A recent McKinsey Global Institute study, "The Race Takes Off in the Next Big Arenas of Competition," tracks 18 future competitive arenas—from AI services and semiconductors to electrification, robotics, space, and cutting-edge biotechnology. The report also explores China's future development, highlighting which industrial arenas are key to its success.
Global Landscape: Rapid Growth in 18 Arenas, AI Ecosystem Explodes at an Accelerated Pace
McKinsey has been tracking developments across various competitive sectors and found that since 2022, the market capitalization of these 18 sectors has grown at approximately four times the rate of other industries, while revenue has grown tenfold. The accelerated development of the artificial intelligence ecosystem is a core theme: semiconductors, cloud services, and AI software have collectively added approximately $500 billion in revenue and $11 trillion in market capitalization over the past three years.
The report also identified a new competitor: "all-encompassing giants," with nine companies currently competing on a large scale across multiple arenas. These giants are projected to generate a combined $700 billion in operating cash flow by 2025, with total R&D and capital expenditures exceeding $800 billion in the same year.
Focus on China: Strengths and Challenges in the Arena
Currently, companies from the United States and Greater China together account for 90% of the total market capitalization in these arenas. The United States leads in market capitalization in 14 of the 18 arenas and in revenue in 10. However, we can see that China is rapidly catching up, especially in terms of revenue share, as evidenced by the following points.
1. China's global manufacturing strategy is deepening. The overall development of the Chinese market, the scale of investment, and the expansion of global connections are driving the growth of China's manufacturing and exports. These two advantages continue to enhance China's importance and its status as an economic powerhouse, boosting its global competitiveness. As global industrial chains continue to transform, China remains a major exporter, and its trading partners are constantly changing. China's position as the "factory of factories" is becoming more solidified, and it is now providing impetus for global manufacturing development. According to our observations, Chinese companies are increasing investment in key future industries and expanding their investments outside Asia, making their global role even more important.
2. Intense Competition in the Arena: The future industrial arena is reshaping the global competitive landscape, with Greater China emerging as a leading region. A McKinsey report indicates that 18 competitive sectors are growing faster than other industries. Between 2022 and 2025, market capitalization is expected to grow at approximately four times the rate of other industries, and revenue at approximately ten times the rate.
In the global Future Arena, Greater China accounts for approximately 15% of the market capitalization and 30% of the total revenue, second only to the United States (which accounts for 75% of the global Future Arena's market capitalization and 55% of its revenue). Within Greater China, companies included in the Future Arena hold a significant share, accounting for 30% of market capitalization and investment, and 17% of total revenue—the highest proportion globally. However, the return on investment for companies in China's Future Arena appears disproportionate. While the overall return on invested capital (ROIC) is approximately 18%, it remains lower than in the United States, reflecting intense competition and differences in market structure.
3. The continued expansion of cross-industry enterprises: China now boasts a concentration of powerful industry leaders and globally-scale companies, whose continued growth demonstrates their ambition to expand into new sectors. From mobile phone and internet companies to internet-related service providers, these enterprises have consistently increased investment over the years, deepening their coverage and strategic footprint. As leading semiconductor and electric vehicle manufacturers accelerate their expansion to achieve a broader market presence, these companies are also focusing on and deepening their expertise in specific areas. I anticipate that the entire ecosystem will continue to expand, with new cross-industry enterprises emerging one after another.
4. Electrification as a Key to Development: Electrification is a core pillar of many industries and even a key to economic development. As industry players scale up, consolidate, and accelerate their growth, it will drive industry development. The following three industries are particularly focused on the Greater China region:
Electric Vehicles: By 2025, Greater China will account for over 60% of global electric vehicle sales. Benefiting from strong domestic demand, electric vehicle sales have surpassed traditional vehicle sales by mid-2025. Coupled with competitive cost advantages, the industry's development has become a global focus. Batteries: Approximately 85% of global battery manufacturing capacity and about 70% of key mineral refining are concentrated in Greater China. Nuclear Energy: Due to lower construction costs and faster construction speeds, over 50% of global nuclear power capacity is under construction.
5. AI Accelerates E-commerce Development. Digitalization remains a crucial area, already possessing a significant scale advantage. Combined with the continuously growing artificial intelligence (AI), this will intensify competition. For example, in e-commerce, four of the top five e-commerce companies by Gross Merchandise Volume (GMV) are from Greater China. These companies are also striving to enhance value and build consumer-interest-based platforms. With the support of AI, the industry is also reshaping its landscape through new interactive interfaces, such as agentic AI. Furthermore, China remains one of the world's largest gaming markets, with sales reaching approximately $45 billion in 2024.
6. The AI industry is becoming increasingly competitive. Greater China already possesses strong foundational AI capabilities, covering industries including semiconductor manufacturing, AI software, and services. Chinese tech giants are all launching their own AI products, tools, and services, leading to intensifying competition.
7. New Technology Developments: Driven by proactive deployment and policy support, China's hard technologies and emerging fields are demonstrating strong momentum. Capabilities in robotics, autonomous driving, and aerospace continue to improve; for example, driverless taxis are already in large-scale operation and have even become profitable on a per-unit basis, indicating a positive market trend.
In the face of global economic volatility, a breakthrough mindset is even more crucial. Competition is fierce in China's most promising sectors, with companies actively seeking growth opportunities and seizing chances. For China, the key challenge for the future will be how to maintain its advantages in manufacturing and electrification while simultaneously improving the return on investment in fields such as AI and semiconductors, and cultivating its own "all-encompassing giants."
This article originally appeared in Capital.