In the past decade, China has constructed a strong structure to support its AI economy and made significant contributions to AI internationally. Stanford University’s AI Index, which evaluates AI improvements around the world across different metrics in research, development, and economy, ranks China amongst the top 3 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, for example, China produced about one-third of both AI journal documents and AI citations worldwide in 2021. In financial investment, China represented nearly one-fifth of international private 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 area, 2013-21.”

Five types of AI companies in China

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

Hyperscalers develop end-to-end AI technology ability and team up within the environment 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 establish software and solutions for specific domain use cases. AI core tech companies offer access to computer system vision, natural-language processing, voice recognition, and artificial intelligence abilities to develop AI systems. Hardware companies provide the hardware facilities to support AI demand 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 nation’s AI market (see sidebar “5 types of AI business 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 household names in China, have become understood for their highly tailored AI-driven customer apps. In reality, many of the AI applications that have been commonly adopted in China to date have actually remained in consumer-facing markets, propelled by the world’s largest web customer base and the capability to engage with customers in new methods to increase consumer loyalty, income, 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 professionals within McKinsey and throughout markets, 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 outside of business sectors, such as financing and retail, where there are already mature AI use 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 phases and could have an out of proportion effect 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 decade, our research study indicates that there is remarkable chance for AI growth in new sectors in China, consisting of some where development and R&D spending have actually traditionally lagged worldwide equivalents: vehicle, transport, and logistics