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Beijing, Shenzhen, Shanghai become centers of innovation

Gao Yuan
Updated: Aug 31,2015 9:18 AM     China Daily

It is a tale of three cities. During the past three years, Beijing, Shenzhen and Shanghai have become Chinese centers of innovation.

Tens of thousands of budding tech-savvy entrepreneurs have poured into the big three cities with dreams of changing China’s economic future.

“Beijing, Shanghai and Shenzhen are the most economically dynamic regions in China,” Zhao Guodong, secretary of Zhongguancun Cloud Computing Industry Alliance, an industry body, said. “They edge other places in attracting the most ambitious and forward-looking entrepreneurs.

“The technology resources of these cities, and the talent pool, are also the best across the country,” he added. “These are the successful ingredients for every startup.”

Each city has a unique place in the high-tech entrepreneurial mix-feeding off each other when it comes to innovative startups.

Beijing, for example, is awash with angel investors, hedge funds and venture capital firms that have helped fuel the breakneck growth in online and technology-based businesses.

Zhao Yong returned to Beijing from the United States two years ago to set up DeepGlint, which has up to 100 employees. The former Google Inc engineer, who was part of the team that developed Google Glass in Silicon Valley, is busy working on a three-dimensional visual recognition system. “It basically allows computers to see the world,” Zhao said. “The sort of device which could be used in driverless cars or security systems.”

After spending more than a decade working for an array of technology giants such as Nvidia Corp, Hewlett-Packard Co and Google in the US, he has had to learn quickly about nurturing a startup here. “It has been a challenge,” he said. “But the business potential in China is bigger than anywhere else and the demands are therefore different from the rest of the world, such as culture and the way of doing business.

“After saying that, Beijing is a special place where the West meets the East. That is why I decided to start a business in this city,” he added.

It also has Zhongguancun Science Park, which is commonly referred to as China’s Silicon Valley, with nearly 20,000 tech companies. According to data from the park, Beijing creates more than 120,000 startups every six months.

Funding is one of the major reasons behind this boom.

AngelCrunch, an online platform helping startups attract investors, was able to raise more than 920 million yuan ($143 million) for technology projects in the first half of this year.

“The number of companies searching for angel funding, or the first-round of investment, jumped by 178 percent to 92 in the first half of this year compared to the same period in 2014,” Lan Ningyu, founder and CEO of AngelCrunch, said.

Startups specializing in consumer gadgets and mobile apps dominate the marketplace for investment.

But according to Zhao, of Zhongguancun Cloud Computing, financing was just part of the blend that has made Beijing so attractive for fledgling firms.

“The capital has deep technology resources that have grown during the past few years,” he added. “It has a lot going for it.”

Beijing has the largest number of elite universities and scientific research institutes in the country. About 230,000 college students graduate from universities in the capital each year. Many stay on to roll out startup companies or join similar ventures.

“The large number of graduates from top-tier universities have also raised the innovation bar,” Zhao said.

But while Beijing has the financial and technological muscle, Shenzhen in Guangdong province has the manufacturing brawn. The city has been transformed in the past 35 years after China started opening up in the late 1970s.

Once a sleepy fishing village next to the Hong Kong Special Administrative Region, Shenzhen quickly became an electronics manufacturing center for global tech giants looking to cut their production costs.

Three decades later, the city is now home to domestic behemoths such as Huawei Technology Co Ltd and ZTE Corp. Both companies specialize in major technology infrastructure projects as well as manufacturing consumer goods such as smartphones and tablets.

Another major group there is DJ-Innovations Technology Co Ltd, or DJI, which is the largest manufacturer of commercial drones, and smartphone maker OnePlus.

The Shenzhen miracle is not short of success stories. “The city has come a long way,” Kitty Fok, head of IDC China, the market research, analysis and advisory firm, said.

“It has become a crucial hub for electronics globally, and that is why Intel Corp started to host its China technology event in Shenzhen two years ago,” she added.

A glance at the numbers shows that investment in research and development topped 30.5 billion yuan ($4.8 billion) in the first half of this year, or 4.04 percent of the city’s GDP. That percentage figure surpassed most developed economies, including the United States and Japan, the Shenzhen Statistics Bureau reported.

Naturally, that has fueled the entrepreneurial spirit in the city. Pete Lau, a former executive mobile phone manufacturer at OPPO Electronics, left the company to start OnePlus in 2013.

His plan was to produce a high-performance and affordable smartphone. Tapping into the city’s manufacturing prowess, OnePlus smartphones are now rolling off assemble lines in Shenzhen before being shipped to Europe and the US. Being a privately owned company, OnePlus has yet to released detailed financial figures.

“But this demand from local startups for mobile chips has already caught the attention of global component suppliers,” Fok said.

While Shenzhen has a distinct edge over Beijing when it comes to manufacturing, Shanghai is like the new kid on the block.

Even though the city is a global financial center, it is short on angel investors and lacks Shenzhen’s manufacturing clout.

Still, the Shanghai authorities hope to turn the city into a major innovation hub after unveiling a raft of measures to entice foreign talent, including easier visa access. The city is also working on investment options for domestic startups.

In addition, the local government is providing a more “startup-friendly environment” for young companies. Office rents are also cheaper compared to Beijing.

“Entrepreneurs can easily lease offices in high-tech parks that host startups. They are usually half the price compared to Beijing,” Yu Jianjun, CEO of online music-sharing site, which is based in Shanghai and has about 160 million users, said.