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Technology


CHINA’S SMART CITY TRANSFORMATION: DATA COMMERCIALIZATION IS KEY

Tuesday, June 7, 2022



It will take another five to eight years for technology such as 6G communication
networks, satellite internet, autonomous driving and quantum computing to drive
economic growth in China and the world. In addition to increasing investment in
existing technologies in the next three to five years, writes Chen Xi of Harbor
Overseas, China should also look to perfect its data market, which is expected
to improve total factor productivity and tackle political, economic and social
challenges resulting from the slowdown of growth.

Credit: jamesteohart / Shutterstock.com

Technologies that are available to us determine how we consume digital goods and
services. Digital consumption, such as driving intelligent vehicles and using
smart government platforms, is made possible by technologies such as cloud
computing and artificial intelligence (AI). Digital consumption in turn propels
the production of such technologies. For example, growing interest in e-sports,
health trackers and teleconferencing leads to the consumption of products such
as virtual reality technology and wearable devices, thus stimulating the
production of such digital goods and services. In developing the digital
economy, all economies should prioritize the production of technologies over
promoting digital consumption.

Second, digital intermediaries bridge the gap between consumers and the
producers of technology. Consumers from different sectors and backgrounds often
have specific expectations of digital products and services, and producers
sometimes fail to address these specific demands. Digital intermediaries promote
digital consumption through processing data, confirming data rights, evaluating
and pricing data, and assisting the rightful owners of the data or the
technology producers to access the profits. Deals could be between small and
medium-sized enterprises (SMEs) and tech giants or among SMEs.

Governmental data in China is housed mainly in city-level big data centers,
which in general are under the Economy and Information Technology Bureau, while
social data owned by individuals and groups is stored on privately run
platforms. Both state-owned digital investment companies and private platform
economies rely on big data exchange platforms in major cities such as Beijing,
Shanghai and Shenzhen to complete data transactions. Due to high operating
costs, however, these state-owned digital investment companies and private
platform enterprises often fail to meet the demands of highly personalized,
diversified and fragmented digital consumption. Having a sophisticated digital
intermediary ecosystem that can provide customized products and services could
be the solution.



Building platforms that balance governance and market efficiency

State-owned smart city investment companies promote the centralized construction
and sharing of infrastructure and the decentralized collection of data to
contribute to a shared pool of resources, all of which are conducive to good
governance. We should be cautious, however, about the inertia of state-owned
investment platforms in traditional infrastructure investment, construction and
operations. For example, an investment platform may monopolize the downstream
data market, which could discourage MSMEs (micro, small and medium enterprises)
from innovating in various fields, including law, finance, consulting and
technology, thus weakening market efficiency. To prevent this, the government
should proactively coordinate planning, allowing intermediaries to focus on
other opportunities and their businesses in the data market. It is also
necessary to establish a cross-regional intellectual property protection and
dispute resolution mechanism, as well as a regulatory anti-monopoly mechanism to
keep competition in check and protect digital intermediaries.

On the other hand, we should be cautious about the risk of information
infrastructure turning into real estate investment trusts (REITs). Most
infrastructure such as urban wireless networks, data centers or urban big data
platforms are public facilities that tend to have low profitability and lose
their values within three to 10 years, which is much shorter than the
depreciation of traditional infrastructure. State-owned investment platforms may
therefore accumulate many low-profit assets, which will increase debt risk.

Adjusting administrative structures to facilitate data governance

In general, China enjoys a wealth of experience with data governance systems
applied in cities, districts, streets, communities and buildings, as well as
popularizing the use of mobile terminals at different levels and decision-making
systems. The next important task would be to make the governing structures and
rapidly changing technology adapt to each other.

The Chinese government acts according to three considerations: responsibilities,
organization and staffing. “Data” should also be included to allow the execution
of pilot projects in certain cities. The Economy and Information Technology
Bureau and its big data centers can provide regular and standardized guidance
and supervision during the whole life cycle of the data.

Second, the state should establish interdepartmental and cross-regional virtual
organizations to promote collaboration. At the municipal level, for example,
cross-departmental virtual platforms can improve the efficiency of governance
without burdening individual government departments. In addition, towns and
communities can also build cross-regional virtual platforms to address the
challenges of cross-regional governance.

Third, a supervisory mechanism should be put in place to ensure fair competition
and strict oversight. Regulatory bodies such as the Market Supervision
Administration should establish an integrated and comprehensive credit
supervision mechanism for enterprises and the government. In addition,
regulatory sandboxes can be enforced annually or on a departmental basis. The
items on the regulation list could be adjusted based on effectiveness.

