2015 target for basic 'Internet of Things' structure

China aims to build a basic industrial structure for the Internet by 2015 to promote technical upgrading and public service levels, according to a government document.

The structure will center on the "Internet of Things", regarded as the third round of the information technology revolution after the emergence of mobile phones and the Internet. It refers to uniquely identifiable objects and their virtual representations in an Internet-like structure.

The country will "launch fiscal and tax policies in favor of investment and financing (in the sector), so as to promote an orderly and healthy development of the Internet of Things", according to a guidelines document on the central government website on Sunday.

Equipping objects with identifying devices could transform daily life. For instance, businesses may no longer run out of stock or generate waste products, as involved parties would know which products are required and consumed.

The State Council, China's cabinet, said the country will achieve "applications of the Internet of Things in key areas by 2015, as well as breakthroughs in core technologies".

China will "develop a number of backbone enterprises, cultivate a group of innovative small businesses, and form a number of distinctive industrial clusters," the guidelines stated.

According to a development plan for Internet of Things industries compiled by the Ministry of Industry and Information Technology, China's IOT market was close to 200 billion yuan ($32 billion) in 2010.

Analysts expect the market expanded to 365 billion yuan by the end of 2012, and will grow to more than 1 trillion yuan over the next four years.

Stocks related to the IOT concept rallied on Monday, led by BDStar Navigation and Invengo Information Technology Co, both of which rose around 5 percent. The entire slate was up 1.66 percent at the close.

Hu Yujie, an industrial analyst with Cinda Securities Co, said cities such as Wuxi, Shanghai, Beijing, Hangzhou, Qingdao, Ningbo and Suzhou have all launched their "smart city" programs, which will be included in the IOT development program.

"The industrial chain of the Internet of Things is widely distributed, ranging from wireless communication to mobile devices and chips. All industries will benefit from the development of the Internet of Things," Hu said.

According to the latest guidelines, China will step up its fiscal support to IOT industries through a special fund for technical innovation, and tax preferences for eligible enterprises.

Apart from support from the central government, the guideline also calls for the participation of venture capital and private investors, in addition to priorities in credit support.

IOT companies are also encouraged to seek direct financing from domestic and overseas capital markets. Chen Yongjie, a senior researcher with the China Center for International Economic Exchanges, said the majority of industrial players in the IOT market are already small and private businesses, and the policy support will help them to be further involved in the sector.

"Small and private businesses have natural advantages in the development of the Internet of Things, as they are good at capturing the market and directing technology development," Chen said.

However, the guidelines also warn against "blindfold construction" of IOT facilities in some regions, and call for the issues to be dealt with properly.

Wu Hequan, an academic at the Chinese Academy of Engineering, said, "China attaches the most importance in the world to the development of the Internet of Things, yet the behavior of many local authorities is still at the concept level."