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[China Time] Decoding the Rise of Zhongguancun, China's Silicon Valley
Dong Xin
DATE:  Dec 05 2018
/ SOURCE:  yicai
[China Time] Decoding the Rise of Zhongguancun, China's Silicon Valley [China Time] Decoding the Rise of Zhongguancun, China's Silicon Valley

(Yicai Global) Dec. 4 -- "Zhongguancun is China's Silicon Valley," Zhou Hao, founder and chief executive of fintech firm QuantGroup, told Yicai Global. It "meets all my needs for starting a business."

Zhou, who returned to China from Wall Street, said Zhongguancun not only gathers high tech firms, but also attracts talented innovators in science and technology. "It gave us startup tax incentives, loan support, which means good opportunities for starting businesses and a suitable environment for growth."

China's economic opening-up in the 1980s gave birth to this tech hub, which spawned tech names such as Lenovo and Baidu. Located in Beijing's Haidian district, Zhongguancun was formerly an electronics bazaar known as Zhongguancun Electronic Street in the early 1980s. It is now known for innovation after nearly 40 years of development.

As the first national high-tech industrial development zone and the first national independent innovation demonstration zone, it led the foundations for China's first private technology company, the first firm without any specific business scope, the first business with intangible assets accounting for all the registered capital, the first limited partnership investment institution, the first government guidance fund, and the first local legislation of the science and technology park.

Leading tech firms such as Founder, Tsinghua Unigroup, Yonyou Software, Sohu, Sina, Semiconductor Manufacturing International, Vimicro, BOE Technology and Loongson Technology all started off at Zhongguancun more than 30 years ago. New generation firms like JD.Com, Xiaomi, Qihoo 360, Didi Chuxing, Meituan, Vision, SenseTime, UISEE Technology, Cambricon Technologies, Horizon Robotics have also emerged rapidly and stand out as global competitors.

Global Talent Spot

Gathering talented individuals from across the world, and deepening reform and innovation is the key feature of the place, Di Lixin, director of the Zhongguancun Administrative Committee, told Yicai Global.

Talents required for innovation and starting businesses are the core necessities of Zhongguancun, where scientists, entrepreneurs, investors and all kinds of professional service talents go through their paces. They combine their strength in innovation and entrepreneurship.

Covering an area of about 100 square kilometers, Zhongguancun is home to more than 300 regional headquarters or research and development centers of multinationals, with nearly 10,000 foreign employees as well as over 30,000 staff who have returned to China after completing overseas studies.

The Zhongguancun Administrative Committee has set up 10 overseas offices in Silicon Valley, London, Tokyo and other locations. Companies based here have set up nearly 1,000 research and development centers or branches abroad. With its increasing international influence, Zhongguancun has become an important node in the global innovation network and an internationally renowned zone for active innovation and entrepreneurship.

Zhichun Road Phenomenon

It also boasts the Zhichun Road Phenomenon. Every office on Zhichun Road is crowded with angel investors and venture capitalists looking for potential projects.

At the beginning, Horizon Robotics received funding from Morningside Ventures, Hillhouse Capital, Sequoia Capital, GoldenSand Capital, Linear Venture, Kai-fu Lee's Sinovation Ventures and ZhenFund. Later, in 2016, it secured huge financing from famous Silicon Valley venture capitalists Yuri Milner, Wu Capital, Tsing Capital and Vertex Ventures China.

Zhongguancun has many angel investor-backed startups like Horizon Robotics. It has attracted more than one-third of the country's venture capital investment cases, and the figure in recent years is equivalent to Silicon Valley's share in the US. Xu Xiaoping, founder of ZhenFund, has said publicly that angel investment is aimed at talents.

"Competition between venture capital institutions at Zhongguancun is fierce," IDG Capital founding partner Xiong Xiaoge said. "One must move quickly before opponents seize projects."

Zhongguancun has come up with an innovative 'project roadshow' to allows experts, businesspeople and venture capital managers to participate in the public evaluation and selection of "major frontier projects and companies." The committee will select 20 to 30 frontier businesses each year for support, helping speed their development.

After nearly 40 years of development, Zhongguancun has developed six emerging industrial groups including the new generation of information technology, biomedicine and healthcare, intelligent manufacturing and new materials, energy conservation and environmental protection, modern transportation, and emerging services.

Companies based in the tech hub had total annual revenue of CNY5.3 trillion (USD774.5 billion) last year, with combined profits of CNY467.1 billion (USD68.3 billion). They paid CNY259.4 billion in taxes and contributed 34 percent to Beijing's economic growth. Their total income jumped 16.3 percent to CNY1.9 trillion from January to May.

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Keywords:   Zhong Guancun