Smart Device Empire, Part 2: Policy Underpins PRC’s Global IoT Ambitions

Executive Summary:

• Beijing views control over the platforms, standards, and data flows of the Internet of Things (IoT) era as a source of lasting structural leverage, and has spent more than a decade positioning itself at the center of this emerging system.
• The PRC’s share of global smart home device shipments is projected to reach 20–30 percent by 2028, driven by a domestic environment of sustained policy support, coordinated investment, and state-managed access to capital.
• Massive state-led investment in broadband, 5G, and next-generation network infrastructure—deployed by major state-owned telecom operators—has given PRC firms a decisive first-mover advantage in developing, refining, and exporting advanced IoT technologies.
• Beijing’s active role in shaping international standards signals that its ambitions extend beyond manufacturing scale, aiming to embed Chinese technical protocols, governance norms, and data practices into the global connected-device ecosystem.
• Looking ahead, the spread of PRC IoT platforms points toward a fully integrated digital environment in which everyday devices are linked to AI, cloud, and edge systems under Chinese influence—raising long-term risks of technological dependence, data capture, and reduced autonomy for foreign governments and industries.

Beijing is positioning the full spectrum of state policy tools behind its Internet of Things (IoT) ambitions—aligning telecom infrastructure, protected domestic markets, and tightly managed technical standards to consolidate its influence at home and extend it abroad. This expansion goes beyond selling connected devices: by dominating core components like cellular IoT modules and driving global rule-making through initiatives such as China Standards 2035, the People’s Republic of China (PRC) is creating long-term supply chain dependencies and reshaping the rules of digital interoperability (China Brief, July 25).

PRC security services openly concede that connected devices can be turned into tools of surveillance or disruption. On July 21, the Ministry of State Security (MSS) warned citizens to “beware of ‘electronic spies’” (警惕“电子间谍”), claiming that some foreign-made chips, smart devices, and software contain “backdoors” (后门) that allow remote control or covert data collection. The MSS urged consumers to buy domestically produced (国产) systems to avoid these risks, underscoring that smart device security is a matter not just of personal privacy, but of national security (WeChat/MSS, July 21). This logic appeared to gather momentum as microchips became a sharper point of contention between Beijing and Washington: on July 31, the PRC’s cyberspace regulator summoned Nvidia over alleged “backdoor” risks in its H20 AI chips, signaling that the MSS warning was part of a wider campaign to spotlight and curb perceived vulnerabilities in foreign technology (CAC, July 31).

The warnings capture a central paradox: the same risks that Beijing sees in foreign IoT products—unpatched vulnerabilities, legally mandated data access, and potential use in cyber operations—also travel with Chinese-made devices as they spread worldwide. Backed by Digital Silk Road diplomacy, subsidized financing, and turnkey deployments from smart-city platforms to home appliance ecosystems, these exports are building a global network of PRC-linked hardware and standards. According to 2024 estimates, the PRC will account for roughly 20–30 percent of all global smart home device shipments by 2028, while becoming the largest single market by unit volume (Omdia, November 18, 2024). Control over these systems offers not only commercial advantage— by dominating the platforms, standards, and infrastructure of the “IoT era”, the PRC seeks not only market share, but enduring structural leverage over the networks that will define 21st-century life.

State-Owned Telecom Networks as the Backbone of Beijing’s IoT Leverage

By the early 2010s, Beijing had designated the Internet of Things (IoT) as a strategic industry, embedding it into national development plans as a pillar of digital infrastructure and industrial transformation. Successive top-level blueprints—including the 13th and 14th Five-Year Plans and national informatization strategies—framed “connecting everything” as essential to future competitiveness, channeling state funding into 5G networks, smart cities, and IoT build-outs (Xinhua, March 17, 2016, March 13, 2021). Local governments followed suit, establishing special funds and subsidies to accelerate smart sensor manufacturing, home automation platforms, and AI-enabled appliances.

From 2014 onward, Premier Li Keqiang’s (李克强) push for “mass entrepreneurship and innovation” (大众创业、万众创新) opened the way for a wave of startups in home robotics, IoT chips, and smart home security devices, backed by government contracts, dedicated incubators, and access to public procurement channels (PRC Government, December 26, 2014; MERICS, June 24, 2021). Together, these national and local measures created a tightly guided ecosystem for scaling domestic IoT and smart home technologies across both industry and everyday life.

