An an­cient city grows in­no­va­tively by de­vel­op­ing its dig­i­tal econ­omy

Newsweek International - - CHINA FOCUS - By Ding Ying & Wang Hairong

There is a fa­mous Chi­nese say­ing that “in heaven, there is par­adise, on earth, Hangzhou and Suzhou.” Hangzhou, cap­i­tal of east China’s Zhe­jiang Prov­ince, is re­puted for its en­chant­ing scenery and abun­dant nat­u­ral re­sources. With the boom in in­for­ma­tion tech­nol­ogy (IT) and In­ter­net Plus in­dus­tries, the city now has grown into a par­adise for in­no­va­tion and en­trepreneur­ship.

A flour­ish­ing in­dus­try

As re­form and open­ing up en­tered a new phase in China, Hangzhou seized the op­por­tu­nity to de­velop its dig­i­tal econ­omy and its ef­forts have paid off. To­day, it is known as “the cap­i­tal of e-com­merce” be­cause of its ro­bust In­ter­net in­dus­try.

Hangzhou’s In­ter­net in­dus­try has main­tained an an­nual growth rate of more than 40 per­cent, higher than that of megac­i­ties such as Bei­jing and Shang­hai. Its In­ter­net com­pa­nies ac­count for 6.5 per­cent of the to­tal na­tion­wide, only be­hind Bei­jing, Shang­hai and Shen­zhen, ac­cord­ing to a re­port on the In­ter­net in­dus­try pub­lished by and Netease’s joint In­no­va­tion Cen­ter in Oc­to­ber.

Hangzhou had 21 uni­corns as of the end of Oc­to­ber—star­tups in emerg­ing in­dus­tries val­ued at more than $1 bil­lion. Though fewer than Bei­jing’s 83 and Shang­hai’s 34, it out­paced Shen­zhen’s 18, ac­cord­ing to Itjuzi, a busi­ness in­for­ma­tion ser­vice provider fo­cus­ing on the In­ter­net in­dus­try.

In 2017, the value added of Hangzhou’s in­for­ma­tion in­dus­try ac­counted for more than one quar­ter of the city’s GDP, grow­ing at 21.8 per­cent and con­tribut­ing more than 50 per­cent to the eco­nomic growth of the whole city, ac­cord­ing to the lo­cal govern­ment’s work re­port re­leased at the be­gin­ning of this year.

Ye Rong, deputy mayor of Shangcheng Dis­trict, used the city’s two fa­mous land­marks to de­scribe the change in the city. “We are strid­ing from the West Lake era into the Qiantang River era,” he told Bei­jing Re­view.

West Lake and the Qiantang have dis­tinctly dif­fer­ent per­son­al­i­ties. The for­mer, with gen­tly rip­pling wa­ter, is re­garded as a suave beauty who al­ways charms, no mat­ter whether wear­ing plain clothes or gaily made up. The lat­ter is fa­mous for its spec­tac­u­lar, pow­er­ful waves that some­times surge on the banks.

“Tourism was at the heart of the West Lake era. Hangzhou, a pic­turesque tourist desti­na­tion, im­pressed peo­ple with the land­scape south of the Yangtze River,” Ye said. “Now it is not only a tourist city with ex­quis­ite scenery, but also a vi­brant city full of in­no­va­tion.”

With ur­ban­iza­tion, big cities are fac­ing the com­mon chal­lenge of de­vel­op­ment slow­down caused by lim­ited ur­ban space and re­sources. Hangzhou is break­ing this bot­tle­neck by de­vel­op­ing its dig­i­tal econ­omy.

Shangcheng is one of the old­est and small­est dis­tricts in Hangzhou with an area of 18.1 square km. It was where the royal palace lo­cated in the South­ern Song Dy­nasty (1127-1279). “Our dis­trict cov­ers a lim­ited area ge­o­graph­i­cally, but our de­vel­op­ment space is un­lim­ited,” Ye said.

