Multi-faceted efforts are being made to transition China’s economy from a reliance on fixed-asset investment to that of market-driven consumption. As announced with China’s 13th Five-Year plan, civil engineers are designing and developing “Smart Cities”. Under this plan, local and national governments are making targeted efforts to address urban resource shortages, pollution, traffic congestion and safety concerns, and aim to provide a toolkit for deeper issues such as a shortage of high quality consumer products, low service efficiency and general dissatisfaction among the urban population. Several new policies have been announced that are dedicated to improving the wealth and education levels of urban residents in an effort to transform physical, as well as social, infrastructure to promote healthy consumption in China’s new economy.
Planning for these “Smart Cities” (or “Smarter” for those already-established urban centers) encompasses civil planning and sociological research, and its development includes coordinating across industries of strategic importance, such as energy and environmental protection. Additionally market-driven “buy-in” is needed from sectors such as health care, transportation, logistics, finance, communications, and education. The Five-Year plan clearly outlines expectations that these “Smart Cities” will serve as one of many key drivers of economic development and will broadly improve the lives of the Chinese middle class.
This effort is an integrated approach, whereby public services and private enterprises must collaborate across transportation, logistics, healthcare and education, and these efforts can be accelerated by the utilization of modern web-based technologies and cloud computing systems. This type of cross-product and cross-industry integration will also lead to smarter government administration, rationalized construction and building, more efficient transportation, and increasingly safe public security. Smart cities will also have a substantial impact on daily consumption habits and companies will need to quickly adapt through the use of more robust analytics and consumption reporting tools. There is a waterfall effect as well, as these infrastructure improvements will lead to more robust data and analytics on consumption habits, and FMCG and retailing brands will simply know their consumer better and be in a stronger position to provide products and services with higher sell-through rates.
As Chinese consumers steadily see their living standards rise and income levels grow, it is increasingly important that the infrastructure of their cities improve. Upstream and downstream consumption services will be integrated across industries such as; i) elderly care, healthcare and medicine; ii) travel, fitness and athletic facilities; and iii) leisure, parenting, education and entertainment. Business decisions and market operations must be based on the cross-industry network of “Smart City” big data, rather than relying solely on the simplistic efforts of yesterday – surveys, and trial-and-error.
China’s rapid urbanization, continual expansion of cities and a burgeoning group of middle class urbanites is gaining close attention of policymakers and companies. Businesses that can provide consumers with better products and services will be in a strong position to reap the rewards of these structural shifts.
Lunar | February 29, 2016