Made in China 2025—unveiled in 2015—set targets for high domestic content in these areas, backed by a toolbox of tax breaks, research and development (R&D) subsidies, and procurement mandates to nurture local champions (Avnet Silica, June 13, 2019). Targeted funding and incentives continue to bolster the sector, with authorities establishing IoT industrial parks, innovation zones, and pilot demonstration projects to concentrate research and commercialization (Rhodium Group, May 5). Companies in the IoT space benefit from research grants, state-guided venture capital, and preferential policy support. The strategy urged public institutions and state-owned enterprises to adopt IoT solutions aggressively, using the PRC’s own smart technologies, as a pathway to scale up the industry and position Chinese firms as global players.

Unlike Western markets, the PRC’s smart home sector has a unique structure: telecom and service providers (often state-linked) play a leading role in sales and distribution (IoT Now, August 2, 2021). For example, telecom operators and utilities offer smart home bundles (such as internet plus home security kits), and property developers embed smart systems in new apartments, often in partnership with tech firms (Omdia, November 18, 2024). This model is encouraged by government smart-city programs and creates a channel for rapid deployment of devices at scale (e.g. citywide rollouts of smart meters or community surveillance cameras).

As a result, a generation of PRC smart home manufacturers—from appliance giants to tech startups—has risen in a policy-sheltered, capital-rich environment, steered by central ministries and local bureaus.

That industrial base is reinforced by massive state-led infrastructure investments: the domestic rollout of broadband and 5G networks has been heavily funded and guided by the government, with China Mobile, China Unicom, and China Telecom as the primary operators. By mid-2021, officials reported installing over 800,000 5G base stations (about 70 percent of the world’s total), supported by over $200 billion in planned telecom investment from 2020–2025 (MERICS, June 24, 2021). This is projected to reach over 4.5 million 5G base stations in 2025 (RCR Wireless, January 2). In addition to the 5G rollout, China is also actively deploying 5G-Advanced (5G-A) in 300 cities, focusing on AI sensing and smart infrastructure (RCR Wireless, June 27). This vast, state-funded network buildout gives PRC firms a powerful first-mover advantage in developing, testing, and exporting next-generation smart home and IoT technologies.

Building a Domestic Launchpad for Smart Home Dominance

The PRC’s home market is being used as a strategic springboard for global expansion in smart home tech. Domestic tech platforms benefit from an asymmetric advantage: they can scale up in a “protected, insulated, and government-bolstered” national market with minimal international rivalry, then deploy that scale overseas (NBR, March 2022). Beijing is using this playbook to nurture national tech champions in IoT and smart infrastructure. Companies like Huawei, Alibaba, and Tencent benefit from state-backed infrastructure and policy environments that enable wide deployment of their technologies across cities and sectors.

Protected access to national markets allows firms to test and refine IoT platforms. State-owned China Mobile, for example, has co-developed with Huawei the world’s largest IoT service support platform—capable of managing 1.4 billion users and enabling clients to handle tens of millions of connected devices with advanced features such as IoT card management and intelligent security controls (Informa, October 30, 2024). Alibaba’s City Brain has transformed Hangzhou into a national model for smart urban governance, while Tencent is advancing digital infrastructure concepts like Shenzhen’s “Net City” (网络城市) (Shenzhen Government, April 27). With strong home-field validation, these firms now shape international norms—Huawei in 5G-IoT ecosystems, Alibaba in cross-border smart city adoption (e.g., Kuala Lumpur), and Tencent in urban-scale digital integration projects.

This combination of state-backed infrastructure, protected market access, and surging domestic demand from urban consumers and an expanding middle class gives Chinese manufacturers powerful economies of scale and continuous data feedback loops. These advantages allow firms to refine products, dominate emerging standards, and enter foreign markets with mature, cost-competitive platforms—positioning them to shape not just the technology, but the operating norms of connected systems worldwide.

Technical Rulemaking for Domestic and Global Integration

Standardization is one of Beijing’s most powerful tools for consolidating and exporting its IoT advantage. The PRC government closely manages tech standards for IoT and smart devices through bodies under the Ministry of Industry and Information Technology (MIIT) and the Standardization Administration of China (SAC) (Global Taiwan Institute [GTI], February 5). The goal is twofold: first, to streamline the multitude of domestic standards; and second, to push Chinese standards internationally. Within the PRC, authorities encourage interoperability among smart home products and alignment of standards (e.g. common protocols for device connectivity, IoT data formats) to ensure a unified national market.

