Smart Cities - A $30 Billion Opportunity For Cisco, But Will Local Citizens Be Ready?
The following post is about two former colleagues – Asa from New York City and Lifen from Changsha, China. They have never met one another, but their lives are bizarrely linked together because of an emerging trend that’s being spearheaded by a US-based real estate development firm and technology giants like Cisco Systems.
About five years ago my former colleague Asa found himself caught in a dilemma about his career advancement. He had just received a job offer from an up-and-coming advertising firm in New York City. Should he keep his job at Gale International, an established international real estate development firm in the US or accept the new advertising firm’s offer? He chose the advertising firm. When I asked why, he responded, “who cares about building a city in middle-of-nowhere South Korea? There’s no way that will amount to anything – this advertising firm on the other hand, is going to launch my career.”
Since Asa switched companies the real estate project in South Korea has in fact evolved into the model smart city of the future – New Songdo City, South Korea. New Songdo is not a typical city - it is the beginning of what ambitious real estate developers like Gale International, and several multinational technology firms led by Cisco are seeking to replicate throughout emerging markets in Asia and beyond.
This is where the story of Lifen, my former Beijing-based colleague, begins. Lifen is from Changsha, the capital city of China’s Hunan province. In 2009 the Changsha Municipal Government authorized Gale International to build its next smart city right outside of Lifen’s hometown. The Meixi Lake District is one of 20 new cities Gale International plans to build across China and India alone.
The rate of urbanization is increasing in China and many other emerging markets, but are citizens ready to move into these smart cities? Out of China’s population of over 1.3 billion, only a small portion of these are considered middle-class and above. This means that most families Gale and Cisco aim to relocate into their smart cities are low-income rural families with comparatively low levels of education. The transition from a rural to an urban lifestyle is difficult enough, but from a rural lifestyle to a smart city urban lifestyle? From an economic and social standpoint, this seems like a stretch.
New Songdo City has the potential to be a great success, but the overall standard of living for average citizens in South Korea is significantly higher than that of China or India. During her last trip home, Lifen recently helped her father set up an email account. I am curious to see how she manages to teach him how to use the Cisco TelePresence in his living room to pay for his water and electricity once her parents move into Meixi Lake District.
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Although new cities in China may not be connected and wired to the extent of a “smart city”, urbanization is taking place at an amazing pace. Beijing and Shanghai are best known as the “big cities” of China, but 2nd-tier cities and “city centers” are being created in every province of China, seemingly “in the middle of nowhere”. But these city centers create a hub for local economies, and drive trade and growth, until you have a “2nd tier city” that is actually bigger in terms of population than New York or LA. There are DOZENS of these 2nd tier cities, and as they keep growing, new ones will also keep appearing. Before you know it China’s 2nd tier cities will not only start developing “smart” infrastructure themselves, but there will be a need to create a whole web of smart infrastructure for cities to interact with other cities.
ceo@chinafirstcapital.com