Sunday, June 26, 2005

"Frying" Real Estate, Stock, and Goods

In the "Prologue" to the previous set of 5 posts, I noted that chao dipi or frying real estate was a problem in Zhongguancun. It is also a problem throughout cities in China and the world (witness the current real estate boom/speculation).

To clarify things, I want to quote extensively from a book by Ellen Hertz entitled The Trading Crowd: An Ethnography of the Shanghai Stock Market, published by Cambridge University Press (1998). Find it at Barnes and Noble here: (

I quote from Professor Hertz in order to clarify the meaning of chao or frying, which she discussed here in both a general and particular (to the Shanghai stock market) context.

The following paragraph is found on pages 140-141:

"Chao literally means "to stir-fry," the characteristic cooking technique in Chinese cuisine. It is used in the stock market--but also in the stamp, real estate, antique, goldfish, foreign currency and other markets--to refer to buying and selling within a very short time period, profit being earned through price differentials (chajia), rather than "real" increase in value. My informants always appeared mildly amused by the term, suggesting that its culinary connotations remain close to the surface. When explaining the analogy, informants highlighted rapidity, that is, the fact that the contents of the wok are transformed from raw into cooked food in a very short time. At a second level, the reference to food highlights the fact that one earns one's living (and hence one's eating) through this activity: someone who "stir-fries" stock for a living eats as a result of what he does. Finally, stir-frying involves a quick flip given to the contents of the wok; this flip has its analogy in the somersault (gentou) which stocks make when they double in price, and, paradigmatically, it is this quick somersault, as opposed to the steady climb of long-term investments, on which the dahu [big players of the stock market] nourishes himself."

I hope to return to chao in the future in reference to chao huo, a type of goods in Zhongguancun. As a teaser, chao huo refers to the practice of selling electronics products that have been stir-fried from a second electronics store. The U.S. equivalent would be Best Buy selling a VCR that it bought from Circuit City and then re-sold to the Best Buy customer.

Coda: Government Has Its Place

(Post 5 of 5)

The Crux: The Place of Government

“Memory is an intriguing thing; sometimes it represents lost dreams.” The once red-hot Zhongguancun “Electronics Avenue” today has become a wide road lined with bunches of buildings. The truly embarrassing thing is that its quality has not changed: it is still an electronics market. Zhongguancun has not undergone the intrinsic transformation from a large market to China’s Silicon Valley.

The government has already done much to subsidize and support Zhongguancun. People should not longer rebuke it as lacking. But looking at the current situation, the pace of the government and the pace of enterprise development need to be readjusted.

Zhang Zhongning said that at the beginning of the 80s, a group of technology savvy entrepreneurs drove the development of Zhongguancun, while the government’s position was to provide assistance and service. With the construction of the Science & Technology Zone, the government became a principal actor in encouraging economic development. Different districts and different government departments made increasing GDP their main goal. In this way, they began to rely heavily on real estate industry for development.

In Zhongguancun, real estate should not be allowed to transform science & technology-Zhongguancun into property-Zhongguancun. Only in this way will the advantages and long-term economic development of Zhongguancun be possible. Quick successes and instant benefits are not the development rules for a knowledge economy.

Again, in the construction of Zhongguancun’s finance system: assistant director of the Institute of Finance Research at the State Council Development Research Center, Zhang Chenghui, said, “Today, Zhongguancun enterprises are encountering financial difficulties. This shows that the government has not taken responsibility for many aspects of finance for SMEs. If finance is difficult for SMEs, this is not a problem that SMEs can solve and so the government needs to provide procedures for special support.”

Zhang Chenghui thinks that the government should put a lot of effort into this, for example providing credit services for SMEs, and providing loan and executive services. The government can form a non-profit intermediary to do this.

Zhang Zhongning says that the current Zhongguancun Science & Technology Park is managed by Chinese Academy of Sciences (CAS), institutes of higher education (Peking University (PKU) and Tsinghua University, who represent a group of universities), the Beijing city government, and the Haidian and Chaoyang district governments. Among these multiple managers, various governments and government departments need to take advantage of different things to survive. The relationships between these various advantages have not been coordinated. For example, the Beijing city and Haidian district governments built a Haidian Western District, while Tsinghua and PKU each have their own science parks. This creates a total new area of several million square meters. CAS is building an Eastern District. In actuality, this is all being done by real estate developers and creating a very serious low-level reconstruction.

