Tencent, Alibaba in race to snap up smart city deals with local gov't

2015-04-16 16:30Xinhua Editor: Gu Liping

After vying against each other in mobile payment, online retail, and taxi-hailing, Chinese internet giants Tencent and Alibaba have taken their battle to a new field - government smart city initiatives.

Several announcements from both Tencent and Alibaba over the past month suggest the two firms are deepening their involvement in local government's initiatives to improve administrative efficiency and transparency.

Under these partnerships, Tencent and Alibaba have asked local governments to move part of their public services, such as applying for car license plates , social security and hospital registration, to the companies' respective mobile applications..

Starting in April, citizens in a number of eastern Chinese cities and northern Chinese province Shanxi can now use Alibaba's mobile payment service Alipay and microblog Sina Weibo to make hospital appointments, check traffic tickets, pay for utility bills and other services.

Cities and provinces are also signing up to Tencent to have public services loaded on popular instant messaging app WeChat. Users in Shanghai, Zhengzhou, capital of Henan Province and southwest municipality Chongqing will be the first to access such services on their WeChat.

The cooperation between local governments and tech firms came after Chinese Premier Li Keqiang urged companies in traditional sectors to leverage internet and cloud computing to grow their competitiveness as the world's second largest economy faces structural headwinds.

Growth of China's economy moderated to a six year low of 7 percent between January and March this year.

"These partnerships with internet firms show that local governments are responding to the central leadership's call to give the internet a greater role in regional economic growth," said Tina Zhang, research director at IT consultancy Gartner.

Citizens in China's largest cities have been complaining about bureaucratic inertia and inefficient public services. Internet could offer a solution to these problems but success depends on the scope of services available through mobile apps and whether they can really make a difference in service quality, Zhang said.

"Moving these services online will eliminate a lot of 'sore points' for citizens, such as waiting in long lines at administrative halls and dealing with grumpy public servants" says Liu Xiaojie, an Alipay executive. "What used to take people hours and miles can now be finished in seconds on our apps."

More than 85 percent of China's 649 million web users now log online using mobile devices, prompting internet giants to diversify their mobile offerings into areas such as retail, dining and transportation.

Similar to previous deals made by other firms, Tencent and Alibaba hope that making public services accessible on their mobile apps could help boost the user base of their mobile apps.

Tencent's WeChat now boast a user base of more than 500 million. Alipay, which started out as a payment escrow service for Alibaba's online marketplace and, also has nearly 200 million users on its mobile apps. Alibaba also has an 18 percent stake in Sina Weibo, whose user base stands at 176 million.

In addition to access to public service on mobile apps, Tencent and Alibaba are also offering cloud-computing capabilities to local governments and helping them build a unified platform for data gathering.

A spokesperson from Aliyun, the cloud computing arm of Alibaba, told Xinhua the market for government-related cloud solutions in China is now valued at 40 billion yuan.

Alibaba says its smart city solutions for local governments also includes using its third party payment service Alipay for government revenue. Eastern Chinese province Zhejiang has said that Alipay will be used to collect non-tax revenue for the provincial government in the future. This source of revenue currently stands at 600 billion yuan in the province.

Such deployment will allow internet firms to capture more data about their consumers, whose behaviors on mobile applications could reveal to companies more about their preferences.

"The more services these apps can offer to users, the more data they can collect from their users and these will help internet firms profile their consumers more accurately" said Jimmie Zhang, principal research analyst at Gartner.

"The Chinese government has more data than any other organization in the country, but these data are not creating any value as long as they sit on government computers or books.," Alipay's Liu says, "they should be used to drive productivity gains."

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