Intelligent Navigation of China's Smart Cities

China’s build-out of “smart cities” is significantly smaller than suggested by the hype, but still represents a $153 billion opportunity across 54 projects, mostly in the southern and eastern provinces, according to a Lux Research report. Among the 54 “real” projects, 35 are scoped at city level — in some of the country’s largest and most crowded cities, including Beijing and Shanghai — and account for $76.2 billion, nearly half the total investment. Seventeen projects are at the sub-city level and two at the city cluster level.

Lux researchers assessed real on-the- ground realities through a detailed project-by-project analysis, supplemented by extensive interviews with government officials, state-owned enterprises, academics, and technology providers. Among their conclusions:

  • Telecom will be the biggest beneficiary. The bulk of the spending on smart cities will be on telecommunications because of the need to build robust infrastructure to support the proliferation of data transmission. From 2011 to 2015, Lux Research estimates the investment on data transmission at $96 billion, or more than 60% of the total investment.
  • Sub-city projects have the most reliable stakeholders. City cluster projects have the highest average project investment but are hindered by the weak ability of lower tier cities to manage large projects. In contrast, sub-city projects are, on average, more investment intensive because of the leading cities’ higher GDP and the resulting stronger ability to make large investments.
  • Foreign companies’ future unclear. Foreign IT companies like Ericsson, IBM and Cisco have enjoyed early access to China’s market but their future is cloudy due to expected Chinese demand for reciprocity and government concerns about information security. There is no definitive threshold that could preclude foreign companies but the barriers will get higher with the rise of the big three telecoms and entities such as CASIC, Digital China and State Grid.

“Intelligent Navigation of China’s Smart Cities” is part of the Lux China Innovation Intelligence service.


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