“If we have a problem, should we go to the Bureau of Science & Technology, the Beijing city government, the Zhongguancun Management Committee, the Haidian district government or the Chaoyang district government? This is a very complicated management system,” said an IT boss in Zhongguancun.

There are many other problems in Zhongguancun. The solutions to these problems are even more numerous. Put simply, the government has gone from a leading position to the wrong position and back to its original position. These shifts have brought about major changes in Zhongguancun.

Maybe we have placed too much hope in Zhongguancun. Or maybe we are overanxious. But regardless, as long as Zhongguancun’s direction has not become skewed then giving Zhongguancun more time will only bring about a better future. (Topic selection: reporter Ge Fangxin)

Copyright: Global Business & Finance Magazine All Rights Reserved Unauthorized Reproduction Prohibited

SMEs' Diagnosis

(Post 4 of 5)

The Finance “Bowel Obstruction”

For a long time, SMEs’ difficulty with finance has been referred to as the “Goldbach’s conjecture” of Zhongguancun’s high-tech industry.

Investigation has shown that the main reason many enterprises go bankrupt is problems with funding at the early and middle development periods. Unable to climb up onto the first stage, they run out of time to grow and are selected out early on. Those enterprises that reach the “first stage” of enterprise development sometimes run into difficulties due to long term funding. This also causes enterprises to miss out on high-speed growth opportunities, in the end becoming static “small, old enterprises.”

How can the lack of capital in the early stages of enterprise development for SMEs be solved? This is a crucial problem for the development of Zhongguancun.

Whether it is a coincidence or not, during visits to 5 Zhongguancun enterprises this reporter learned that, to the present, none of the 5 had received venture capital or bank loans. Then, where can Zhongguancun SMEs get money?

Small and large, there are over 100 venture capital companies in Zhongguancun. But in choosing “the stage of investment projects” in which to invest, most favor long-term and mature projects. Venture capital investments continue to lean “away from poor and towards rich.” Venture capital companies focus primarily on large enterprises, paying little attention to SMEs that need venture capital the most. Large enterprises “have flowers added to their bouquets,” while SMEs “are alone in the snow without charcoal.”

People think that venture capital is cautious in this way because of the cold spell that fell on IT enterprises in 2001. Some enterprises are immoral and in the process of attracting venture capital hide their money. Once they get capital investment, they bankrupt the company or abscond with resources. Some enterprises, even though not intentionally deceiving others, will not invest in management. Hence, once capital is invested, they make large expenditures and hand out ruminations of over 10,000 yuan a month to employees, expecting that they can always depend on venture capital to survive.

Fang Xingdong in Losing Zhongguancun points out that capital has not favored Zhongguancun. Capital includes both IPOs and venture capital.

The data has shown that total investment in China for 2004 was 1.269 billion USD. 27% of this went to Shanghai and 19% went to Beijing, a lowly second. In the past year, the companies that listed on NASDAQ are all Shanghai Companies: Shanda, Ctrip, and EachNet.

Specialists have shown that the immaturity of relevant intermediary service organizations is an important factor that affects enterprise finance. One investigation showed that 78.6% of enterprises think that the undeveloped nature of intermediary organizations affects venture capital negatively.

Advanced systems produce advanced technology. Whether or not Zhongguancun can become China’s Silicon Valley, it is clear that a large amount of advanced technology in a short period of time that will not determine it. A perfected finance environment and system is the crucial factor determining the life or death of Zhongguancun.

The Zhongguancun Science & Technology Zone Management Committee once advanced a policy entitled the “Gazelle Plan.” This is a classic Silicon Valley import. This Plan aimed to reform the SME finance environment in the Zhongguancun Science & Technology Zone. According to estimates, the “Gazelle Plan” brings liquid capital in the amount of 5 billion yuan to “gazelle enterprises” in Zhongguancun.

