The next Frontier for aI in China might Add $600 billion to Its Economy - 156

1 The next Frontier for aI in China might Add $600 billion to Its Economy

In the past decade, China has constructed a strong structure to support its AI economy and made significant contributions to AI worldwide. Stanford University's AI Index, which assesses AI developments around the world across numerous metrics in research, advancement, and economy, ranks China amongst the leading 3 nations for worldwide 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 papers and AI citations worldwide in 2021. In financial investment, China accounted for almost 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 geographical location, 2013-21."

Five types of AI companies in China

In China, we find that AI companies generally fall into one of 5 main categories:

Hyperscalers establish end-to-end AI technology ability and team up 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 companies develop software and services for particular domain usage cases. AI core tech providers offer access to computer system vision, natural-language processing, voice acknowledgment, and artificial intelligence abilities to develop AI systems. Hardware companies supply 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 country's AI market (see sidebar "5 kinds 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 family names in China, have ended up being known for their highly tailored AI-driven consumer apps. In truth, many of the AI applications that have been extensively adopted 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 customers in brand-new methods to increase customer commitment, earnings, and market appraisals.

So what's next for AI in China?

About the research

This research study is based upon field interviews with more than 50 experts within McKinsey and across markets, together with 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 outside of industrial sectors, such as financing and retail, where there are already 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 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 suggests that there is remarkable opportunity for AI growth in new sectors in China, including some where innovation and R&D costs have typically lagged worldwide equivalents: automobile, transport, and logistics