How to survive and thrive in China’s smart cities
CHINA has become the world’s largest market for smart city projects, which the Chinese government greatly supports.
Where do the opportunities lie?
Generally, the smart city is made up of three parts: one, the base or foundation that includes optical cables, 5G network, data centre and others; two, the big data level that includes cloud computing; and three, the application level that includes virtual reality, self-driving technology, e-government and others. Artificial intelligence and cybersecurity are integrated into all three parts.
Smart cities are subsets of the digital economy which includes a multitude of hardware suppliers for smart city initiatives such as mobile payment, remote healthcare and education, and high definition games. These suppliers form a large digital economy supply chain network and provide jobs based on digital technology.
According to China’s Ministry of Industry and Information Technology, the scale of the country’s digital economy has reached RMB31 trillion (S$6 trillion), occupying one-third of China’s GDP.
Having gone through a five-year-long wave of smart-city building, the main funders (mainly the Chinese government) of smart city projects have recognised a few problems that are difficult to solve.
Urban planning is not an exact science. Although big data and geographical information systems can create digital maps and data-enhanced platforms that help to illustrate and analyse problems in city operations, current technology remains unable to replace human intervention and decision-making. Demands for basic services like accommodation and healthcare facilities remain urgent in developed and developing countries alike. Any smart city design would need to take these fundamentals into account.
More importantly, in light of a global economic slowdown, including that of China’s, smart city projects that are originally slow to show returns add to the financial pressures of the government. Under these circumstances, smart city vendors that lack a competitive edge will be heavily burdened.
Small and medium enterprises that fly the “smart city” flag high but lack hard-core technology may also go bankrupt. Such cutting-edge technologies, with a higher benchmark for entry, make it more difficult to duplicate and imitate. They typically require long-term investments and extensive research and development processes, but also bring in good returns. In such a situation, a better strategy for survival could be a buyout by another company.
On the upside, four types of enterprises stand to benefit from smart city market restructuring.
The first type are the ones forming the base or foundation of the information and communications technology sector, such as Huawei and ZTE Corporation. Demand for new generations of telecommunication infrastructure such as 5G or 6G networks, as well as the maintenance of the existing 4G network, will always be present. These enterprises also have their own challenges: in the face of a slowdown and market pressure to sustain substantial growth, revenues that could be shared among business partners may be reduced.
These companies create high-quality manufacturing jobs and have control over longer supply chains.