And yet, if IT SMEs in Zhongguancun want to get loans and financing from these organizations, it is very difficult. “The amount of financing we need is not a lot--a trifling 3 million yuan. But we have tried many different methods, for example guaranteed loans from Zhongguancun Guarantee Company, and we even tried project loans, but we still have no sources,” complained a high-level figure in a Zhongguancun IT enterprise.

For the majority of Zhongguancun’s IT SMEs, loans require that they provide collateral; but even then the fees for the loans are not cheap. The materials required to apply are numerous and procedures are burdened with trivial details.

Because of this, financing for every enterprise requires the display of multiple skills. Through investigations, this reporter learned that a common solution is private fund-raising including underground finance. On the basis of several founding partners’ original capital, the enterprise starts-up. Then, as development continues, the company will be forced to find new partners and attract financing for the next step.

But private and underground financing are the manifestation of a lagging financial system. For growing enterprises, relying on capital and profits to develop is an nerve-racking and unseen danger. The phenomenon of “vanishing” companies will occasionally appear in Zhongguancun, wherein companies are unable to continue only because they are lacking a couple dozen thousands of yuan.

Saturday, June 25, 2005

What Land Can Do

(Post 3 of 5)

Commodifying Zhongguancun Real Estate

Zhongguancun has its origins in the flows of commerce. Commercial development drove the development of the real estate industry but the real estate industry has obstructed Zhongguancun’s development. This seems like a paradox.

According to the 2004 “Investigative Report on Software Parks in Eight Cities,” there are three types of domestic software parks: company type (Zhongguancun, Dalian, Shanghai, Zhuhai); government agency type: those established by government departments (Jinan, Qilu, Shenzhen); and government and company joint type (Hangzhou).

Therein lies an obvious question: what is the benefit of company operations in Zhongguancun? It is known that income from real estate occupies a very important position.

Because of the large-scale involvement of real estate, Zhongguancun has quickly become “pricey.”

During a interview, this reporter learned that an ordinary counter in Hilon Electronics Market rents for 9,000 yuan, while an initial “support payment” of 88,000 yuan must be paid before entering the market. In addition, only qualified enterprises are able to enter: it is necessary to register as a company with at least 500,000 yuan in capital?getihu [self-employed laborers] are completely barred from entry.

Further, in Zhongguancun’s other parks, including Fengtai and Yizhuang, there have been effects from surging real estate development and escalating real estate prices. Real estate prices are climbing there as well.

An employee at a mid-level software company opened in an office building, Li Jianjun, told this reporter: “Even this grade of office building costs 6 yuan per every square meter. There is nowhere in Beijing where the price is this high.” High rents are especially difficult for SMEs to bear. Some enterprises have started to use residence buildings as offices or purchased homes to use as office and residence. Some have even moved to the Chaoyang District in eastern Beijing where office buildings rents are relatively cheaper. Mr. Li also intends to leave Zhongguancun and is in the process of browsing housing in Chaoyang.

The “new star” in Zhongguancun over the past years is Zhongxing Micro-Electronics Company which collaborates with world “giants” and maintains its own video chip technology and products. The chairman of the company, Dr. Deng Zonghan who has studied in the U.S., recalled his experience of starting-up by saying that there are too few office spaces to choose from in Zhongguancun these days. This has created a situation where the price of land, housing, and office buildings averages higher than other domestic and international rates. These factors have added to the cost of doing business for SMEs.

It is reported that there is no price disparity between land in Zhongguancun and that in the CBD [Central business district]. Moreover, SMEs in Zhongguancun have the lion’s share of these places?companies with 10-50 people occupy 80%; private enterprises occupy 80%. Clearly, capital is tight for these innovative enterprises and they need to conserve costs. High rents put huge amounts of pressure on their starting up.

In Zhongguancun in this era, almost all real estate projects, whether they are offices or apartments, orient their first round of consumption toward Zhongguancun IT enterprises. Zhongguancun enterprises are a special community both shouldering “the task of developing China IT to new heights” and also carrying “the assignment of digesting the development of regional real estate economics.” Is this double role too heavy?

