The DSR’s Urban Frontiers: China’s Smart Cities Strategy

Image Source: Freepik

China’s overseas smart city development under the Belt and Road Initiative (BRI) and its sub-initiative, the Digital Silk Road (DSR), is reshaping the geo-economic and technological landscape of the Indo-Pacific. Launched in 2017, the DSR promotes China-led information and communication technology (ICT) cooperation and digital infrastructure development with BRI partner countries. Between 2017 and 2023, Chinese economic engagement in the Indo-Pacific, under the DSR framework, totalled US$22 billion, spanning telecommunications, artificial intelligence (AI)-enabled surveillance applications, and cloud computing.

Supported by Chinese state banks, as well as private and state tech firms, Beijing has signed DSR cooperation agreements with around 40 countries, out of which 24 are from the Indo-Pacific. Through the DSR, China has emerged as a dominant provider of AI-driven surveillance and smart governance tools in the region, raising critical questions about long-term digital autonomy in the region’s countries. This article examines how the DSR’s smart city initiatives function as Beijing’s instruments of strategic and geo-economic statecraft.

Components and Objectives of DSR’s Smart Cities

China’s overseas smart cities integrate the DSR’s ICT cooperation across various domains, including surveillance, undersea cables, 5G/4G cooperation, hi-tech manufacturing, BeiDou navigation systems, cloud computing, and AI partnerships, along with traditional BRI infrastructure development.

Table 1: Overview of Identified Chinese Smart Cities Technology Exports

Source: U.S.-China Economic and Security Review Commission

According to Table 1, the breadth of Chinese smart city technology exports spans multiple sectors—from surveillance systems and 5G infrastructure to fintech, municipal services, and integrated emergency platforms, reflecting the expansive global reach of Chinese firms. The DSR instrumentalises smart cities development as a strategic opportunity. Under it, Chinese state-owned and private companies pursue large-scale deployments, particularly in developing nations, where low-cost solutions backed by state-owned lenders such as the Export-Import Bank of China (China Eximbank) have proven especially effective. Though transparency around data governance in these projects remains limited, access to vast, cross-border datasets certainly strengthens the competitive edge of Chinese firms. It may also contribute to the state-aligned intelligence collection efforts.

Smart-city projects improve infrastructure but also knit partner cities into a China-centric economic, technical, and security architecture.

Beijing frames its DSR smart cities as a win-win modernisation effort. Furthermore, these projects also serve Beijing’s multiple strategic goals. The key interconnected objectives of DSR smart-city projects include promoting export markets for Chinese tech firms, alleviating domestic overcapacity and boosting Chinese leadership in emerging technologies. They also aim to deepen economic ties via Chinese financing and trade, promote the yuan and China’s digital platforms and tie participating countries into China-led digital supply chains. Additional objectives include strengthening bilateral relations through technology aid, exporting Chinese governance models such as ‘cyber-sovereignty,’ shaping regional digital governance institutions, gaining access to foreign data and networks for intelligence and building geopolitical leverage through weaponised interdependence.

Collectively, these objectives reinforce one another: smart-city projects improve infrastructure but also knit partner cities into a China-centric economic, technical, and security architecture. By weaving smart-city technology with loans, standards-setting, and high-profile visits, China advances a comprehensive statecraft strategy under the DSR cooperation framework. Table 1 illustrates China’s broad toolkit being exported globally. These DSR smart city projects are designed not just to modernise urban areas in recipient countries, but also to project Chinese power and embed partner economies within China’s strategic orbit.

Geopolitical and Geo-economic Implications

China has steadily implemented its strategy in the Indo-Pacific, especially across Southeast and South Asia. The total economic engagement of the DSR in the Association of Southeast Asian Nations (ASEAN) economies amounts to US$10.3 billion, with Indonesia, Singapore, and Malaysia collectively accounting for over half of these deployments. Most investments have been routed through Chinese private tech firms—Huawei, Alibaba, and ZTE—which together led roughly 79 percent of Southeast Asia’s smart city and data centre contracts. Chinese companies have also built much of the Indo-Pacific’s telecom backbone: undersea cables now carry Beijing’s influence. Chinese carriers push 5G networks in cities from Jakarta to Manila, and Chinese cloud/data centres have sprung across the region. These successes highlight that China has largely realised its economic goals—overseas markets, tech exports, and innovation partnerships have all multiplied under the DSR.