Ye said emerg­ing in­dus­tries’ con­tri­bu­tion to the dis­trict’s econ­omy has sur­passed that of tra­di­tional in­dus­tries. The dig­i­tal econ­omy has be­come a pil­lar in­dus­try, along­side fi­nance, cul­tural and cre­ative in­dus­tries, and mod­ern com­merce. It can boost the de­vel­op­ment of tra­di­tional in­dus­tries by en­hanc­ing their value and change con­sump­tion by upgrading habits. “In the past, peo­ple re­garded the In­ter­net merely as a tool, but now they find it to be a re­source too,” he added. “[By har­ness­ing the In­ter­net] we can fi­nally re­al­ize our de­vel­op­ment motto of ‘lim­ited space, un­lim­ited growth.’”

An evo­lu­tion leader

Hangzhou’s boom­ing In­ter­net Plus in­dus­try has ben­e­fited from two fac­tors. One is the hi-tech at­mos­phere jointly cre­ated by its In­ter­net gi­ants and uni­ver­si­ties. The other is the lo­cal govern­ment’s pref­er­en­tial poli­cies to sup­port In­ter­net in­no­va­tion.

Hangzhou hosts the head­quar­ters of the Alibaba Group and the of­fices of Netease. Alibaba topped the list of the 100 big­gest In­ter­net en­ter­prises in China in 2018 jointly re­leased by the In­ter­net So­ci­ety of China and the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy, while Netease was fifth.

Alibaba is famed for its an­nual shop­ping spree that started in 2009. Since then, ev­ery year it has con­cluded with colos­sal sales, break­ing the pre­vi­ous year’s record. This year’s bo­nanza on Novem­ber 11 gen­er­ated $30.8 bil­lion of gross mer­chan­dise vol­ume, an in­crease of 27 per­cent year on year. The group’s CEO Daniel Zhang con­fi­dently pro­claimed, “Look­ing ahead, Alibaba will con­tinue to lead the evo­lu­tion to­ward the fu­ture dig­i­tal econ­omy and life­style.”

Many of Hangzhou’s In­ter­net-re­lated com­pa­nies have some link to Alibaba. Some busi­ness starters are for­mer Alibaba em­ploy­ees. Some ob­tain fi­nanc­ing from it. Li Zi, Gen­eral Man­ager of Hangzhou Find­land In­for­ma­tion Tech­nol­ogy Co., told Bei­jing Re­view that she worked for Alibaba for eight years, when she was in mar­ket­ing. “Alibaba has a very open-minded cul­ture of en­cour­ag­ing em­ploy­ees who are start­ing their own busi­ness,” Li said.

Formed in part­ner­ship with Google in 2014, Find­land helps Chi­nese com­pa­nies’ over­seas ex­pan­sion. “We serve 200 to 300 clients ev­ery year. Our sales vol­ume this year is dou­ble last year’s,” Li said.

Zhe­jiang Univer­sity, one of China’s top uni­ver­si­ties, prides it­self on its cul­ture of in­no­va­tion and en­trepreneur­ship. The univer­sity is also renowned for the num­ber of busi­ness star­tups it has fos­tered. Its re­searchers are mak­ing an im­pact in ar­eas like ar­ti­fi­cial in­tel­li­gence (AI), as­sem­bling tech­nol­ogy for large air­craft, clean en­ergy, ocean tech­nol­ogy, in­dus­trial con­trol tech­nol­ogy, and global pub­lic health ini­tia­tives for the pre­ven­tion and treat­ment of in­fec­tious dis­eases.

In ad­di­tion to Zhe­jiang Univer­sity, a num­ber of

pri­vate in­sti­tu­tions have emerged in re­cent years. West­lake Univer­sity, in­au­gu­rated on Oc­to­ber 20, is a pri­vate univer­sity that has al­ready at­tracted dozens of in­ter­na­tion­ally renowned schol­ars. Hu­pan Univer­sity, founded by Alibaba founder Jack Ma and sev­eral en­trepreneurs and schol­ars in Hangzhou, aims to cul­ti­vate the next gen­er­a­tion of Chi­nese en­trepreneurs.

