In the previous decade, China has actually developed a solid foundation to support its AI economy and made considerable contributions to AI globally. Stanford University’s AI Index, which examines AI developments around the world throughout various metrics in research, development, and economy, ranks China amongst the leading three nations for worldwide 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, for instance, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In economic investment, China accounted for nearly one-fifth of worldwide 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 financial investment in AI by geographic location, 2013-21.”

Five kinds of AI companies in China

In China, we find that AI companies typically fall into one of 5 main classifications:

Hyperscalers establish end-to-end AI innovation capability and collaborate within the environment to serve both business-to-business and business-to-consumer companies. Traditional industry companies serve clients straight by developing and embracing AI in internal change, new-product launch, and client services. Vertical-specific AI business develop software and options for specific domain use cases. AI core tech suppliers supply access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to develop AI systems. Hardware business supply the hardware infrastructure 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 country’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 instance, leaders Alibaba and ByteDance, both family names in China, have actually ended up being known for their extremely tailored AI-driven consumer apps. In fact, many of the AI applications that have actually been commonly embraced in China to date have actually remained in consumer-facing markets, moved by the world’s largest web customer base and the ability to engage with customers in new ways 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 professionals within McKinsey and across markets, along with comprehensive analysis of McKinsey market evaluations in Europe, the United States, Asia, and China specifically in between October and November 2021. In performing our analysis, we looked outside of commercial sectors, such as finance and retail, where there are currently mature AI usage cases and clear adoption. In emerging sectors with the highest value-creation potential, we focused on the domains where AI applications are currently in market-entry phases and might have an out of proportion impact by 2030. Applications in these sectors that either remain in the early-exploration phase or have mature market adoption, such as manufacturing-operations optimization, were not the focus for the purpose of the study.

In the coming decade, our research suggests that there is significant opportunity for AI development in new sectors in China, including some where development and R&D costs have typically lagged worldwide counterparts: automotive, transport, and logistics