Tech Clusters in China: the Chinese Answer to the Silicon Valley

19/08/2019

Within China’s tech clusters, Beijing, Shenzhen, Hangzhou, Guangzhou, and Chengdu are the technological hubs that will dethrone the Silicon Valley model

 

There is no more need to highlight how China has grown in recent years, especially for what concerns its economy and hi-tech sector. If in the past, the People’s Republic was following the Silicon Valley model, today, the big Asian country is no longer a follower but it is rather leading the hi-tech revolution itself.

Since the beginning of its race towards the global supremacy, the Dragon has become not only the second-largest economy in the world but is now also the second-largest global market for Research & Development (R&D) spending and is expected to surpass the US by 2020. Moreover, over 4 million students graduate in the fields of science, technology, engineering, and math every year, supporting the growth of local tech companies and the entry of major international tech firms.

 

The Dragon’s investments in the innovation and hi-tech field together with a deep pool of tech talents have allowed the country to host not just one Silicon Valley but rather many tech clusters, operating in many different sectors.

 

Within the 19 clusters included in China’s 13th Five-Year Plan, some cities are focusing on hi-tech development with one simple goal: support the national economy, promoting the coordinated development of regions and participating in international competitions and cooperation to achieve the country’s main mission to become a hi-tech superpower by 2025.

Among these tech clusters, Beijing, Shenzhen, Hangzhou, Guangzhou, and Chengdu are China’s five hi-tech frontrunners, which lead the country’s technological innovation while also shaping the world’s hi-tech future.

 

Tech Clusters in China - hangzhou - cifnews

© 123rf. Hangzhou, Zhejiang. China’s tech sector has grown so much lately that the total spending on R&D reached $60 billion in the first half of 2018.

 

Silicon Valley has long been seen as the world’s technology capital, home to some of the world’s mightiest technology companies, such as Facebook, Apple, Google, and Netflix. Here, some of the most powerful companies are concentrated within the 4,801 square kilometers area with some spilling into nearby San Francisco.

However, as mentioned before, there is no single Silicon Valley in China, a theory also confirmed by the National Survey Research Center Poll conducted at Renmin University in Beijing. Unlike the United States, in the Middle Kingdom, tech hubs are distributed across numerous megacities, which not only have a sound economy and a deep pool of talent but which are also home to some of China’s most valuable tech firms.

Among the Chinese major tech clusters, Beijing is the leading hub for obvious reasons like the massive presence of hi-tech giants headquarters. E-commerce firm JD.com, ride-sharing company Didi Chuxing, and the internet giant Baidu are all based in Beijing.

The northern district of the city, Haidian, is home to the “Silicon Valley of the north”. Inside the Haidian district, there is the Zhongguancun Technology Hub, which is basically occupied mostly by Tsinghua University’s TusPark, tech companies, and research faculties. Didi Chuxing, China’s biggest on-demand ride-sharing company, has its headquarters right there while the Baidu campus is not far.

 

If Shenzhen sets the benchmark for tech manufacturing, and Beijing is Chinese “Unicorns” paradise, Hangzhou is best-suited for e-commerce.

 

Flanked by tall skyscrapers, this region is attracting more hi-tech companies including Intel and Sony. Microsoft built a $280 million research lab with over 5,000 employees in Beijing, and even Google has inaugurated a research lab with the support of the city government. Moreover, Beijing is also preparing to welcome those skilled professionals fleeing from other countries with new ten-year visas.

Shenzhen, instead, in Southeastern China, is a former fishing village turned into the modern metropolis that connects Hong Kong to the rest of the country. The city has undergone a drastic development in the past decade and it has now risen to become a tech hub, hosting headquarters of Tencent, ZTE, and Huawei.

Since 1980, Shenzhen is one of the first Special Economic Zones in China, therefore, attracting a lot of investors. Part of China’s Greater Bay Area, Shenzhen is known for being the center of hardware manufacturers. From the popular smartphone company Huawei to the drone maker DJI, the city’s proximity to the factories in Southern Guangdong province has surely played to their advantage.