The lo­cal govern­ment has also come up with pref­er­en­tial poli­cies to en­cour­age in­no­va­tion and star­tups. Ac­cord­ing to the lat­est pol­icy pub­lished in Au­gust, star­tups in­clud­ing In­ter­net-re­lated com­pa­nies can en­joy a sub­sidy of 5,000-20,000 yuan ($725-$2,900) ev­ery year. Col­lege grad­u­ates who start a busi­ness can re­ceive free funds be­tween 20,000 yuan and 200,000 yuan ($2,900-$29,000) from the govern­ment if their projects make the grade. Once their pro­grams reach the na­tional level, the en­ter­prises can win an award of 300,000 yuan ($43,500). More­over, the lo­cal govern­ment can also sub­si­dize their of­fice space rent. Big­data Workspace, an in­cu­ba­tor started in 2015, is lo­cated in one of the tall of­fice build­ings crammed with In­ter­net com­pa­nies in Shangcheng. The in­cu­ba­tor has stan­dard fa­cil­i­ties for startup founders: of­fice rooms, pri­vate tele­phone rooms, con­fer­ence rooms and a cozy cof­fee shop. It also pro­vides sup­port­ing ser­vices such as print­ing and meet­ing ser­vices and tech­nol­ogy sup­port. The in­cu­ba­tor has tu­tors for star­tups, who range from CEOS, pro­fes­sors and govern­ment of­fi­cials to in­vestors who can pro­vide tech­nol­ogy, pol­icy, le­gal and fi­nan­cial con­sult­ing ser­vices, said Yu Lu, Oper­a­tion Di­rec­tor of the in­cu­ba­tor’s mother com­pany Winkind Smart Park Tech­nol­ogy (Hangzhou) Co. Ltd.

Big­data Workspace has a three-stage de­vel­op­ment plan: At the first stage, be a mak­ers’ space; at the sec­ond stage, in­cu­bate in­ter­nal and ex­ter­nal cloud com­put­ing projects; and at the third stage, in­vest in in­cu­ba­tor-re­lated ser­vices. Cur­rently, 13 com­pa­nies are be­ing in­cu­bated in the workspace. More than 30 have al­ready grad­u­ated and moved out.

Ac­cord­ing to Yu, star­tups choose the in­cu­ba­tor cen­ter also due to the cheaper costs, es­pe­cially the rent, as the in­cu­ba­tor re­ceives fi­nan­cial sup­port from the govern­ment to en­cour­age star­tups.

A smart city

Be­sides ed­u­ca­tion and pol­icy sup­port, Hangzhou, with its liv­able en­vi­ron­ment, rel­a­tively mod­er­ate cost of liv­ing, and con­cen­tra­tion of sci­ence and tech­nol­ogy re­sources, has at­tracted a large num­ber of tal­ented IT pro­fes­sion­als from other cities.

Ding Siyu, a 22-year-old who worked for an IT com­pany in Bei­jing, came to Hangzhou sev­eral years ago with her boyfriend. Now she works with Xiaowanzi, a leisure game pro­duc­ing com­pany.

“We earn sim­i­lar salaries here but the rent is much lower than in Bei­jing. Also, in Bei­jing, peo­ple nor­mally spend hours com­mut­ing. Here in Hangzhou, it takes us only 30 min­utes to go to work. And the cli­mate and air qual­ity are bet­ter than in Bei­jing,” Ding said.

To­day, Hangzhou has be­come a dig­i­tal city. Peo­ple can go any­where and buy what­ever they want with their smart­phones us­ing the Ali­pay app. Hangzhou was ranked the world’s 20th smartest city based on its per­for­mance in 2017 by Ju­niper Re­search, a Uk-based com­pany that is one of the lead­ing an­a­lyst firms in the mo­bile and dig­i­tal tech sec­tor. The or­ga­ni­za­tion gauges cities based on their use of the In­ter­net of Things and other rel­e­vant tech­nolo­gies to im­prove their in­fra­struc­ture.

In such a smart city, res­i­dents can pay for their com­mute, ac­cess med­i­cal ser­vices, or­der food, get an in­voice and do many other things by sim­ply scan­ning bar­codes or QR codes with their phones. ■

Wang Kai (cen­ter), founder and CEO of Hangzhou-based Xiaowanzi, checks out the com­pany’s new games with col­leagues

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