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How the Internet of Things Can Drive Growth in China’s Industries

China needs to close the gap in critical skills and infrastructure, promote cross-industry collaboration and accelerate IoT investment.

Overview


The Internet of Things (IoT) could ignite China’s productivity growth and usher in a new era of global competitiveness for its industries. But this opportunity could be lost without the right enabling conditions. To ensure progress, China needs to close the gap in critical skills and infrastructure, promote cross-industry collaboration, and accelerate IoT investment.

Background

Like the industrial revolutions such as steam power and electrification before it, the Internet of Things is fast becoming the new motive force driving the global economy. Uniting the physical world of objects and the virtual one of computing and analytics, it offers unrivalled opportunities for productivity gains, innovation, and new markets (see “What is the Internet of Things?”).

Globally, nations are scrambling to seize the opportunities this new digital age promises, but for China, the task is particularly urgent. The economy has slowed significantly, productivity growth has dwindled, while competition at home and abroad has intensified. And many of the country’s industries remain stuck in low-value segments, constrained by weak innovation capacity.

In response, China’s government has launched the “Made in China 2025” initiative, modelled on Germany’s “Industrie 4.0” scheme for improving that country’s manufacturing competitiveness (see “Industrie 4.0”). The goal of “Made in China 2025” is to upgrade the nation’s manufacturing capacity, with an eye toward boosting China’s global position in manufacturing and production. It calls for greener, more intelligent and higher-quality manufacturing through the integration of production processes with the internet. Additionally, the government has introduced its “Internet Plus” strategy to integrate the country’s mobile internet, cloud computing, big data and IoT initiatives to promote the extensive application of IT and smart technologies.

Analysis

Our economic modelling shows how the IoT could provide significant benefits for China at the national level, but what about among industries? To understand its sector-specific economic potential in the country, Accenture teamed with Frontier Economics to estimate the cumulative GDP impact of the IoT for twelve key industries in the country.

Our analysis revealed that, based on China’s current policy and investment trends, the IoT could add US$196 billion to the cumulative GDP in manufacturing industries alone over the next 15 years.

While these gains may seem significant, the country could further boost its IoT impact considerably. By making targeted investments and supporting other similar initiatives to improve the country’s capacity to absorb IoT technologies, the additional value generated by each industry would be substantial. For instance, in the case of manufacturing, the economic value from the IoT could jump from US$196 billion to US$736 billion—a 276 percent increase. For resources, the increase would be from US$48 billion to US$189 billion—almost three times higher than under current conditions.

According to the analysis, manufacturing industries would account for the highest proportion of the IoT’s economic benefits, followed by public services spending by the government, and the resource industries. These top three positions account for over 60 percent of the IoT’s total cumulative GDP impact by 2030. In contrast, healthcare, education and transportation industries will likely make relatively small additions to the cumulative GDP from IoT due to their small sector sizes.

Recommendations

China is seeking breakthrough growth in the digital age, and the advent of the IoT could be a game-changer for the nation and its industries. But without the right enabling conditions, that opportunity could be lost. To accelerate the emergence of IoT-led growth, China should focus on three critical imperatives.