In the previous years, China has constructed a solid structure to support its AI economy and made considerable contributions to AI internationally. Stanford University’s AI Index, which examines AI developments around the world across different metrics in research study, development, and economy, ranks China among the top 3 countries for global AI vibrancy.1”Global AI Vibrancy Tool: Who’s leading the global AI race?” Expert System 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 financial investment, China accounted for nearly one-fifth of global 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 investment in AI by geographic area, 2013-21.”

Five types of AI business in China

In China, we find that AI companies usually fall into among 5 main categories:

Hyperscalers develop end-to-end AI technology ability and work together within the community to serve both business-to-business and business-to-consumer business. Traditional industry business serve consumers straight by establishing and adopting AI in internal change, new-product launch, and client service. Vertical-specific AI business develop software application and services for specific domain usage cases. AI core tech companies supply access to computer vision, natural-language processing, voice acknowledgment, and artificial intelligence capabilities to establish AI systems. Hardware companies supply the hardware infrastructure 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 types of AI companies 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 family names in China, have become understood for their extremely tailored AI-driven consumer apps. In reality, most of the AI applications that have been commonly adopted in China to date have remained in consumer-facing markets, propelled by the world’s biggest web customer base and the ability to engage with customers in brand-new ways to increase consumer loyalty, profits, and market appraisals.

So what’s next for AI in China?

About the research study

This research is based upon field interviews with more than 50 experts within McKinsey and throughout markets, in addition to comprehensive analysis of McKinsey market assessments in Europe, the United States, Asia, and China particularly between October and November 2021. In performing our analysis, we looked beyond business sectors, such as financing and retail, where there are already 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 a disproportionate effect by 2030. Applications in these sectors that either remain in the early-exploration stage or have mature market adoption, such as manufacturing-operations optimization, were not the focus for the function of the research study.

In the coming decade, our research indicates that there is incredible opportunity for AI development in new sectors in China, including some where innovation and R&D spending have traditionally lagged worldwide counterparts: automotive, transport, and logistics