Buy ten barrels of water and get one water dispenser for free!
–Well-known marketing slogan for Chinese barreled water
Background
China is a country affected by severe droughts and water shortages. According to the data released by the Global Water and Agriculture Information System of the United Nations Food and Agriculture Organization (FAO), the annual per capita water resource in China was 2,062 cubic meters in 2014: only one-fourth of the average world level. This makes China one of the poorest in terms of per capita water resources in the world.
The crisis of water scarcity has been exacerbated by the limited availability of freshwater resources and water waste, pollution, climate warming, and decreasing precipitation. One Chinese city affected by water insecurity is Yingtan (鹰潭), a city located in Jiangxi Province (江西省) of Southeastern China with over 1 million people. As in many cities in China, tap water is not safe to drink. Households need to buy barreled water, and businesses have to install water purifiers for clean water.
“Buy ten barrels of water and get one water dispenser for free” is a promotional slogan of a Chinese community water station selling barreled water. In fact, because of its relatively clean and convenient features, barreled water once became the leader in China’s domestic drinking water market, which has grown into a sizable market of nearly 100 billion RMB. However, the barreled water industry is experiencing a cold winter due to frequent safety problems, rising operation costs, residents’ awareness of health and environmental protection, and other factors.
The Yingtan City Water Project
Direct drinking water with installed water filters has the advantage of containing almost no impurities compared to tap water, and none of the packaging and transportation costs that barreled water incurs, making it a more competitive alternative. In developed countries, the direct drinking water system has been used for decades. However, it has struggled to catch on in China because local governments and enterprises typically lack the expertise and financial capacity to equip cities with “smart” facilities—facilities that use innovative cutting-edge technologies. Nevertheless, this was resolved when Huawei, a large technology supplier with expertise in smart city technology, joined forces with Yingtan city officials.
The smart water project leverages cross-sector expertise and funding to create “smart” water facilities, including water purifiers and meters, which allow residents to check the water quality using an app on their smartphones. Another core client base is companies, which can also subscribe to these water management services to ensure that they have access to clean water, resulting in considerable cost savings and reduced waste of water resources.
“We use applications as a starting point and encourage companies to upgrade through trial and error.” Pan Weihua, Yingtan City Information Office Deputy Director, said in an interview with Xinhua News Agency reporters. As the director said, the Yingtan smart water meter project is the result of continuous trial and error by technology companies with the support of the local government. This partnership fits into China’s changing approach towards innovation, which features the reduced management role of the central government and increased latitude for private enterprises’ decision-making.
So far, Yingtan has become the first city in China to apply smart water meters citywide, with 130,000 smart water meters installed in the city. These devices can measure real-time water consumption and alert for real-time water leakage. According to the Yingtan Water Supply Company’s data, the pipe network’s leakage rate has dropped from 20 percent to 12 percent, saving 2.4 million tons of water annually.
Improvement in Urban Water Supply Solutions
The platform deployed in Yingtan is, generally speaking, an Internet of Things (IoT) project with multiple innovative public services. The smart water meter, which requires intelligent sensing devices and a processing center to connect the meter to the Internet or 5G, is one key example of innovation. This new network collects a wealth of data, which can be harnessed for advancements in big data, another Strategic Emerging Industry (SEI). The Yingtan City government took the lead in the smart city project’s top-level design, with mobile network carriers providing the technology infrastructure and the local small and medium-sized enterprises (SMEs) providing the specific types of terminal services, including transportation, assembly, and installation.
As the IoT infrastructure builder, Huawei has made a breakthrough in the government and SMEs’ problem regarding lack of capital and innovative technology. Huawei provided a series of innovative solutions from chip to platform for further partnerships between the government and local SMEs.
As the client of IoT infrastructure services, Yingtan City indeed was the right choice for Huawei. As it turns out, Yingtan, a small inland city, is more likely to promote “city-level” applications because of its small size. In 2017, Yingtan became a pilot demonstration city for the achievement transfer and transformation of the national primary science and technology project of “New Generation Broadband Wireless Mobile Communication Network”, ushering in a historical opportunity period.
As the next step, the Yingtan Municipal Government plans to establish a cooperative alliance with Huawei and sign a series of Internet of Things usage agreements with Huawei to expand the coverage of the Internet of Things (IoT) and ensure the implementation of subsequent technological innovation. Simultaneously, the Yingtan government should continue to help build an open and prosperous IoT ecosystem and introduce more local SMEs to continue innovating public services on Huawei’s platform.
National Promotion of Smart City & IoT Projects
The IoT ecosystem can be introduced and applied to other regions in China. We see the most potential success for IoT systems in formal and informal agreements, primarily highlighting public-private partnerships.
The Yingtan Internet of Things construction project demonstrates the significant role of technology enterprises in infrastructure construction. Therefore, the local government should create an environment conducive to technology enterprises’ development, such as introducing preferential policies to invite leading technology enterprises and encourage local enterprises’ innovation.
Specifically, local governments can sign strategic cooperation framework agreements with enterprises to further deepen the cooperation between them and promote the construction of smart cities. For example, the Yingtan government can sign long-term agreements with technology companies such as Huawei and mobile network carriers to provide a secure infrastructure for the local IoT ecosystem. Governments at all levels can implement universal tax reduction policies, such as suspending or exempting the value-added tax (VAT) of enterprises below a specific size and reducing tax levels for local small and micro-enterprises. This will serve to enable local small and medium-sized enterprises (SMEs) to increase their spending on R&D. This, in turn, strengthens their confidence in the potential for future development and innovation, enhancing the market’s overall vitality.
The local government should take the initiative to cooperate with local SMEs to launch a variety of innovative service products based on IoT through public-private partnerships. As an innovative financing model, three-party public-private partnerships involving local governments, large technology suppliers such as Huawei, and local SMEs have great potential to improve the quality of public services, stimulating innovation and reducing costs.
The current smart water purifier and smart water meter project in Yingtan City is not the only case. Yu Xiuming, the mayor of Yingtan City, said in an interview with Xinhua News Agency that in 2018, Yingtan introduced 14 projects of more than 1 billion RMB in the Internet of Things industry. These IoT core and related industry projects generated an output value of over 40 billion RMB in 2019, just a year after implementation. As another sign of promise in the IoT industry, in Yingtan alone, the number of IoT enterprises has increased from 79 in 2017 to 214 in 2019.
Moreover, in regions outside of Yingtan, large technology vendors represented by Huawei are also carrying out extensive cooperation with Chinese local governments. The “Internet + traffic” cooperation involving the Ministry of Transport in Xinjiang, the People’s Government of Karamay, and Huawei Technologies Co., Ltd., is one good example. This partnership will deeply integrate the new generation of information technology such as cloud computing and big data with the management services of the transportation industry, so as to build Xinjiang into a “transportation hub” with unique advantages along the Silk Road Economic Belt.
These examples all show that local governments in China are well-positioned to negotiate long-term contracts with private enterprises. Contracting the private sector to operate government public services such as water, electricity, and transportation increases efficiency. Incorporating more innovation and localization directly into the operating model of critical public utilities would bode well for China’s provision of public goods and for future innovation-led growth.
(Image Source: Reuters)
Authors:
Haoyang Li
Weijia Ma
Qihan Li
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