In the past years, China has constructed a strong structure to support its AI economy and made considerable contributions to AI internationally. Stanford University’s AI Index, which evaluates AI improvements around the world across numerous metrics in research study, development, and economy, ranks China among the leading three nations for international AI vibrancy.1”Global AI Vibrancy Tool: Who’s leading the international 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 documents and AI citations worldwide in 2021. In economic financial investment, China represented nearly one-fifth of worldwide private financial 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 geographical location, 2013-21.”

Five types of AI companies in China

In China, we discover that AI business typically fall under one of 5 main categories:

Hyperscalers establish end-to-end AI innovation capability and collaborate within the community to serve both business-to-business and business-to-consumer companies. Traditional industry business serve clients straight by establishing and adopting AI in internal improvement, new-product launch, and customer care. Vertical-specific AI business develop software and services for specific domain usage cases. AI core tech service providers supply access to computer vision, natural-language processing, voice recognition, and artificial intelligence capabilities to develop AI systems. Hardware companies 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 represent more than one-third of the country’s AI market (see sidebar “5 types of AI business 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 household names in China, have ended up being known for their highly tailored AI-driven customer apps. In fact, most 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 largest web consumer base and the ability to engage with customers in brand-new ways to increase customer loyalty, earnings, 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 throughout industries, along with substantial 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 beyond business sectors, such as financing and retail, where there are already fully grown AI usage cases and clear adoption. In emerging sectors with the greatest value-creation potential, we concentrated on the domains where AI applications are currently in market-entry stages and might have an out of proportion impact by 2030. Applications in these sectors that either remain in the early-exploration stage or have mature industry adoption, such as manufacturing-operations optimization, were not the focus for the function of the research study.

In the coming decade, our research study indicates that there is tremendous opportunity for AI growth in new sectors in China, including some where innovation and R&D costs have generally lagged worldwide equivalents: automobile, transport, and logistics