Real estate development often needs loans from commercial banks to support it; hence there is pressure to repay the loan and real estate developers cannot help but pass on this pressure to the next business. The efficient use of real estate space, related to the flow of capital, has gradually become the focus of developers. As a result, how to maximize the benefits of capital is the top priority of developments. How to reasonably develop the industrial structure and commercial pattern of this region is often only a secondary consideration.

In light of this, some have noted in jest that “if the electronics market becomes untenable, the owners might change all the businesses into clothing or commodities.”

“‘Wearing software enterprise clothing to do real estate business’ companies can be found everywhere,” said IT critic Fang Xingdong in his Losing Zhongguancun, published in 2004. His book speaks frankly about how real estate has become a promotional poison to the long-term development of Zhongguancun’s IT enterprises.

Zhang Zhongning in the “Investigation Report on the Economic Increase of the Zhongguancun Science & Technology Zone” says that: “Real estate in Zhongguancun has become a factor, but this may only indicate the cost of ‘cashing out’ 20 years of savings including the ecology, brand, and intangible assets of the high-tech industry.” “Zhongguancun has gradually adopted a development plan whereby land and environmental resources are used by the market to attract capital while technology investments have turned into economic contributions. The hopes from ‘Official Reply’ [State Council answer authorizing investment in Zhongguancun infrastructure and planning] were that a large number of innovative technology results would move to market bringing economic development, but this has not happened.”

Besides land, another deadly problem that coerces the development of Zhongguancun is finance.

Whence Zhongguancun Lost its Way?

(Post 2 of 5)

Zhongguancun Veered Off Track

Nothing happens without a reason. If Zhongguancun’s loss of orientation towards technological innovation is the “result,” there are many aspects to the “reason” for Zhongguancun veering off track.

With the rise in the price of land, costs have increased, “squeezing” many small- and medium-sized enterprises (SMEs) out of Zhongguancun. At the same time, the spendthrift top 500 worldwide companies have been setting up shop one after another. At the 6th Zhongguancun Computer Festival in September, 2003, a report pointed out that “the Zhongguancun Software Park alone has attracted Siemens and six other world-renown global companies.”

Microsoft, IBM, Cisco... Favorable land and tax policies have been pawned by Zhongguancun for this type of company. Meanwhile office-style buildings bring endless admiration. Zhongguancun seems to have flourished.

But remember the saying “do not forget what make you success [sic, in English]” (don’t forget what made you successful). For Zhongguancun, excessive attention to attracting the world-renown top 500, even engaging in the economics of [regional] headquarters, will only bring short-term increases to GDP. The successes on the report cord will be attractive but this will destroy Zhongguancun’s “ecology” and the cost will be its original feature. The entrance of IT giants will bring rising real estate prices and a dense commercial atmosphere. This pushes small innovative companies directly off into the abyss, and it traps small- and medium-sized enterprises in positions of dependency on large companies. SMEs can only make profits on the margins, making their progress difficult and losing their innovative capacities.

In the end is it the increase in GDP or the cultivation of small companies with innovative capacities?

While investigating Zhongguancun, this reporter heard an open expression of the viewpoint, from a member of a certain science park in Zhongguancun, that: if a science park wants to be high-quality, it must attraction international companies so as to encourage local companies to internationalize and improve technology. The blueprint is very macro.

However, the IT industry in China is adolescent in comparison with international monoliths. Competitiveness is not even on the same scale. If the two are crudely grafted together, it is difficult to imagine how a fruitful end will result.

Moreover, the IT industry will never realize the daydream of exchanging markets for technology. For example, cellular phones, consumer electronics, and computers have already achieved widespread consumption in China. The core technology is chips, and are there any of our companies that have mastered this? “With no R&D to support them, Chinese enterprises will always follow others” said Zhang Zhongning, director of the Central Science & Technology Committee of the 93 Society, who has tracked Zhongguancun for many years.

Exchanging markets for technology has been a nightmare for China’s automotive industry. That should be enough to wake up the IT industry.
Luckily, among the 14,000 enterprises in Zhongguancun, multinational companies are still few and far between. How can these companies survive?

