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September 8, 2014

Beijing`s Silicon Valley

Last year when I visited Guangzhou in southern China I wrote about the advance of China’s innovation economy. This past weekend I attended a conference in Beijing`s Zhonguancun district, better known as its Silicon Valley, on Innovation and Entrepreneurship and thought I’d do a similar recap of key themes.

Here`s a quick primer on Beijing`s innovation district – https://www.youtube.com/watch?v=yrGjEl3Q9cI

Three takeaways from the conference stand out for me:

1) Confidence about quality – a repeated theme from both Chinese and non-Chinese academics was the increasing quality of Chinese research and innovation, notably as measured through the number of high quality publications and an increasing number of homegrown brands and firms.  One stat mentioned was the share of Chinese publications in top ranking science journals (as measured by Nature). Here China has seen an increase from 1.85% in 2001 to 11.3% in 2011.Tied to this latter point, an increasingly important source of commercial innovation is formerly ‘shanzhai’ firms or copycat firms that are moving from mimicry to internal innovation. One example noted in presented research was Tianyu Communications Equipment Corporation which has evolved over the past decade from copycat firm to leading OEM.

2) There are still significant challenges in the broader entrepreneurial and innovator ecosystem. While patent numbers, publications and incubator growth speak to an exponential nominal rise in Chinese innovation, there are both quality, quantity and commercial problems with this explanation.One presenter noted, for example, that a significant percentage of patents were produced by universities under incentives from government to do so, regardless of their commercializable value. Whether the vast majority of these amount to anything is an obvious question for many.  Moreover while the number of incubators across the country has risen from 131 in 2000 to over a 1000 by 2010, the number of firms created shows far less traction (I’ll try to find the exact source of this from the presenter). This underscores a more acute challenge about the translation of China’s massive research and innovation inputs (i.e. $$$) into commercial outputs. One factor noted as positive with respect to this is the gradual shift towards a stronger role for private/business R&D. Over the decade 2000-2010, business R&D has seen its share of total R&D rise from 60 to 73%. Canadian policy makers would drool over those statistics, both total and the trend.

3) While there are concerns that the Chinese labour market is “not entrepreneurial enough” with respect to high-end innovation, I heard from several sources that the government acknowledges that it must do more to facilitate advances in the sector. This relates in part to oft-repeated comments that the lack of freedom in China will stifle long-run innovation.The significant growth in relatively independent incubators and reductions in the substantial redtape associated with Chinese commercialization are part and parcel of a series of attempts to open space for entrepreneurs. Pioneer student parks for students/researchers returning from abroad are similarly developed with, and I’m simply repeating what I heard, enough flexibility to allow ideas to flourish and for venture capital dollars to chase the good ones.

 

All together then what I heard was a general bullishness about China’s economic transition to a knowledge-based economy. While there are evident challenges related to filling what one researcher called the “business to consumer gap” (i.e. in building brands) the steady flow of small companies out of leading incubators such as the one at TUSpark and across Zhonguancun, and the growing presence of serious VC money nearby, speaks to an increasingly sustainable pipeline. How these mature and spinoff other sustainable firms is evidently the next important question to ponder… DH.

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