Beijing’s Zhongguancun Area – The Next Silicon Valley?

Dubbed as “China’s Silicon Valley” the country’s largest high-tech park in west Beijing is not only home to Chinese high-tech companies like Lenovo, Baidu and Sohu.com, it is also the China headquarters of leading global companies like Google, Microsoft and Intel.

Part of the Chinese government’s plans to develop an innovative economy, the State Council (China’s Cabinet) recently approved a development plan called the Zhongguancun National Innovation Demonstration Zone (2011-2010) which allows companies in the area to pilot new innovative projects and R&D programmes.

A key part of the plan is to increase the revenues of companies in Zhongguancun to 10 trillion yuan (US$1.8 trillion) by 2020 from 1.55 trillion  yuan in 2010. The forecasted revenue increase will come from the planned tax incentives for companies locating to the area and R&D subsidies. The plan is to position Zhongguancun in the top three global technology clusters within the next twenty years.

Following a recent visit to Zhongguancun by Campbell Ventures a number of interesting parallels with the development of the Californian Silicon Valley are emerging. The three main parallels are:

1.In a similar way that a number of businesses in Silicon Valley emerged from Stanford University, Zhongguancun is close to several of China’s top universities and national academies. Historically Zhongguancun was crowed market selling electronic components and devices to technicians and University researchers. In 1980, Chen Chunxian, a researcher at the Chinese Academy of Sciences, founded a technological development service department under the Beijing Society of Plasma Physics in Zhongguancun , making it the first civilian run scientific and technological institution in the area.

2. Spin out companies from Universities are at the core of Zhongguancun growth and innovative technology development. The company Founder for example was spun off from Peking University. Lenovo Group was spun off from the Chinese Academy of Sciences (CAS.) Liu Chuanzhi, a former researcher at CAS later lead the acquisition of IBM’s personal computer division for US$1.75 billion in 2005.

3. In a similar way to Silicon Valley in California, Chinese venture capital firms are locating in the Zhongguancun area to be closer to potential high growth tech businesses and to monitor emerging opportunities from CAS and other institutes. Campbell Ventures recently met with Cao Guifa, Chairman of Wit Invest who is located in Zhongguancun. Cao Guifa was the first CEO to float a Chinese company (China Shoto) onto the London AIM stock exchange. China Shoto are a manufacturer of back-up batteries. Cao Guifa also explained that his firm not only provides the money to invest in high growth companies but also significant advice and support on issues like floating on a foreign stock market. Interestingly when I asked Cao Guifa “what is the most important factor that you consider before making an investment into a Chinese company?” He replied “by far the most important is the quality of the management team.” From my experience this is exactly the same response that you would receive from most western early stage/ spin-out venture capital companies. It highlights the fact that no matter where you are in the world the quality of the management team is critical to attracting the interest of investors.

For further information about this article and how it could impact your business please contact:

Mike Campbell
Managing Director
Campbell Ventures Limited

Mobile +44 7771 615641

Email mike@campbell.pwebs.co.uk

Websites campbell.pwebs.co.uk

www.china-business-experts.com