In the past four years, the number of machine-to-machine connections via mobile networks has grown by 35 percent annually and now accounts for more than three percent of total mobile connections, according to the GSMA association of mobile operators.
China has lead the way and accounts for 40 per cent of the total mobile machine-to-machine connections, ahead of the United States and Japan combined.
Hooking up machines via mobile networks has already allowed for deployment of systems which allow for real-time monitoring of the location of buses, systems which direct drivers to free parking spots, and energy meters which report consumption automatically.
Regulatory uncertainty has held back the deployment of machine-to-machine applications in some countries, while in China support from the government which has made development of the Internet of Things a top priority which has led to the market quickly reaching a critical mass, said the GSMA.
"A rapidly developing and urbanising country, China is looking to use information and communications technologies to make its fast expanding cities smarter and enable a better quality of life for their citizens," said the report.
The Chinese government plans to invest more than $US600 billion in the sector through 2020, it added.
China's three mobile operators see the rapid growth in the segment continuing and are looking at rolling out applications in the agriculture, healthcare, automotive, retail and consumer electronics sectors.
With growth in traditional voice subscribers having slowed in many developed countries, mobile operators have been looking at developing other services to expand their businesses.
The GSMA study found that China's three mobile operators were using machine-to-machine technology to develop new revenue streams and move up the value chain as they are usually developing the systems in co-operation with clients instead of just selling connectivity.
The GSMA expects the number of mobile machine-to-machine connections to hit 242 million by the end of this year, which excludes consumer electronic devices using mobile networks like smartphones, tablets, and e-readers.