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China is currently the world’s leading producer of artificial intelligence (AI) research and AI patents. This is a huge leap forward compared to where the country was 20 years ago. In 2019, China held 22.4% of the global share of peer-reviewed AI publications, compared to 16.4% from the EU and 14.6% from the US. Moreover, China files more AI patents and publishes more scientific papers on new AI research than any other country in the world. Especially in the fields of speech and vision, e.g., speech recognition, image recognition, or video recognition.

One reason why China has been able to advance so quickly is its abundance in two crucial components of AI development: data and talent. The competitive advantage in AI development comes from being able to develop domain specific expertise or applications for industry-specific data. This essentially means, that a product is created for a specific purpose, after which user data can continually improve its ability to achieve that purpose through machine learning.

China is uniquely positioned because its large population is dynamic and receptive to further digitization in their lives. For instance towards the use of AI-based products or services, which creates the generation of big data required for rapid improvements. For example, the CEO of Didi, China’s largest ride-sharing company, has stated that their app processes over 70TB of data every single day. This data is then used to continually refine Didi’s AI system for planning driving routes and ride requests.

Moreover, the country has continued a decades long push to improve its technological prowess, leading to a wide selection of talented computer scientists and engineers. Over the past few years, China has implemented favorable policies for AI development, such as the “Action Outline for Promoting the Development of Big Data” released in 2015 and the “New Generation of Artificial Intelligence Development Plan” released in 2017. These steps are clear indications that AI is a field supported by the government. This has led to new AI firms being established in the country.

All these factors helped to push China to the forefront of AI development.

How Shein jumped ahead using AI

Shein is a fast-fashion brand founded in Nanjing in 2008, and exemplifies the advantages provided by a thorough integration of AI. Despite remaining almost entirely a direct-to-consumer digital player, except for occasional offline pop-up stores, Shein has managed to entirely disrupt the fashion industry abroad. Through Shein’s implementation of an AI optimized supply chain, the brand is able to keep its business thriving while maintaining minimum inventory and overhead. In fact, the brand has an AI-enabled design and production process that is so efficient, it can produce an entire collection of apparel, from ideation to production, in just three days. This allows the brand to launch up to 5,000 new products every day.

However, the environmental impact of this type of fast fashion must be acknowledged, with the increased production of clothing pieces also causing a rise in pollution and carbon emissions. As Shein is constantly producing new pieces of clothing that follow the latest fashion trends, it has encouraged increased purchasing behavior among consumers, which also causes them to wear the clothing pieces for shorter periods of time before discarding them. This has added to the waste and pollution in the fashion industry and is a factor that must be considered.

What does this mean for brands?

Despite the issues with sustainability, Shein is still a brand that can be learned from, especially in terms of its utilization of AI-based technology to streamline supply chains and allow for increased adaptability to new trends and consumer interests. Being agile and having a customer-centric approach will help brands when it comes to standing out from their competition.

The rapid digitization of the country means that consumers are fast to adopt new technologies, especially if it provides convenience to their daily lives. Examples include the widespread use of WeChat with its ‘all-in-one’ selection of services, the rise of E-commerce compared to brick-and-mortar stores, and the increased reliance on doorstep delivery systems.

Similar to Chinese consumers, brands need to be receptive to these changes, as opposed to becoming overly reliant on past technologies. When it comes to developments in digitization and technology, every part of the market is interlinked. Advances in 5G will lead to increased digitization and connection among Chinese consumers, and thus provide larger amounts of user data for companies, which will further assist in the improvements of AI systems. Brands that want to continue thriving in the Chinese market need to take note of these disruptive shifts and ensure they are not left behind.

How Melchers supports foreign companies in China

Melchers can help foreign companies to develop and roll out their own China strategy. We have been active in China business for 155 years and maintain offices in 18 Chinese locations. As a result, we have a strong national and local presence and understand the individual needs of consumers across China. We help our brand partners to understand the Chinese retail market, correctly assess the market size and competitive situation and identify short, medium, and long-term opportunities for growth. In doing so, we can assume the entire retail function of our brand partners.


To learn more about our services, contact Melchers today via [email protected] or go to for more information.

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