A person familiar with the situation of Zhongguancun enterprises these days told this reporter that Zhongguancun has no “result-less” companies, and if it does, those companies are having a hard time. “Ten years ago, a couple of buddies could get together and assemble a company to make money--now it is impossible.” The “result” here refers to different kinds of backing, which is to say that many companies could depend on developing government resources to get projects and survive. Projects were the lifeline of these companies.

So these companies did not need much to use much gongfu [kung-fu] on their R&D. Whoever had the resources would get the project and build a temporary office or subcontract to others. This meant that funds were surging and people rested easy. What should be noted here is that this type of development pattern created space out of rented power. Clearly, expecting this type of enterprise to carry out technological innovation is unrealistic. The end result of this over a long period has been that Zhongguancun’s SMEs have had an abnormal development path.

In Zhongguancun, high-tech enterprises have another mode of survival: relying on universities and academies of science to create enterprises. In terms of transforming the results of experiments into products and industrializing, enterprises formed by schools have certainly been successful. Because of the special status of enterprises formed by schools, despite the fact that the gong and drum of system-conversion have sounded loud enough to shake the heavens, and they have been threatened with “being cut off,” they still maintain a special advantage in comparison to ordinary enterprises run by individuals. They continue to receive the support of schools and the state, which includes a hefty amount of capital.

For the SMEs starving for capital, this should be a good thing. But since many of this type of enterprise are parasitical upon birth, they have become “abusive” parasites. When they are out of money they stretch out their hand wanting more, while the pace of their technological R&D is slow and passive.

Aside from this, in a high-tech incubator, many enterprises formed by schools become famous for a time, after which the government subsidizes them. And yet it may be this type of overemphasis that actually ends up smothering enterprises and talent.

Song Cheng is a software engineer at a certain famous enterprise formed by a school. When he recalled the grand times of the company, he is still overwhelmed by the amount of support from the government and by the endless reporting from the media. All at once, the company became a star and its founder a celebrity. However, the face-pace of the government created many problems for a company that had not yet found its feet. For example, internal management could not adapt quickly and subsequent development was difficult. In the short space of three years, almost all of the original employees had left the company. Currently it has gone from bad to worse and may not continue to exist much longer.

With this type of incident in mind, one could say that Zhongguancun has almost no enterprises that engage in true company business. Zhongguancun has lost the soil and ecology that allow SMEs to survive.

It is said that Shanghai will combine Silicon Valley, U.S.A. with Tsinchu, Taiwan to form an IT triangle. In this golden triangle, Zhongguancun has been eliminated.

Who smothered the innovative energy of Zhongguancun? Who changed the flavor of Zhongguancun?

Zhongguancun Lately

(Post 1 of 5)

Published March 1, 2005

Zhongguancun: Heaven or Hell?

Perhaps Future Generations will Regret Boasting about the Past

World Finance Xi Xiumei, Reporter

The “lifecycle” of IT enterprises in Zhongguancun is very short: on the order of 1-5 years. Approximately 20-30% of newly established enterprises face bankruptcy. Other statistics show that in Zhongguancun, a small- and medium-sized (SME) enterprise dies out every 9 minutes.

Going north from the hustle and bustle of Zhongguancun’s Hilon Building past Tsinghua Park, it is only a short distance to the Shangdi Information Industry Base.

February 18, 2005, 10 a.m. Although the beginning of spring is far off, the temperature stood at a dozen degree below zero with a harsh wind creating a hush over the area. Except for a few cars whizzing by, only some unmelted snow was about. Some have predicted that this spring will bring unbearable cold. And with Zhongguancun farther and farther from its goal of being China’s “Silicon Valley,” is this not an “unbearable cold” for the high-tech enterprises here?

At Odds: Zhongguancun Lately

“Starting-up in Zhongguancun these days requires an investment of 1 or 2 million. It’s like skipping rocks on the water?there is no sound,” said Shen Hankun, who has been immersed in Zhongguancun for 6 years.

Shen’s company is in the Shangdi Enterprise Park and is classified as a start-up company in the growth stage. The company was established in 2001 with only a dozen people, including him. These days, the company has almost a hundred employees. “While the company is in Zhongguancun, the customers and market are all overseas, as are the investors. They have nothing to do with Zhongguancun,” Shen Hankun said.

