In Depth: How the Wheels Could Fall Off China’s Road Connectivity Plan

China is gearing up for a future where vehicles can communicate with roads through major investments in "smart roads." These infrastructure enhancements are designed to support vehicle-road-cloud integration for self-driving cars, linking vehicles with traffic lights and cameras to facilitate seamless data exchange. This initiative is part of broader efforts by the Chinese government to invigorate investment activity and potentially address the economic slowdown. With over half-a-trillion yuan being directed towards these initiatives from central and local governments, questions arise on how to involve the private sector meaningfully in this transformation. In July, the Ministry of Industry and Information Technology (MIIT) announced pilot programs for vehicle-road-cloud integration across 20 cities, aiming for a standardized framework by 2026. [para. 1][para. 2][para. 3][para. 4]

Vehicle-road-cloud integration is akin to vehicle-to-everything (V2X) technology, aiming to enhance smart transport systems. The extensive financial commitment from the government is seen as an act to transition beyond small demonstration zones as part of a larger ambition to showcase smart transport technologies extensively. Industry estimates project over 600 billion yuan ($84.3 billion) investment from China’s governments into this sector by the end of the year, planning to extend initiatives to 50 cities by 2026 with participation from over 20 automakers. Despite the substantial investment, these smart roads are capital-intensive, with retrofitting costs potentially exceeding one million yuan per intersection. [para. 5][para. 6][para. 7][para. 8]

The current focused investment direction has raised concerns about whether government funding alone can sustain such expansive projects, particularly given the absence of abundant funding avenues, specific applications, and technical support. Despite establishing developmental zones for self-driving testing and smart city infrastructure, funding remains a challenge, with many cash-strapped local governments only allocating a minor part of their budgets for these upgrades. To cut costs, some initiatives utilize less reliable consumer-grade chips, casting doubt on the long-standing financial feasibility. [para. 9][para. 10][para. 11]

Beijing remains a frontrunner in embracing this shift. In February 2020, amid the early Covid-19 pandemic, it set up an office dedicated to autonomous driving demonstrations and has since proposed draft rules to accommodate smart street infrastructures in future roadworks. Efforts are underway to bid out infrastructure projects under its vehicle-road-cloud project with substantial preliminary investment. However, most cities lack Beijing’s financial muscle, struggling to cater to significant one-time development costs estimated at around half a million yuan for smart infrastructure at a single intersection. Sustainability issues remain concerning strained fiscal budgets, prompting the need for private stakeholder participation to support these projects. Partnering transport industry players to manage operations post-development is seen as a potential revenue source, alongside offering subscription services to car owners for network control platforms. [para. 12][para. 13][para. 14][para. 15][para. 16]

Data monetization emerges as a viable avenue for cash-strapped governments to capitalize on these projects by selling road condition data to self-driving concerns. Cities like Beijing are actively offering traffic signal sensing and other real-time data to car manufacturers and ride-hailing services. Experts foresee using smart road infrastructure to enhance public transportation efficiency; for example, smart systems in Tianjin and Suzhou have improved bus operational efficiency and reduced power consumption significantly. However, the full potential of vehicle-road-cloud integration in areas like traffic management and urban governance remains to be explored further. [para. 17][para. 18][para. 19][para. 20]

Despite the consensus that smart vehicles present future prospects, the industry and government differ on whether intelligence should primarily reside within the vehicle or the infrastructure. There are liability issues over traffic incidents involving autonomous vehicles on smart roads, and doubts persist regarding real-time data processing capabilities in genuinely demanding situations, illustrating the infancy of vehicle-road-cloud technology. [para. 21][para. 22][para. 23][para. 24]