More than 85 percent of China's 649 million web users now log online using mobile devices, prompting internet giants to diversify their mobile offerings into areas such as retail, dining and transportation.

Similar to previous deals made by other firms, Tencent and Alibaba hope that making public services accessible on their mobile apps could help boost the user base of their mobile apps.

Tencent's WeChat now boast a user base of more than 500 million. Alipay, which started out as a payment escrow service for Alibaba's online marketplace Taobao.com and Tmall.com, also has nearly 200 million users on its mobile apps. Alibaba also has an 18 percent stake in Sina Weibo, whose user base stands at 176 million.

In addition to access to public service on mobile apps, Tencent and Alibaba are also offering cloud-computing capabilities to local governments and helping them build a unified platform for data gathering.

A spokesperson from Aliyun, the cloud computing arm of Alibaba, told Xinhua the market for government-related cloud solutions in China is now valued at 40 billion yuan.

Alibaba says its smart city solutions for local governments also includes using its third party payment service Alipay for government revenue. Eastern Chinese province Zhejiang has said that Alipay will be used to collect non-tax revenue for the provincial government in the future. This source of revenue currently stands at 600 billion yuan in the province.

Such deployment will allow internet firms to capture more data about their consumers, whose behaviors on mobile applications could reveal to companies more about their preferences.

"The more services these apps can offer to users, the more data they can collect from their users and these will help internet firms profile their consumers more accurately" said Jimmie Zhang, principal research analyst at Gartner.

"The Chinese government has more data than any other organization in the country, but these data are not creating any value as long as they sit on government computers or books.," Alipay's Liu says, "they should be used to drive productivity gains."