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Can China crack the Internet of Things?

It’s heralded as TNBT (the next big thing), high on any self respecting futurist’s to do list for 2012. Yet industry insiders remain sceptical that the Internet of Things (IoT) will reach fruition, this year, at least. They cite costs, technical prowess, planning and government support as some of the hurdles which need to be negotiated before we can get on the road to technological nirvana (or anti privacy hell, as some would have it) and our environment, buildings, vehicles, clothing and devices are all  sensing, communicating, networking and producing masses of beautiful data. 

However, in China, costs, technical prowess, planning and government support would not appear to be a problem. The country’s Ministry of Industry and Information Technology implied last month, in its 12th Five-year Development Plan of the Internet of Things, that it will actually be bringing forwards development goals and roadmaps for IoT, together with further measures to support and promote the development of the industry.

This month Beijing invested in a laser writing scheme for pork products. The capital city consumes 30,000 pigs a day over the New Year period and it’s the national favourite meat. However, eating pork can be dangerous: 4 million pounds of it had to be recalled by the government last year after pigs from central provinces were found to have been injected with a fat-reducing drug. Even if the meat is safe, many Chinese complain of water being injected into the meat to increase its weight.

In order to deal with this, the Government has launched the “Meat Reassurance” project. A series of numbers are etched onto pig’s bodies with a laser, they show the date that the pig was slaughtered and which shipment it is part of. Sixty-seven Beijing supermarkets are currently hooked up to the project. Their customers can receive a printed code telling them where the meat came from, each time they buy pork.. It also means, if there is another outbreak of poisoning, the government can easily check who is responsible and special slaughterhouse meat hooks with RFID chips can record the weight of pigs before and after they leave the slaughterhouse.

The project has initially cost the government around £200,000. It will be extended to cover all the city’s supermarkets within three years. Supermarkets and slaughterhouses will pay for about two thirds the project’s costs, 

The project is just one of many the Chinese government has authorised in its drive to adopt the IoT as one of the “strategic industries” which will receive £1 trillion in government investment over the next five years. Most IoT investments will fund transport and logistics projects, including GPS tagging for shipping containers, and automated traffic control systems, according to the Internet of Things Association in Shenzhen, southern China.

The Chinese government believes strongly that a technological revolution brought about by the IoT is just what’s needed to push the economy, particularly industries, clear of the current international financial crisis. It sees  IoT as an "engine" that promotes industrial upgrade and drives society towards “informatization” with  its vast market potential.  which applies to all aspects of production and all aspects of people's lives. It’s superior to the Internet itself in that it links up the physical world, which has a far greater volume. The  Chinese expect that, by 2020, the ratio of thing-thing network business to current human-human network business will be 30:1, and IoT will be widely adopted and developed into a £ trillion-level industry.

Much of this view is shared with Western governments, however take up of the new technologies has been far slower in the West and despite knowledge that the IoT will create an enormous, largely beneficial  impact, it’s  currently creating an enormous headache for anyone seeking fast-track implementation outside China. One of its most lucrative aspects is Machine to Machine communication (M2M), an area creating much excitement and no little hype.

“There is no doubt that the machine-to-machine market, as a component of The Internet of Things, holds a lot of promise for many OEMs, ISVs and ICT service providers,” writes  Eric Goodness, a vice president in Gartner Research, which provides technology analysis and intelligence. Gartner are currently working on a user survey related to M2M solutions, due for publication in early February. 

Goodness believes that the next 24 months are key to convincing companies to integrate new M2M solutions, especially if there isn’t significant promise of cost reduction or efficiency. Of the companies polled who were NOT planning to deploy any M2M solutions in the foreseeable future, Gartner found doubts that applying M2M connectivity to IT, would provide measurable business value. Goodness puts this down, largely, to a lack of knowledge and ineffective solution positioning by providers: “ In my inquiries,” he says, “I hear user’s frustration with how their providers enable inflated expectations in the pre-sales phase only to back off claims when confronted with the user’s real world requirement to establish an ROI expectation in a contract. The gap is sometimes massive…and off-putting”.

So, it seems that, while, in the West, the success of M2M and IoT is certain, the timeline of success is less so. Goodness believes that growth rates will under-perform many of the standing forecasts in the market today. But is it the same story in China? Well, that depends, largely, on your politics.

Chinese state capitalism has had some success in tackling second-generation infrastructure problems such as building the information superhighway - China’s mobile-phone network is the world’s largest, yet it suffers from fewer technical hitches or areas with no signal than America’s. China has the world’s biggest number of internet users and has turned itself into a pioneer in some areas of green energy.

China has also been successful in producing national companies that can compete globally. Two-thirds of emerging-market companies that made it onto the Fortune 500 list are state-owned. Governments can provide companies with the resources that they need to reach global markets. They can also insist on mergers that produce global giants.

Some of these Chinese nationals are the corporate world’s greatest learning machines, they have come to prominence through studying the best of the breed and by taking over foreign companies, thus gaining expertise. State subsidies enable them to plan for the future as well as respond to fast-changing consumer tastes. 

Yet there is much evidence that state-owned companies are less innovative and less productive than private ones although this has not stopped them from making lots of money. In 2009, state giants China Mobile and China National Petroleum Corporation made more than the country’s 500 most profitable private companies combined

State-owned companies are attractive places to work: they pay more than private firms, equivalent to multinational ones, offer shorter hours and cast-iron job security. However this industrial utopia has its price: extravagant perks and widespread corruption have been reported as well as the belief that institutions nominally owned by the people have been taken over by ruling elites. Reports also suggest that the 99% of the population who do not benefit from these arrangements are getting increasingly angry with the 1% who do. But unlike their contemporaries in the West they have few ways of showing it. Perhaps we should be asking a different question. Perhaps it's more important to ask, even if China does become a leading purveyor of IoT technologies, will the technology linking things together form enough glue to bind the people together? 

To see what's happening in China at first hand, there are still opportunities to join UKTI’s Enabling Innovation 'M2M & Internet of Things' Trade Mission to China, 19 - 23 March 2012. Find out more here.

 
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