To elevate its global standing in IoT and digital industries, the PRC is turning standard-setting into a central pillar of state power. IoT firms gain first-mover advantage by operating in a tightly regulated domestic market with unified technical benchmarks, accelerating commercialization and reducing interoperability friction. International expansion is bolstered by a push to align national and global standards, giving firms like Huawei, Xiaomi, and Tuya an easier pathway into emerging markets that adopt PRC-aligned rules. Standards now move in lockstep with innovation, as Beijing integrates standardization into R&D pipelines to create exportable technical influence across sectors like smart homes, artificial intelligence (AI), and industrial automation. This stems from the 2021 “National Standardization Development Outline” (国家标准化发展纲要), a top-level Party policy blueprint that ties the country’s technological rise to comprehensive state-led control over domestic and international standards (Xinhua, October 10, 2021).

The 2024 “IoT Standard System Guidelines” (物联网标准体系建设指南 [2024版]) mark another major step in Beijing’s drive to shape the global IoT landscape (MIIT, August 27, 2024). These guidelines create a comprehensive national blueprint, formalizing a full-spectrum framework for IoT standardization, spanning perception tech, data processing, operating systems, and smart applications in sectors like industry, agriculture, and smart homes. They also call for publishing over 30 new national and industry IoT standards by 2025 and participating in crafting at least 10 international standards—an effort explicitly tied to a broader “New Industry Standardization Pilot Project (2023–2035)” (新产业标准化领航工程实施方案 (2023–2035)) to give Chinese solutions greater international traction (MIIT, August 22, 2023). Finally, the guidelines frame standardization as a tool of scale and integration by promoting end-to-end ecosystem coordination and requiring stronger integration of technical R&D, industrial deployment, and regulatory oversight. Local governments are encouraged to support pilot zones and Chinese firms are expected to lead in international forums, reinforcing Beijing’s strategic vision of “collaborative advancement and open cooperation” (协同推进，开放合作) that aligns global norms with Chinese industrial priorities.

Exporting Influence via Trade Support

State policies explicitly treat the home market as a “training ground” for global success. Made in China 2025, for instance, not only set targets for domestic market share of Chinese tech products but also encouraged firms to “go out” (走出去) and capture international market share once they are strong at home (Avnet Silica, June 13, 2019). In practice, this means the government often supports companies in exporting their smart home solutions. One avenue is via the Digital Silk Road, the technology component of the One Belt One Road initiative. “National Informatization Strategy” calls on the country’s internet and tech firms to support “the creation of a Digital Silk Road” (打造网上丝绸之路)—essentially exporting Chinese digital infrastructure and services abroad in tandem with OBOR investments (Xinhua, July 27, 2016; Brookings, November 19, 2020).

In smart home terms, this could involve telecom carriers bundling smart community platforms into overseas real estate projects, or appliance makers setting up “smart living” showrooms in OBOR partner countries. Huawei and other telecom giants have already delivered smart city and safe-city systems—including IoT cameras, streetlight sensors, and urban control hubs—to parts of Asia, Africa, and the Middle East. Many of these exports are backed by preferential financing from PRC state banks, giving Chinese vendors a competitive edge in foreign procurement decisions.

Beyond leveraging diplomatic, commercial, and financial tools to open doors abroad, Beijing also helps its smart technology firms gain footholds globally by shaping trade conditions to favor Chinese tech expansion. In trade negotiations, Beijing routinely pushes for market access for its digital products, even as it limits foreign competitors at home. As a result, Chinese smart devices often enter global markets with fewer barriers than foreign brands face in the PRC. This includes the European and U.S. markets, which remain largely open to a flood of smart TVs, cameras, and IoT devices from the PRC, whose take-up is buoyed  by cost advantages driven by scale, state support, and favorable financing.

One PRC firm, Hisense, has become a top global smart TV seller by offering lower-cost, high-quality products backed by government support, mixed-ownership structures, and the country’s vast manufacturing base (NBR, March 2022). Once scaled, firms like Hisense aggressively target overseas consumers—embedding platforms like Roku and collecting user data that, in Hisense’s case, may be stored on servers in the PRC (Hisense, December 1, 2017, February 1, 2019).

This approach uses domestic scale to validate products and springboard them into global markets. The broader goal is to make Chinese platforms and components foundational to next-generation smart homes worldwide. Critics warn this could create new vectors for data access, surveillance, or disruption (The Cyber Wire, August 8, 2023). From Beijing’s perspective, this strategy is a strategic hedge, allowing for expanded exports while reducing dependency on foreign tech ecosystems.

Table 1: Architecture of the PRC’s IoT Expansion Strategy

Strategic Gains and Global Risks: The Endgame of China’s IoT Expansion

Beijing’s push for global IoT dominance is a strategic bet on shaping the rules, markets, and vulnerabilities of the digital era. If successful, Beijing will not only secure a major share of global tech value chains but also accumulate structural power through standard-setting, surveillance capabilities, and systemic dependencies.

