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Since the inclusion of ‘Smart City’ as a focus area in the Twelfth Five Year Plan (FYP) for National Economy, the number of cities in China (the PRC) to embrace Smart City concepts has rocketed. As of September, 2013, 311 cities have proposed or started Smart City projects, covering cities of all size across the whole country, affecting 52.6% of the population of 1.4 billion. The total investment for the period 2011-2015 on ‘Smart Cities’ will be more than 1.6 trillion yuan (US$260bn). This article examines these Smart City investments and the likely impact.

In the period between 2008 and 2013, the development of Smart Cities in the PRC has grown from concept, through confusion, and progressed to the stage of commercial reality. As of September 2013, Smart City projects have been proposed by all of China’s mega-cities (so-called ‘sub-provincial level’ cities), 89 percent of the second tier ‘prefecture-level cities’ and 47% of ‘county-level’ cities.

At present, China is in a phase of rapid industrialization and urbanization. The city in China faces more challenges than overseas advanced cities in terms of government administration, social management and public services, infrastructure, and environmental degradation. The PRC’s need for Smart City construction is much more urgent. It needs to focus on wider problems. More coordinated effort is required in order to have successful Smart City projects that are uniquely suited for the Chinese market.

The deployment time for Smart City initiatives has been reduced greatly due to the degree of coordination within the government which has issued joint recommendations, combining the guidelines from various relevant ministries. Under the recommendations, there are three leading development models proposed for Smart Cities within the PRC:

• The Comprehensive Development Model: More focused on Tier 1 cities with strong economies and advance information technology infrastructure. These cities will use smart city projects to promote city development, accelerate city transformation by promoting urban development strategies and upgrading various urban developments. For example, the Ningbo government implemented “Seven Policies in One Go”, with emphasis on comprehensive organisation and the establishment of an expert committee and the provincial Institute for Planning the Development of Standards.
• The Idiosyncratic Leadership Model: This is a focus of the southeast coastal cities. It emphasises a particular advantage of the city location, technical resources or talent advantage. Through the smart city construction, these cities will drive and promote advanced industry that are unique to them, with first mover advantage to bring more high-quality resources, forming a virtuous circle. For example, Qianhai, which is a suburb of Shenzhen, is focusing on ‘Central Energy Management, Infrastructure Co-Building and Sharing’.
• The Vigilant Follower Model: Mostly comprised of small and medium cities, which will upgrade and construct intelligent information infrastructure and applications as the key task of their Smart City project. By drawing references from more advanced cities and adapting it to their own situation, these cities will strive to maximise the opportunity that Smart City development can bring. For example, Chengdu has built urban transportation system based on IoT, cloud computing and communication centre.

Cities around the world should be closely watching Smart City developments in the PRC. China is currently at the bleeding edge of developments, and learnings gained from these trailblazing deployments will help future deployments elsewhere. Also, the rest of the world will benefit from the economies of scale that the diverse Smart City projects in the PRC will bring. Finally, for the most part, Smart City projects in the PRC can be used as reference cases for the rest of the world.

However, it is clear that countries around the world should expect China to start exporting Smart City expertise. The PRC is building a huge base of expertise in deploying Smart City solutions. Ultimately we expect that this expertise will be productised, in some way, for export. The form that this will take is up for debate, but it is coming.

By Alex Chau, Machina Research Principal Analyst, Head of Asia