High-tech zones up the game

They play role in upgrading China's industries in key areas such as Information technology, robotics, aerospace and ocean engineering

China's ancient capital and home of the terracotta warriors wrapped in an early autumn mist might seem a different world to California's Silicon Valley.

The northwestern Chinese city of Xi'an is, however, home to one of China's leading national high-tech parks, which the government hopes will produce the Microsofts and Apples of tomorrow. The sheer scale of the Xi'an High-tech Industries Development Zone dwarfs the walled Qin Dynasty (221-206 BC) Chinese capital.

The zone is home to some 20,000 companies, of which 3,000 have their headquarters there, as well as shopping malls, hotels and homes of millions of people.

This is not a lone initiative either. China has more than 100 similar national high-tech zones.

They will play a role in the technological upgrading of China's industries in key areas such as information technology, robotics, aerospace and ocean engineering that were identified as priorities by a Chinese government consultative committee report on Sept 29.

The oldest and best known of the technology parks, which was set up in the late 1980s, is Zhongguancun in Beijing's Haidian district, which gave birth to Chinese computer giant Lenovo and technology company Founder.

Other high-profile ones include Shenzhen High-tech Industrial Park, or SHIP, host to China's mobile communications giants Huawei and ZTE.

In their near-30-year history there can be little doubt these zones and parks have delivered results.

The big question is whether the huge scale of investment in terms of construction and the offering of rent-free periods, grants and other subsidies to companies locating there is justified.

There is also the issue of whether innovation can be planned in the first place, with Silicon Valley and other technology centers around the world often being more spontaneous university spin-offs.

Whatever the debate, there has been huge investment in innovation at Xi'an and not just by Chinese companies.

Over the past five years, foreign investment has been between $800 million and $1 billion annually.

Some of the Fortune Global 500 Companies located there are Samsung and Applied Materials, the US semiconductor company.

The South Korean electronics giant has invested $7 billion in setting up a research and development center, focusing on flash card technology, which has created 2,000 jobs directly and another 4,000 indirectly.

Over morning tea in his office, Yang Renhua, the 50-year-old deputy director of the Xi'an High-tech Industries Development Zone, has no doubt the zones are making a major contribution.

"I think the high-tech zones have, and will continue to play an important role in the development of the economy," he says.

"This is particularly the case with Xi'an. It is a part of western China that got slightly left behind after the reform and opening-up process in the late 1970s that spearheaded growth in the country's costal regions of Guangdong and Shanghai."

Like Silicon Valley and its ties with Stanford University, and Cambridge Science Park with Cambridge University, part of the Xi'an zone's success is its close links with local universities, including Northwest and Xidian, which are particularly strong in engineering, computer science and microelectronics.

The zone has also dovetailed with China's Western Development Strategy, which was launched in 1999 to trigger economic development in the poorer western areas of China.

"Shaanxi is a province based on heavy industries like coal and oil, and there needs to be a structural improvement and upgrading of its industries.

"Many companies in the zone have already shifted from low-end to high-end manufacturing. The local government has been particularly keen for companies to upgrade their technology and production lines," he says.

It is also strategically placed for the government's Belt and Road Initiative to create new trade links with central Asia and Europe.

The Yuxinou (Chongqing-Xinjiang-Europe) International Railway means goods can be transported the 9,850-kilometer distance from Xi'an to Rotterdam in 16 days.

"The initiative is a great opportunity for Xi'an that is very much at the start of this new road. The railways will bring down logistics costs for companies in this region. They will no longer have to transport goods to China's southern and eastern seaports, which are 2,000 kilometers away."

Peter Williamson, professor of international management at Judge Business School at the University of Cambridge, who has written extensively about innovation in China, says for this planned innovation approach to work, the technology parks have to link with industries already in the area.

"It is not a matter of building great facilities and thinking you have a science park that can then produce innovation. You have to leverage something that is already there. This could be a university or a cluster of existing companies. I think the performance of science parks in China has actually been patchy."

Williamson also insists it is actually difficult to plan innovation since it is heavily dependent on unquantifiable factors such as scientific knowledge.

"This knowledge is in people's heads. It is not a matter of just importing data and being able to innovate from that. You also have to be very linked in, not just to what is happening elsewhere in China but also across the world."

The technology parks are an integral part of China's ambition to be a global technology leader and not just a follower.

The government set out as long ago as 2006 its Medium and Long Term Program for Science and Technology Development, or MLP. It said it wanted China to be an "innovative society" by 2020 and a world leader in science and technology by 2050.

William Kirby, TM Chang professor of China Studies at Harvard University, argued in Can China Lead?, co-authored by Harvard academics Regina M. Abrami and F. Warren McFarlan, that this was a serious objective.

