State-owned enterprises are becoming the &#34;main force&#34; in China's AI application demand.
HSBC pointed out in its latest research report that the Chinese artificial intelligence (AI) application market is showing a clear structural differentiation. The demand in the B-end market, especially from state-owned enterprises, is shifting from the initial construction of computing power infrastructure to the specific implementation of AI applications, becoming the core driving force for market growth.
At the same time, cost-sensitive small and medium-sized enterprises are rapidly adopting low-cost, standardized vertical AI applications and are showing an increasing acceptance of subscription payment models. In contrast, the monetization process of AI applications in the C-end market is relatively slow due to a weak consumer environment and fierce competition among internet giants.
<h2>Demand from State-owned Enterprises: Shifting from Computing Power to Applications, High Growth Certainty</h2>
The report indicates that after completing the initial construction of AI computing power infrastructure, the demand focus of state-owned enterprises is clearly shifting from hardware to application software, especially in the fields of defense equipment and manufacturing. The main goals of these enterprises in applying AI are cost control and efficiency improvement, with rigid and clear demand.
Data shows that relevant software suppliers have begun to benefit. For example:
<ul>
<li>
Yonyou has received pure AI product/module orders amounting to approximately 100 million RMB in the first half of 2025.
</li>
<li>
NANCAL's AI products achieved approximately 270 million RMB in revenue in 2024 and are expected to nearly double in growth in 2025.
</li>
</ul>
HSBC expects that starting from the second half of 2025, the demand for AI software from state-owned enterprises will further accelerate, providing significant upside potential for software companies deeply engaged in this field.
<h2>Small and Medium-sized Enterprises Market: Low-cost Subscription Models Rapidly Penetrating, but Competition is Fierce</h2>
For small and medium-sized enterprises with limited IT budgets but also pursuing operational efficiency, low-cost, standardized vertical AI applications are gaining rapid popularity.
These applications typically adopt a subscription model, with annual fees ranging from 10,000 to 50,000 RMB, and are favored for their high cost-performance ratio. Typical cases include:
<ul>
<li>
Beisen's AI interviewer, leadership coach, and other products.
</li>
<li>
CHANJET's AI bookkeeping and tax automation tools, which aim to serve 500,000 end customers by 2025 and reach 1 million by 2026.
</li>
</ul>
This trend not only brings scalable growth to AI applications themselves but also creates favorable conditions for traditional software suppliers to transition to subscription models. However, the report also warns that due to the relatively low entry barriers, competition in this market is becoming exceptionally fierce.
<h2>C-end Monetization Dilemma: Weak Consumer Environment, Intense Competition Among Giants</h2>
In contrast to the booming development of the B-end market, the commercialization progress of C-end AI applications in China is relatively slow.
The report uses overseas markets as a reference:
<ul>
<li>The annual recurring revenue (ARR) of the AI programming assistant Cursor exceeded 500 million USD by June 2025</li>
<li>The monthly revenue of the text-to-video model Kling has exceeded 100 million RMB in April/May.</li>
</ul>
These cases validate the strong pricing power of professional AI productivity tools. However, the domestic C-end market faces two major challenges: first, a weak consumption environment, and second, fierce competition from internet giants. Even companies with a large user base are quite cautious in their monetization efforts. For example, Kingsoft Office's WPS AI monthly active users (MAU) reached approximately 20 million by December 2024, but the company's focus this year remains on optimizing AI products and enhancing user engagement, with its knowledge base product only starting internal testing in late June

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The demand for AI from state-owned enterprises has shifted from "building the foundation" to "putting it to use," with large orders continuously emerging

- The report highlights that state-owned enterprises (SOEs) in China are becoming the main drivers of AI application demand, shifting focus from infrastructure to specific applications.  
- Meanwhile, small and medium-sized enterprises (SMEs) are rapidly adopting low-cost, standardized vertical AI applications, favoring subscription models, despite facing intense competition.  
- In contrast, the consumer market for AI applications is struggling with slow monetization due to a weak consumption environment and fierce competition from internet giants.

China's AI Application Market: Strong Demand from State-Owned Enterprises, SMEs Embrace Subscription Models, Slow Monetization on the Consumer Side