The company does R&D on microprocessors. Before it went into industrial-scale production, there were few people who recognized the value of this company domestically. Moreover, a project that easily requires 10 million in R&D funds is unbearable to the average domestic venture capital company. So the boss had to depend on his own personal “doors” to finance. Despite this, he put everything he had into this company. He received financial support from white-colored “big noses” [Caucasians] and collaborations with overseas high-tech companies.

It is well-known that IT companies like Shen Hankun’s are abundant in Zhongguancun. Founders of these companies have extensive backgrounds overseas so that finance, R&D, products, and markets are oriented overseas. They choose Zhongguancun to start-up mainly because of high-quality, low-cost human resources.

This is a practical business that is” at odds” with Zhongguancun. “The body is present but the mind floats” makes life seem easy for these enterprises.

Yet other SMEs are not quite so lucky. It is said that the “lifecycle” of IT enterprises in Zhongguancun is very short: on the order of 1-5 years. Approximately 20-30% of enterprises face bankruptcy. It is also said that in Zhongguancun, a SME vanishes every 9 minutes.

Without getting into the accuracy of the figures, the survival status of “grassroots” enterprises in Zhongguancun is obvious. Companies move in and then out of office buildings and the names on doorways are replaced in bunches, phenomena common to Zhongguancun-ers.

This reporter took note of the multitudinous companies that occupied a business/residence building in Shangdi. This is the “protozoan state” of a newly established start-up company. Not far away is the spectacular building that holds Lenovo Group. Maybe every humble company here dreams of becoming a “Lenovo,” but at this stage continuing to exist is the problem they face most directly.

The job-hopping rate of those in the IT industry gives us a peek at what is going on. Over a space of four years, a friend of this reporter job-hopped to 5 different jobs, averaging one new company in less than a year. The situation is such that his friends don’t even bother remembering the name of his current company. Some of the companies he left continue to exist, while others have shrunk or vanished. While a high rate of job-hopping is not the specific province of the IT industry, it is undeniable that the shake-up of talent can only occur in a landscape that is being shaken-up.

Another process that is “at odds” with Zhongguancun is currently underway. The IT company where Cui Tao works is in the process of moving out of Zhongguancun to settle in the Chaoyang District. If you ask the reason, he will say: “A company’s choice of location is, first of all, based on the company’s business and the customers’ needs. So the first reason to move is that we wanted a place near our customers where it would be easy to get things done. Preferential policies are no longer enough to attract IT companies.”

Then, is the synergy that large-scale agglomeration of high-tech companies in Zhongguancun brought about still viable? “What are the benefits of agglomeration? Infrastructure? Zone resources? Talent? The truth is that the infrastructure at our new location is superior. In the information age, one can take advantage of Zone resources from far away. As for talent, people want to work in a strong company that can help them develop,” Cui Tao said.

If the above only counts as “at odds” with Zhongguancun’s exterior, then the current “Village base” of Zhongguancun is a core issue--being “at odds” with technological innovation makes people very worried.

There are standards for assessing the innovative capability of a science park. One is the amount of venture capital invested and number of companies listed; another is the number of technological innovations that receive a patent. The amount of venture capital directly influences the industrialization of technology, while the number of technological innovations affects the interest of venture capitalists. The ability to innovate is a crucial factor in determining the life and death of science parks.

Early on in Zhongguancun, famous products emerged: Wang Xuan’s laser typesetting system, Stone’s typewriter, Ni Guangnan’s Chinese card, and Qiu Bojun’s WPS. They all had a high technological content and drove the prosperity of Zhongguancun. Yet it has been reported that, to the present, although there are over 14,000 companies stationed in Zhongguancun, those with their own intellectual property rights are as rare as phoenix feathers and unicorn horns. The vast majority of companies engage in distribution, installation, or technology transfer.

In 1999, the State Council designated the Zhongguancun Science & Technology Zone as a “technology center” and an “innovation base.” Even now, however, a fact that has become clear is that Zhongguancun is far from a technology center. The equation “Zhongguancun = China’s high-tech” is becoming obsolete. No wonder there is an assertion on the streets: Zhongguancun veered off track.