Economic Resilience and Technological Autonomy

The country stands to capture a significant share of the $1.2 trillion global IoT industry, forecasted to grow over 10 percent annually through 2030 (Statista, accessed July 23). Domestic firms will secure value across the chain, from chips and software to data platforms and connected appliances, helping move the PRC up the tech ladder and avoid the middle-income trap. By embedding its preferred standards and influencing ISO/IEC protocols, Beijing aims to achieve long-term technological sovereignty and lock foreign users into Chinese-designed ecosystems (Exovera, August 2022; IoT Insider, December 7, 2023; GTI, February 5).

Data-driven Spillovers and Domestic Control

IoT dominance also unlocks strategic data flows. Connected devices generate vast quantities of behavioral and environmental data, reinforcing the PRC’s lead in AI development—an area where Beijing aims for global primacy by 2030 (RAND, June 26). Domestically, smart home tech integrates into the PRC’s urban governance and surveillance systems, feeding city-level monitoring platforms and public security operations in real time.

Geopolitical Leverage and Global Embeddedness

Beijing’s expanding control over global IoT supply chains increases its leverage over foreign economies. Its bid for cellular IoT module (CIM) dominance threatens the supply security of rivals, especially amid tensions. In the United States, PRC-made devices remain deeply embedded in healthcare and industrial systems despite bans, surging from 185,000 to 300,000 units in under two years (Forescout, April 2, 2024). These exports also advance the country’s Digital Silk Road strategy, exporting surveillance and smart infrastructure to over 80 countries, while giving Beijing influence in global data governance debates.

Espionage and data exfiltration

The domestic IoT ecosystem forms the backbone of Beijing’s global data-gathering apparatus. Under the PRC’s Data Security Law and National Intelligence Law, firms must hand over user data upon request, turning consumer electronics into intelligence collection platforms (NPC, June 27, 2017; Xinhua, June 11, 2021; Carnegie Endowment, January 30). In early 2024, over 300,000 PRC-made IP cameras, routers, and medical devices were active in U.S. enterprise networks, posing risks for health, location, and operational data exfiltration (Forescout, April 2, 2024). Devices such as drones and connected vehicles equipped with PRC LiDAR or modules can passively map infrastructure for future targeting (FDD, December 2, 2024).

Cyber pre-positioning and infrastructure threats

This dominance in IoT hardware has created systemic cybersecurity risks. As of mid-2025, over 70 percent of the world’s cellular IoT modules come from the PRC (Carnegie Endowment, January 30). Many of these devices run outdated firmware—60 percent with critical vulnerabilities—and can be repurposed for botnets, sabotage, or persistent access operations (Council on Geostrategy, March 19, 2024). Recent breaches include:

• Mirai botnet variant (2024–2025): PRC-linked malware compromised small-office IoT devices, used for DDoS and espionage (The Hacker News, November 27).
• Volt Typhoon (2024): PRC hackers infiltrated U.S. infrastructure via IoT routers, laying groundwork for disruption (CISA, February 7, 2024).
• Industrial IoT attacks: Up 75 percent since 2024, targeting smart factories and utilities via PRC-made endpoints (Industrial Cyber, April 10).

These trends represent more than isolated threats – they form the architecture of a future in which Beijing controls critical components of the world’s connected systems. Without decisive defensive action, the United States and its allies risk strategic subordination enabled by the very infrastructure underpinning 21st-century power.

Table 2: Key Security Risks from the PRC’s Global IoT Expansion

Conclusion

Beijing is poised to deepen and integrate the full spectrum of policy instruments that have driven its IoT rise—combining state-owned telecom infrastructure, protected domestic market access, and coordinated standard-setting to strengthen its position at home and abroad. Industrial parks, pilot zones, and targeted subsidies will continue to incubate new platforms, while 5G-Advanced deployments and state-guided venture funding accelerate the shift toward AI-enabled, interoperable device ecosystems. At the same time, PRC agencies will intensify their push in global standards bodies and trade negotiations to lock in protocols, compliance regimes, and market terms that embed Chinese technical and governance norms across emerging markets and beyond.

These efforts will be reinforced by diplomatic and financial channels—from Digital Silk Road infrastructure packages to preferential export credit—that tie IoT adoption to broader economic partnerships. As more cities, utilities, and consumers abroad integrate PRC-made connected systems, Beijing will gain greater ability to set the terms of data access, device compatibility, and network security. Over time, this convergence of industrial policy, standards diplomacy, and global market saturation could shift the balance of digital governance, giving the PRC structural leverage over how data is exchanged, networks are secured, and connected systems operate worldwide.