The strategic and geopolitical implications of this buildup are closely linked to its economic aspects. By embedding Chinese hardware and software in critical infrastructure, China gains influence in those states’ governance. Chinese firms are now central providers of 5G, surveillance, and fibre networks across the Indo-Pacific. For instance, network-connected facilities (partly built by Huawei) in the Maldives are a key node in China’s planned maritime digital route. Similarly, Pakistan’s new smart-city projects are also closely tied to Beijing and projects such as the new Pakistan–East Africa Connecting Europe (PEACE) cable land at Chinese-controlled ports (Karachi/Gwadar) en route to East Africa. Such ties allow Beijing to project power under the guise of development. By fostering deep connectivity, China has positioned itself as the economic leader in the geopolitics of the Indian subcontinent. There is also a governance dimension: the DSR imports Chinese digital norms, reinforcing a model of tightly controlled internet and mass surveillance in partner countries.

The DSR’s smart cities initiative has become a cornerstone of China’s strategic push in the Indo-Pacific, demonstrating considerable success in advancing Beijing’s interlinked economic, geo-economic, and geopolitical objectives.

These ties have boosted China’s goals. Profits from DSR projects (telco contracts, tech exports) flow back to China, strengthening its ICT sector. Concurrently, partner countries often shoulder Chinese loans or long-term obligations. Pakistan’s exposure to Chinese BRI/DSR loans is estimated at US$28 billion (22.48 percent of its external debt), giving Beijing economic leverage. Thus, while Chinese companies reap market share and China’s economic benefits, many DSR recipients find themselves economically tied to Beijing. These outcomes encapsulate the DSR’s geo-economic logic: Chinese investment in digital infrastructure serves as a bid for lasting influence and integrated value chains in the Indo-Pacific.

Conclusion

The DSR’s smart cities initiative has become a cornerstone of China’s strategic push in the Indo-Pacific, demonstrating considerable success in advancing Beijing’s interlinked economic, geo-economic, and geopolitical objectives. By exporting technology, financing infrastructure, and embedding its digital standards, China has not only opened lucrative markets for its tech giants but also created durable dependencies across regional urban governance systems. The strategic leverage gained from such integration – ranging from access to data to influence over norms – has allowed Beijing to expand its digital footprint with remarkable efficiency, particularly in Southeast Asia, where Chinese firms dominate smart infrastructure development.

Nonetheless, this expansion has also triggered strategic recalibrations. The perception of growing digital dependency on China, coupled with concerns over surveillance, data sovereignty, and coercive leverage, has led many Indo-Pacific countries to reassess their engagement. Some projects have been delayed, scaled down, or restructured, reflecting growing scrutiny of Chinese influence. Ultimately, the DSR’s smart cities push underscores how technology infrastructure can serve as a conduit for strategic influence. Whether partner countries can balance the economic benefits with the risks of over-dependence will shape the future of the DSR’s regional impact and test Beijing’s ability to sustain its digital ambitions.

Sameer Patil is the Director of the Centre for Security, Strategy, and Technology at the Observer Research Foundation.

Prithvi Gupta is a Junior Fellow with the Observer Research Foundation’s Strategic Studies Programme. 

• International Affairs
• Development
• Urbanisation
• China
• AI surveillance China export
• Belt and Road Initiative
• China ICT investments Indo Pacific
• China influence in Southeast Asia
• China smart cities strategy
• China surveillance technology exports
• Cyber-sovereignty China
• Digital Silk Road Cities
• Export-Import Bank of China loans
• Huawei smart city projects

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.

PREV NEXT