Using cloud technology and artificial intelligence, these cities will collect and centralise data on everything from transport and waste management, to pollution and crime.
The government says smart cities will improve urban planning and boost the economy but critics say it's all about tightening control.
Around Beijing there are dozens of so-called 'smart' stores.
They are not run by staff, but by artificially intelligent technology.
A facial recognition camera unlocks the entrance door after recognising a registered customer.
After choosing goods, shoppers use mobile phone to pay for their items.
Smart store customer Hu Guanxiong says he prefers it.
"The whole shopping experience is very quick. You choose your items, you pay and go. If you go to other convenience stores like 711, the space is really small. You have to wait in a line, then pay with cash. It's a lot of trouble compared to this."
First-time customers use their phones to scan a barcode at the front door, then follow instructions to upload a selfie.
In seconds, their personal data is stored.
Artificially intelligent cameras then scan the customer's face, and allow them inside.
Now similar technology is being applied to entire cities.
China plans to transform 500 urban centres into so-called 'smart cities' by the end of this year.
Walter Fang is the Executive Vice President of Beijing-based company iSoftstone, a software developer helping build 'smart city' networks for 80 Chinese cities.
"Smart cities using all these latest technologies to understand, catch and capture all the data, and have more insight for city leaders."
From tracking traffic and energy consumption to monitoring pollution and crowds, Walter Fang's company designs cloud-based systems which can integrate and analyse masses of data using cloud networks, sensors and security cameras.
In major cities there are CCTV cameras on every street corner.
The Chinese government says a smart city is a safe city and that means surveillance is ever-present.
But these cameras do more than just record a scene.
Beijing Tech start-up SenseTime develops smart cameras which can identify personal features, monitor trajectory and speed, and track a person's whereabouts in another part of the city.
SenseTime CEO Xu Li says their AI-based technology can even detect and report suspicious behaviour to prevent crime.
"Previously most of these cameras were monitored by a person. And our technology can actually surpass the human level of accuracy in facial recognition, object classification. And that's why we could use these technologies to make the cameras smarter."
There are up to 100 million CCTV cameras already in China, livestreaming feeds from around the country.
David Ramli, a Beijing-based tech reporter with Bloomberg, says high levels of surveillance are mostly accepted by Chinese society, but there are exceptions.
"Many people are very understanding of the need for surveillance and can find it somewhat comforting but those who are against it, ie dissidents and others, probably don't like the fact they're being watched on every single street corner."
Writer Murong Xuecun says China is using big data to become Big Brother.
The novelist's work was banned in 2013 after he criticised the government online.
"At home I always look around suspecting that there might be cameras secretly installed. The 21st century Big Brother has more powerful tools and more sophisticated methods. The way they're watching us has changed. They're not only spying on our actions, using big data, they can record and know things we've long forgotten."
Back at the smart store, surveillance encourages good behaviour.
A scan before exit checks for stolen goods, reporting and trapping dubious customers inside.
Hu Guanxiong explains.
"The shop's facial recognition and identification system is like a double insurance to make the store safer. If you don't pay, you won't be let out."
From surveillance in China, there really is no escape.
