions to AI internationally. Stanford University’s AI Index, which assesses AI improvements worldwide across various 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 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 investment, China accounted for almost one-fifth of worldwide personal 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 geographical location, 2013-21.”

Five types of AI business in China

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

Hyperscalers establish end-to-end AI technology ability and collaborate within the ecosystem to serve both business-to-business and business-to-consumer business. Traditional industry companies serve consumers straight by developing and adopting AI in internal change, new-product launch, and customer care. Vertical-specific AI business establish software application and services for specific domain usage cases. AI core tech service providers provide access to computer vision, natural-language processing, voice recognition, and artificial intelligence capabilities 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 financing, retail, and high tech, which together represent more than one-third of the country’s AI market (see sidebar “5 kinds of AI business in China”).3 iResearch, iResearch serial market research on China’s AI market III, December 2020. In tech, for instance, leaders Alibaba and ByteDance, both household names in China, have actually become understood for their highly tailored AI-driven customer apps. In fact, the majority of the AI applications that have been widely embraced in China to date have remained in consumer-facing industries, moved by the world’s largest internet consumer base and the ability to engage with consumers in brand-new methods to increase consumer loyalty, profits, 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 experts within McKinsey and across industries, together with substantial analysis of McKinsey market evaluations in Europe, disgaeawiki.info the United States, Asia, and China specifically in between October and November 2021. In performing our analysis, we looked beyond business sectors, such as financing and retail, where there are currently fully grown AI usage 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 a disproportionate impact by 2030. Applications in these sectors that either remain in the early-exploration phase or have fully grown industry adoption, such as manufacturing-operations optimization, were not the focus for the function of the study.

In the coming years, our research study indicates that there is tremendous opportunity for AI development in new sectors in China, consisting of some where innovation and R&D spending have generally lagged international counterparts: vehicle, transportation, and logistics