Credit: jamesteohart / Shutterstock.com

Fourth, an AI governance framework that takes both local demand and
international standards into consideration should be established. At present, it
is difficult to predict fully the negative impact of AI. Passing legislation
could delay the government’s response to the needs of businesses and society. A
flexible regulatory framework based on global standards would provide support to
legislation and could help ensure transparent, fair and interpretable (including
models and interfaces) AI technologies and algorithms; maintain a balance
between human and AI decision-making; and ensure personal privacy, data security
and human-centered values.

Equality – the bottom line of development

Smart cities are evolving into AI-powered societies, which may aggravate social
injustice and add new challenges to the equalization and balanced development of
public services.

Supported by policies, publicity and education, China should seek to bridge
digital divides, particularly among vulnerable, elderly and rural populations.
To ensure that more people reap the benefits of smart cities, the income
distribution mechanism of digital assets can be explored. Because urban areas
and digital giants possess more resources such as talent, capital, technology
and data, the social income gaps will widen. But with advancements in technology
and the verification, evaluation, pricing and transaction of digital assets,
wealth can be redistributed and more people would benefit from data markets.

Promoting the integration of cross-regional data markets

The integration of cross-regional data markets will build new development
drivers. Beijing, Tianjin, Chengdu, Chongqing, Wuhan and other northern Chinese
cities are rich in land, talent, capital and technology. To promote the
integration of the cross-border data exchange platforms among the northern
cities, the Guangdong-Hong Kong-Macau Greater Bay Area (GBA), Hainan and ASEAN,
terms to achieve the openness and expansibility of data should be published that
are similar or stricter than those contained in the Digital Economic Partnership
Agreement (DEPA, the digital trade framework promoting interoperability that
includes Chile, New Zealand and Singapore and China has applied to join). Such
connections drive the proliferation of digital consumption and intermediary
ecosystems and give birth to more technologically advanced MSMEs.

The data market and connections in the physical world are interdependent. The
connectivity of traditional infrastructure such as road, energy and water are
thus very important. For example, the Hong Kong-Zhuhai-Macau Bridge, which
connects both sides of the Pearl River Delta, accelerates the flow of resources.
Such connections will facilitate the cross-regional exchange of data and in turn
improve the business ecosystems of the Shenzhen “Pilot Demonstration Zone”, the
Northern Metropolis of Hong Kong and the Guangdong-Macau In-Depth Cooperation
Zone in Hengqin Island in Zhuhai. With these measures, China will be able to
achieve quality development, open up to the world, undergo high-level reforms
and, eventually, lead the development of smart cities in Asia.

Further reading:

Chen, Xi. (February 17, 2022) “The China-US Geo-Tech Competition: State of Play
2022”, AsiaGlobal Online, Asia Global Institute, The University of Hong Kong.

Lim, Christopher H; and Mack, Vincent. (December 5, 2019) “A Global Smart
Renewable Power Grid: A Radical Proposal”, AsiaGlobal Online, Asia Global
Institute, The University of Hong Kong.

Lim, Sun Sun; and Bouffanais, Roland. (August 9, 2018) “The Science and
Sensibilities of Smart Cities”, AsiaGlobal Online, Asia Global Institute, The
University of Hong Kong.

Opinions expressed in articles published by AsiaGlobal Online reflect only those
of the authors and do not necessarily represent the views of AsiaGlobal Online
or the Asia Global Institute



AUTHOR

Chen Xi

Harbor Overseas

Chen Xi is an expert on geo-tech competition, smart city and ICT corporation
strategy. He is the board chair and CEO of Harbor Overseas, a global smart-city
consulting company. He is senior external advisor to the China Academy of
Information and Communication Technology. Dr Chen is an adjunct associate
professor at Xi’an Jiaotong University and an academic committee member at the
Institute for Global Cooperation and Understanding of Peking University. He
served as the president of Institute of Smart City Planning and Design of
Beijing Municipality, having assisted the Beijing Municipal Government in
shaping smart-city policy, regulation and evaluation systems. Chen was a
visiting senior fellow at the S Rajaratnam School of International Studies
(RSIS) at Nanyang Technological University (NTU) in Singapore in 2019. He served
as president of the Institute of Smart City Research at the ZTE Corporation
2016-2019 and an advisor to the ZTE Strategy Committee. He played a leading role
in designing smart-city projects in Beijing Sub-center, Nanjing, Shenzhen,
Gwadar (Pakistan), and Frankfurt. He completed his PhD under a joint program
between Dalian University of Technology and Cornell University, which was
sponsored by the China Scholarship Council. He finished his post-doctoral
research on the China-US geo-tech competition under a joint program between
Peking University and Beijing University of Aeronautics and Astronautics.



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