"This was not empty talk. Beijing, after all, has a solid track record of setting out a guideline and watching sub-national actors as far down as the village level fall into step through a mix of policies and incentives.

"The development of technology parks is also part of China's innovation planning."

On China's east coast is another of China's national high-tech industrial zones.

The Qingdao National High-tech Industrial Development Zone was given the go-ahead in 2006 by the Ministry of Science and Technology and has a total planned area of 63 sq km.

The coastal city, once a German treaty port and famous for its Tsingtao beer - one of China's few international brands - is home to nearly half of China's marine scientists and marine research institutes.

Working in the zone is Shi Xiaobo, an urbane 52-year-old who is vice-president of the Qingdao Academy of Intelligent Industries, a body set up by the Chinese Academy of Sciences and the local government.

Although born in China, he spent 24 years in the US working in robotics and other areas and is therefore in a good position to judge China's technological progress.

"I think the US has traditionally been far ahead in fundamental research at places like Harvard and Yale. Also, companies like IBM and Google spend huge amounts of money on theoretical research and don't care whether there is a commercial return," he says.

"But in terms of application technologies, I don't think China is very far behind at all."

Shi says the actual role of his institution is not to catch up with the West but with the most technologically advanced parts of China.

"When you talk about high-tech and things like the Internet of Things, Qingdao is completely behind Beijing, Shanghai and Shenzhen. That is why the government plows money into organizations like us."

Xiao Yanheng, director of the Bureau of Science and Technology at the Qingdao National High-tech Industrial Development Zone, has spent more than 15 years working in high-tech zones, having previously worked in another park in Qingdao.

He believes it is a huge challenge for China to catch up with the West in the technology race.

"Over recent years, we have run quickly but the West has not been standing still. I would say that the high-tech parks have played a role in actually narrowing that gap," he says.

"We are not exactly unaware of what is going on in Silicon Valley. I have been there many times. We have also had a number of exchanges with local incubators and enterprises there."

Xiao says that without the zones and their favorable policies, it would be difficult to attract inward investment, particularly from Chinese returning from overseas.

"I think if they decided to set up a business in China, they would choose the high-tech parks because it would give them the right environment."

Wang Qing, professor of marketing and innovation at Warwick Business School in the UK, believes this is the most important role the parks and zones play.

"You can have a debate about how efficient it is to spend all this money on building these facilities, but without them you won't attract the returnees with all the experience they have gained in the US and elsewhere. My own husband went back to start a business in Zhongguancun a few years ago," she says.

"The strategy throughout with the parks has to been to get the brains back from overseas because that is the only way you can do this leapfrogging. If you educated people just through your own system it would take years."

Apart from the national high-tech parks, there are now a number of other technology parks across China specializing in particular industries and technology.

Qingdao Sino-German Ecopark, which was set up in 2010, is one. It is a joint venture between the Chinese and German governments set up when Chancellor Angela Merkel visited the site on a state visit.

It is now home to a number of German and Chinese companies working in the environmental field.

Liu Wen, director of the general office of the park, believes environmental technology could be one of the areas where China takes a global lead.

"We are working toward it being an exportable technology and this was one of the main aims of the park when it was established: to make China an international leader."

Although the scale of China's technology zones and parks may be unique, the concept is certainly not.

South Korea set up such technology parks in the 1960s at the outset of what became its own "economic miracle" and a number of its leading companies were spun out of them.

France, too, adopted a statist approach with parks such as Sophia Antipolis, which opened in 1969 near Nice. It has attracted big names such as IBM and Siemens with scientists attracted to working on the Cote d'Azur.

There are also a number of government-sponsored science parks in the Middle East in countries like Kuwait, Oman and Qatar.

"They have not always been that successful. They have the money but have had scientists working in what I call a bell jar not really linked to anyone or anywhere else," adds Williamson at Judge Business School.

"Where they have had success is forming links with the petrochemical sector in the area rather than developing new industries."

Wang at Warwick Business School, however, believes that in China, the high-tech parks have largely been successful and have been worth the investment.

"Whether China's top-down approach or the bottom-up evolution of technology companies we have seen in the West is more effective is a good question. There haven't actually been any studies to compare. What I would say though is that in China it has worked and is continuing to do so."

Yang at the Xi'an high-tech zone believes much of the work of the zones has been under the radar but this will not be so for too much longer.

"Silicon Valley is actually one of my favorite places and it has created great companies like Apple and Microsoft. I do believe, however, it is possible that one day China's high-tech zone will be as famous as the district in California," he says.

Xie Chuanjiao, Lu Hongyan and Du Juan contributed to this story.

andrewmoody@chinadaily.com.cn