Monday, May 23, 2005

Science and Technology, Land, and Commerce

Is it a Science and Technology Park or a Business Mall?
What Path Will Zhongguancun Follow?

Science and Technology Daily
May 21, 2005

by Li Zhiyong

(or visit the China Blog:

((Translated from the Chinese by Tyler Rooker, May 23, 2005 for

In the past, Zhongguancun had become a pronoun for high-technology. But these days, enterprises engaging in high-tech R&D and production are fewer and fewer, while innovation has slackened. Finance and business has entered Zhongguancun on a large scale. So, we might ask, is Zhongguancun a science and technology park or is it a business mall? What path will Zhongguancun follow?

The “lifecycle” of Zhongguancun’s IT enterprises is very short: 1-5 years, with 20-30% of newly established enterprises facing bankruptcy. Approximately every 9 minutes the life a small- or medium-sized enterprise in Zhongguancun is extinguished. Additionally, the wealthy global 500 arrive one after the other, squeezing small- and medium-sized enterprises, which are technologically innovative but lacking in capital, out of Zhongguancun. In the “village [cun]” there are fewer enterprises engaging in high technology R&D and production, and more engaging in the finance, commerce, and service industries. Zhongguancun’s position as a technology center is being challenged by finance and commerce.

With this background, at May 17 a workshop on Zhongguancun “land and technology” was held. One scholar in attendance ruminated that while “technological innovation” had been the founding root of Zhongguancun, Zhongguancun has already lost its innovative ability. The aura of “Zhongguancun = China’s high technology” is dimming and Zhongguancun’s position as a “high-technology” center is being lost.

“Zhongguancun’s problems have become a bowl of porridge. Before 2000, Zhongguancun was still in an era of science and technology; since 2000, I feel that it is an era of land. Current government departments are weighing the tax benefits and GDP of Zhongguancun as indicators. A mistake in indicators will lead to mistakes in development directions and ultimately interfere with the allocation of resources and industrial patterns in Zhongguancun. Today is it the government that decides who will be most important for large and small companies?” BlogChina president Fang Xingdong pointed out.

Where are Zhongguancun’s problems coming from?

“There is too much attention paid to attracting the global 500 even to the extent that headquarters economics is being undertaken. In the short-term GDP will increase but it will destroy the ‘ecology’ and appearance of Zhongguancun. GDP has concealed Zhongguancun’s false prosperity. No one is paying attention to the amount of science and technology that has been created behind GDP” commented economist Zhang Shuguang, hitting the nail on the head.

“The main indicators for diagnosing enterprise development in Zhongguancun are industrial and commercial figures such as gross income, fees from taxes, and rates of export. Indicators for Silicon Valley in the U.S. are technology innovation and patent indices, while for science and technology enterprises the relevant numbers are venture capital and listed companies. In terms of these indicators, Zhongguancun is still an industrial zone, while Silicon Valley satisfies the requirements of a science and technology zone,” Fang Xingdong said.

It is widely known that there are two considerations in determining the innovative ability of science and technology parks: one is the amount of venture capital and number of listed companies; two is technology innovation and patents. Venture capital directly influences the industrialization of technology, while technological innovation peaks the interests of venture capital. Innovative ability is a crucial factor in determining the life or death of science and technology parks.

“Zhongguancun is actually not short on money but short on mechanisms for evaluating talent and giving incentives. In the late 90s, outstanding people of talent flowed to foreign countries and foreign enterprises. Domestic R&D institutions do not want truly innovative ‘thorns’ but tame, obedient ‘sheep.’ Although over 14,000 enterprises have amassed in Zhongguancun, those with their own intellectual property rights are a rarity; the vast majority engage in circulating, installing, or transferring technology. So Zhongguancun lacks decent enterprises, is short of independently developed technology, and is unwilling to harmonize with the old hats that run the industry,” Zhang Shuguang said.

Lacking intellectual property rights, an independent R&D ability, and the other problems mentioned above are ignored. For Zhongguancun, what does this mean?

“Of the four Chinese companies that listed on the NASDAQ in 2000, one was from Zhongguancun and that was Sina. In 2004, there were 11 new companies and none were from Zhongguancun. Today, the top three internet companies are in Silicon Valley; in Zhongguancun, internet companies have already lost their innovative edge,” Fang Xingdong stated.

“Profits from real estate are huge and some high-technology companies are whimsical. So they take their limited profits from sales and invest them in real estate. In these cases, the funds that end up in R&D are even less. If the heart and soul of business is not invested in R&D, how can the light shine in? Lenovo bought IBM only once IBM had reshuffled its internal structure. Crucial technology cannot be simply purchased: buying technology in the automobile industry is an example of the failure that results. Directly taking other people’s molds and using them will result in the flight of one’s own R&D personnel,” Zhang Shuguang said sincerely.

“The Qinghe area of Guangzhou had a GDP of 66 billion last year with a goal to overtake Zhongguancun. With its integration of capital, people of talent, and technology along with its shipping abilities, in the not to distant future, its gross income could surpass Zhongguancun. They envy the institutes of higher education and research academies we have here. But this is all moveable and will not necessarily stay in Zhongguancun forever.” Professor Ye Jianping from China’s Renmin University issued a wake-up call to Zhongguancun.

Ye Jianping thinks that Zhongguancun has not achieved a brand for many enterprises and the region itself ? this is potentially risky. There needs to be an integration of technology service, R&D, and technology transfer to make science and technology into true productive forces.

“Some people say that land is in the way?that real estate developments have caused housing prices in Zhongguancun to skyrocket, adding to costs for high-technology enterprises. But I think land has accelerated the development of economics in the region. The high-technology industry needs an ecological chain, people of talent, intelligence, and capital; it also needs financial, accounting, and legal service sectors. This will allow the industrial chain to synergize. One of the goals of real estate development is to create a comfortable, convenient environment for high-technology companies, reducing the cost of communication and improving work efficiency.” Beijing Wanjing Real Estate Development Co., Ltd General Manager, Xu Guangyu, said.

As for the many small- and medium-sized technology enterprises that have been “scared” off by high rents, the director of the Haidian District Merchants Service Center, Liu Xiangyang, said: “First we must be clear about innovation and entrepreneurship. I think that Zhongguancun is still positioned as a place of innovation and some of the large enterprises are very innovative. As a merchants' service department, we think about how to efficiently place resources, and how to attract more resources to the central area. We have to use the special advantages of the Haidian District to attract merchant capital.”

The standing director of the China Urban Planning Institute, Professor Lu Bin, said: “Looking at the global picture, when science and technology parks progress into later development, their services will gradually coalesce into city functions, becoming a science city. Compared to Silicon Valley, Zhongguancun has arisen in a spectacular city [Beijing] that has wonderful natural functions. But it is also because the city’s functions are so strong that the price of real estate has risen. Especially with the injection of venture capital, any attempt to make the central region into a pure R&D region is very difficult. Zhongguancun is a vast science and technology mall?we should enrich the service functions of its high-technology.”

As for the current crisis in Zhongguancun, the assistant director of Zhongguancun Administrative Committee, Zhao Mulan, said: “Zhongguancun is developing in the direction of an industrial cluster. Zhongguancun’s problems should be understood with the background of China’s economic transformations. Zhongguancun was constructed by the innumerable decisions of many people?no large intelligence from the government could have formed Zhongguancun. As for development, the Administrative Committee is working with the levels higher up, but the affairs of the “village [cun]” require that enterprises, residents, and related people debate development and positions?and decide on priorities.”

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