(Post 0 of 5)

I apologize for the paucity of posts over the past two weeks. In an effort to provide compensation, I offer the following lengthy article posted in 5 segments. This article is an influential one for understanding the situation of Zhongguancun at the present.

The five posts should make clear the key elements of the argument. The first deals with an introduction to the problem: Zhongguancun, touted as China's Silicon Valley, is facing problems in its development. What are the indicators of the problem?

The second post deals with the source of Zhongguancun's problems: a lack of innovation. But why has Zhongguancun ceased to innovate?

The third post identifies one of the problems: the "frying" of real estate (chao dipi, in Chinese). Real estate development has incresed the cost of starting a business in Zhongguancun. This post addressed the causes of this phenomenon.

The fourth post identifies another problem, that of finance. Lacking true venture capitalists (another there is no dearth of capitalists) Zhongguancun enterprises cannot find funding for their companies.

Finally, the last post is a coda. It deals with the role of government and how government can play a role most productive to Zhongguancun as a whole.

These posts are translated from the original Chinese by me. Copyright is held by the source publication, Global Business & Finance. As such, these posts are presented for general knowledge and in the spirit of fair use. They should not be reproduced or retransmitted without the permission of Global Business & Finance and myself.

Translated June 25, 2005 for by Tyler Rooker

Saturday, June 11, 2005

Number of High-Tech Enterprises Triples in Five Years

Number of High-Tech Enterprises in the Haidian Zone Trebles in the Last Five Years

June 11, 2005

((Translated from the Chinese by Tyler Rooker on June 11, 2005 for

This paper reporting. “By the end of 2004, the Haidian District had a total of 14,280 high-tech enterprises; in the end of 1999, it had 4,846 high-tech enterprises.” In a marked difference from typical government departments who release information idiomatically using vague expressions such as “approximately” and “over such and such an amount,” Zhou Liangluo, the head of the Haidian District and director of the Haidian Science & Technology Zone Management Committee, provided the above information during the opening ceremony for the Haidian Park “Five Years Ascend the Platform” summary and honorary convention. Mr. Zhou is the embodiment of the persistent style of the Haidian Zone--accurate and objective.

“The Haidian District is the region with the most abundant technological and human resources in the entire country.” According to Zhou Liangluo, the per capita gross revenue from technology-industry-trade in the Haidian Park for 2004 was 599,900 yuan. Technology occupies a 60.5% share of total revenue, while pure technology revenue occupies a 20.1% share of the total.

Yuan Hang, manager at Renmin University Jincang Data Company, told this reporter that although there may not be direct benefits to technology-oriented companies from a favorable ecological environment, it attracts people of talent and sets the stage for collaborative partners. A poor external environment will often produce a “nay vote.”

“A quiet change” is both the emphasis and the challenge of dealing with the environment in the Haidian District. The rebuilding of the District environment must deal with a densely packed population so key policies must be both cautious and considerate to keep interference in people’s lives to a minimum. In the past 6 years, the city of Beijing and the Haidian District governments have invested over 20 billion yuan in the Zhongguancun region. Much construction has focused on traffic infrastructure in this region. New construction or rebuilding has been done on 40 roads in Zhongguancun and its immediate area: Third Ring Road, Fourth Ring Road, Fifth Ring Road, the city rail system, Zhongguancun Avenue, Xueyuan Road, and Beiqing Road are the main arteries in the traffic network structure. The scale of investment and the total length of the roads average first in the city.

Establishing a specialized science & technology zone and forming synergies from industry centralization are effective ways to reduce the costs for newly emerging technology enterprises. Recent years have confirmed that many developed countries have practiced these methods. The Haidian District government has been active in introducing advanced ideas and experiences, building a total of 12 specialized zones and production bases. Among these, the already complete Tsinghua Science & Technology Park has over 400 enterprises and intermediary organizations. It is the only class-A national university science & technology park in the country. With promotion and guidance from the government, an upper- and middle-echelon industry centralization structure has gradually formed in the zone.