Shenzhen is currently home to over 3 million businesses, therefore, investments in R&D here will continue to be one of the world’s highest. According to the 13th Five Year Plan, this city will spend 5% of its annual GDP replacing traditional factories with automation by 2020. Indeed, the cutting edge of robotics, hardware, and manufacturing passes through Shenzhen before hitting the global markets.

 

tech clusters in china - shenzhen - cifnews

© Unsplash. Shenzhen, Guangdong. Beijing, Shenzhen, and Hangzhou have emerged as China’s leading hubs for both the hi-tech and the fintech sector.

 

Hangzhou, instead, can thank Jack Ma for being one of the leading tech hubs of the PRC. As home to Alibaba, Hangzhou has earned the title of “e-commerce capital of China”. In April 2016, the government even designated the city as one of the country’s ten cross-border e-commerce pilot cities giving it preferential status to facilitate tax policy and handle foreign goods.

With Alibaba’s headquarters based here, the city does not lack tech talents. Moreover, thanks to the opening of the Hangzhou Blockchain Industrial Park in April 2018, the city is also emerging as a hub in blockchain technology.

Together with Shanghai, Hangzhou forms the Economic Zone of the Yangtze River Delta, one of the most dynamic and innovative clusters in China.

Nevertheless, in addition to these three consolidated tech clusters, Guangzhou and Chengdu are two of the Dragon’s emerging tech hubs.

 

“I truly believe in many specific tech sectors, such as artificial intelligence, being in China offers entrepreneurs a bigger chance to leapfrog companies in Silicon Valley,” says Ben Hu, co-founder of Liulishuo, the company behind the world’s first “AI English Teacher.”

 

Guangzhou, in particular, in addition to being one of the busiest ports in China, will become an international transport hub, benefitting also from its proximity to Shenzhen and Hong Kong. As well as Shenzhen, in fact, even Guangzhou belongs to China’s Greater Bay Area, which is actually leading the country’s hi-tech innovation from the Pearl River Delta region, which now also aims to overtake the world’s three major bay areas, namely New York, San Francisco, and Tokyo.

In the Southern province of Sichuan, Chengdu is part of the Chengdu-Chongqing city cluster, which represents one of the privileged corridors of the Belt and Road Initiative. This cluster is expected to become the fourth pillar of China’s economy, following the Yangtze River Delta, Pearl River Delta, and Beijing-Tianjin-Hebei regions, becoming the inland growth engine and diversifying the country’s economic growth.

Chengdu actually leverages looser household registration policies and tax incentives, which attract both talents and businesses. Indeed, its long history of electronic and technological industries has easily led the city to be the center of high tech that attracts most a variety of multinationals including Nokia, Microsoft, IBM, and Cisco. However, Chengdu is not just about multinationals. The city aims especially to become a startup hub and plans to produce at least seven Unicorns by 2022.

Growing internationally and integrating into global industrial networks, Chengdu has become the 4th pole of the IT industry in China, after Beijing, Shanghai, and Guangzhou.

 

china's tech clusters - chengdu - cifnews

© Unsplash. Chengdu, Sichuan. The Made in China 2025 plan is rewriting the geography of Chinese industrial development by building new hi-tech hubs in emerging cities.

 

Technology and entrepreneurship have entered the Chinese government agenda as the backbone of the national effort to shift economic development driven by manufacturing to one that is steered by innovation. The vision is rooted in the Made in China 2025 plan and driven by the country’s cluster system.

The PRC managed not only to follow the Silicon Valley example but it has shaped it according to its needs. Therefore, contrary to the US model, Beijing, Shenzhen, Hangzhou, Guangzhou, and Chengdu, they all contribute to the Dragon’s rise as a hi-tech superpower.

However, these cities are just five of the country’s major hubs within Chinese tech clusters. Other metropolises, as well as many emerging cities, are already establishing themselves in the technology field, expanding the “Chinese Silicon Valley area” to a national level.

Is it time to take the Chinese example as the next hi-tech model?

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