China's Three Most Creative Cities: Shenzhen, Hangzhou, Beijing
Yicai Global
/SOURCE : Yicai
China's Three Most Creative Cities: Shenzhen, Hangzhou, Beijing

(Yicai Global) March 7 -- Regional development and entrepreneurial competition have seen three Chinese cities rise to the forefront of nationwide innovation and earn comparisons with California's tech hub, Silicon Valley.

"In the past, China has always followed and imitated Silicon Valley," said Sheng Xitai, founder of Angel Plus LLC, who help entrepreneurs source funds, "but in the mobile era, China is no longer a follower."

A recent report by the National Survey Research Center at Renmin University divided China's innovative business models into three categories: Shenzhen's high-tech model, Hangzhou's dotcom model and the innovation-driven model found in Beijing and Shanghai.

Shenzhen, the 'Hardware Armory'

Silicon Valley geeks are all too familiar with Shenzhen, which is hailed by western media a China's version of the world renowned tech region.

"Shenzhen could be more accurately described as the 'Silicon Valley of Hardware,' or a 'hardware armory,'" said Lucas Wang, founder of smart hardware platform HW Trek. "Silicon Valley is biased towards software, with less than one third of companies there developing hardware. In contrast, most leading brands in Shenzhen are hardware innovators."

During China's National People's Congress, the country's legislature, and the People's Political Consultative Conference, its top political advisory body, which are collectively known as the "two sessions," Pony Ma, president of online giant Tencent Holdings Ltd., proposed building a world class technology bar in the Guangdong-Hong Kong-Macau region.

"There's actually a strong synergy in the Pearl River Delta," he said, "because many intelligent manufacturing and research and development businesses are based in Shenzhen. Dongguan and smaller nearby cities offer mature manufacturing products and services."

Shenzhen has already overtaken Guangdong in the number of venture capital projects and total volume of virtual reality investment to become China's third most creative city of 2016, thanks to its unique location close to Hong Kong and strong local business innovation.

Hangzhou, the Leader of Dotcom Entrepreneurship

Hangzhou, in eastern Zhejiang province, is home to China's largest e-commerce firm, Alibaba Holdings Group Ltd. As far as internet technology applications are concerned, Hangzhou is rivaled in China only by Beijing and Shanghai. Cashless payment was a shopping philosophy that originated in the city, and the World Internet Conference was held not too far away.

Creating a large talent pool is critical for internet startups. For example, the prosperity of Silicon Valley is partly attributable to its location close to Stanford University and the entrepreneurial atmosphere created by its student community. Hangzhou needs to further its business development, as it lacks the talent resources found in larger cities like Beijing, the capital of engineering graduates in China.

However, the smaller supply of talent is offset by a large number of older corporate workers looking to start their own business. There is a growing community in the city comprising former Alibaba engineers turned entrepreneurs, who organize 'alumni meetings' on Alibaba premises every year. Most have started their own companies, which include China's leading ride-sharing platform, Didi Chuxing, and travel service provider, Ctrip. Alibaba's founder, Jack Ma, joked that CEOs at 200 of China's top 500 companies would be former Alibaba employees.

The businesses these former engineers open tend to be community-based or online-to-offline services, looking to enhance efficiency by reallocating offline resources online. Such firms have become a highlight of Hangzhou's internet culture.

Beijing, Driving Development with Technology

Compared with Shenzhen and Hangzhou, startups in Beijing are becoming more and more oriented toward technological development.

Some 32 'unicorns,' startups valued at over USD1 billion, emerged in Zhongguancong technology park in 2016, most of them specializing in Big Data, cloud computing and network security, indicating a growing tendency toward tech-driven business growth.

The increase in unicorns here is driven by innovation, business models, capital and market forces, said Guo Hong, head of Zhongguancun Science and Technology Park Administrative Committee.

The impact of the park's success spans further than Beijing. It also opened a new park in Binhai, in the norther city of Tianjin, which aims to attract 100 tech companies this year.

"Beijing is without doubt the real 'Silicon Valley of China,'" a number of investors told Yicai Global, adding that it has a development strategy and entrepreneurial atmosphere similar to the California tech hub.

"I think both cities are uniquely competitive," said Lei Jun, founding chief executive of phonemaker Xiaomi, who is familiar with both regions. Beijing has more universities, more students and a more dynamic entrepreneurial atmosphere, he added, whereas Shenzhen offers a better business environment, a strong innovative culture and more mature industries.

"Beijing outperformed other cities in terms of the breadth, depth and development speed of local industries," said Qiu Zhun, founding partner of venture capital firm Sky9 Capital.

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