An almost ideal living environment has made the Haidian District into the hottest spot for China’s high-tech enterprises. To this, Zhou Liangluo added that in the future perfecting the zone’s environment is the top priority for the District government and the Zone management committee. “To attract a phoenix to nest, it is crucial to create an external environment that is suitable to its development.” Zhou Liangluo said that the future work of the Haidian District government and the Zone management committee will focus on hastening the transformation of government functions. They must assist in building finance and venture capital systems while advancing the perfection of specialized zones and industry bases. A new platform for merchants must be built, while encouragement for independent innovations in R&D must be strengthened. Mr. Zhou sees the goals as improving the degree of organization in industry and promoting the internationalization of the Zone while creating a new level of talented individuals.

Reporter: Yan Yan with Liu Changsheng
Article Source: Science & Technology Daily (June 11, 2005)

Thursday, June 09, 2005

et tu, Hillary?

In the NY Times several days ago (June 6, 2005), I read an article describing a speech by Hillary Clinton in which she criticized the Bush Administration.

While this is understandable in that she is trying to create space between her positions and those of President Bush for the sake of a potential presidential run in 2008, I think both she and the Democratic Party should rethink their position on China.

In her speech, she criticized President Bush for allowing China to become our banker, that is running up a large current account deficit (buying a lot more from foreign countries than the U.S. sells to them) and then financing that debt with Treasure bonds purchased by foreign countries (China buys these bonds to keep its currency from increasing against the dollar, to which the yuan or renminbi is pegged).

If the Democratic Party and Senator Clinton wish to open up a dialogue with America, I think they should consider a free trade platform. It is well and fine to criticize President Bush and his administration for tax policies and running a deficit, but why tie this criticism to an increasingly xenophobic, protectionist, and borderline racist strain of though again China and the Chinese people?

People in China work very, very had. They gain advantage in textiles and apparel to the exclusion of other parts of their economy. If the U.S. wishes China to become a developed country with a democratic government, free speech, and human rights, why would either the U.S. government or the U.S. people want to restrict China’s development by imposing tariffs, quotas, or encouraging anti-China sentiment? It boggles the mind.

While President Bush has many objectionable policies linked to special interests, his policies on China (excluding those enacted recently on quotas for apparel) are the most beneficial to the American people. If I can purchase cheap pants, T-shirts, and shoes at my local retail store, I can focus my energy on maintaining a blog, thinking of new products to develop, and bringing into play the comparative advantage of the American people, rather than how to stop the Chinese people from getting some of the benefits of their hard work.

Life in China for people working in the textile and apparel industries is not a walk in the park. Competition from China makes us (Americans) stronger, quicker, and faster. Our economy needs competition not protection.

I implore Senator Clinton and the Democrats to change their China-bashing ways before they lose out for another decade to pro-China President Bush. John Kerry and John Edwards played their “Benedict Arnold CEOs” card in the 2004 election campaign. This is slippery slope. Let’s make America better, not disparage China!

Wednesday, June 08, 2005

Map and Geography

Brief Introduction to Geographic Position of Zhongguancun
April 29, 2000 Sina Science & Technology

ZGC geography map

Zhongguancun Map

Zhongguancun is located in the northwest corner of Beijing, at westernmost end of North 4th Ring Road. It forms a triangle with Peking University and Tsinghua University, with each abutting the other. The courtyards of ancient dynastic families in Yihe Yuan and Yuanming Yuan (site) are both nearby, while the Fragrant Hills are only 20 km away.

Traffic Lines
From the Capital International Airport to Zhongguancun, one can take a taxi cab (the fare is approximately 100 yuan); or one can take an Air China Bus (ticket price is 12 yuan), and get off at the Modern Plaza or (to the south) walk to the Friendship Hotel, or (to the north) change to the 320 Public Bus on the same side as the Plaza, and get off at the East Zhongguancun stop.

From the Western Beijing Station to Zhongguancun, one can ride the 320 to the last stop which is the East Zhongguancun stop.

From Beijing Station to Zhongguancun, one can first ride the subway in the direction of Pingguo Yuan and exit at the Military Museum. From the south of the Military Museum (south of the road) ride 320 Public Bus to the East Zhongguancun stop.
If you are driving to Zhongguancun, I would advise going from North 3rd Ring Road to the north, toward Zhongguancun.