In the new economy, competition based on hi-tech knowledge is becoming increasingly fierce. To stake out territory in the highly competitive international marketplace, every country is busy establishing a competitive edge in new markets that still possess vast potential for development. Both the "National Knowledge-Economy Conference" (
Two key projects listed in China's "Tenth Five-year Plan" (
Located in Beijing's Zhongguancun, nearby China's two best universities, Peking University (
Zhongguancun has been under development for about 20 years, but has only in recent years succeeded in attracting the attention of the Chinese government and multinationals. Treating Zhongguancun as a special case, China's government is increasingly prepared to pool together all available resources and pour them into Zhongguancun's development. The "Draft Articles for the Zhonguancun Science Park" is to be China's first law governing hi-tech development. The law standardizes a policy of favored status for hi-tech industry and gives the sector power to implement a stock-option system (股份期權制).
In addition, Beijing is opening its doors ever wider to non-resident hi-tech personnel by relaxing previously strict limitations on residency. Inflated local housing prices, a construction boom and high numbers of migrant workers all testify to Zhongguancun's powerful allure.
Zhongguancun, with more resources at its disposal, has experienced smoother development compared to western China. But can it realize its dream of becoming "China's Silicon Valley?" Looking at Zhonguancun's present stage of development, it appears to lack three essential pre-conditions: talent-incentive mechanisms, a financial support system, and an entrepreneurial environment.
Hi-tech industry characteristically has high levels of professionalism, risk, mobility, and creativity. Recruiting hi-tech talent is an important task in determining whether one can maintain a superior position on the ultra-competitive, global hi-tech battlefield. This is the challenge of building effective talent-incentive mechanisms. Just this past May, US President Bill Clinton proposed a plan to Congress regarding the importation of hi-tech talent. In the plan, quotas for imported hi-tech talent between the years 2001 and 2003 would increase from 115,000 to 200,000 people. German Chancellor Gerhard Schroeder has also announced that he will propose a set of measures concerning the recruitment of foreign hi-tech talent, setting a target figure of 20,000 people. The recruitment of hi-tech talent by developed countries has already reached a highly competitive level.
In China there are only 1.49 million Chinese scientists and engineers currently engaged in technology-related occupations. The number of retiring high-level scientific research personnel will peak at the beginning of next year, a development that will force China to face a shortage of hi-tech talent. As for Chinese students studying abroad, even though the accumulated total of returning students reached 400,000 since economic reforms began, this group represents only 33 percent of the total number of Chinese students currently abroad. How to recruit talent through enterprise incentive mechanisms, is clearly a great challenge facing China's hi-tech industry.
The second key pre-condition -- the financial system -- is a key factor in creating an environment conducive to creativity. Every year, US Silicon Valley businesses attract US$15 billion in venture capital, of which 90 percent comes from private investors, and only 10 percent from government agencies. The success of Hotmail best illustrates the importance of venture capital to entrepreneurialism. Hotmail's success began with US$300,000 invested by venture capital companies. The NASDAQ also provided a favorable environment for fundraising. As a result, the success formula for America's Silicon Valley became "Technology, plus venture capital, plus NASDAQ."
Without the support of a financial system, and an understanding of hi-tech industry markets, however, creativity cannot be made to bloom in the marketplace. The problem China currently faces is that it hasn't developed a mature financial industry. Furthermore, there is also a shortage of people engaged in professions closely linked to the finance industry, such as lawyers and accountants. Take the legal profession as an example. China didn't begin offering unified bar exams until 1986. Consequently there are only 110,000 practicing lawyers nationwide. How to increase the number of professionals involved in the hi-tech industry -- while raising professionalism -- is clearly another significant challenge China must face.
The third major pre-condition -- creating an entrepreneurial environment -- requires the infrastructure elements mentioned above. But creativity is also intertwined with cultural aspects. As Morris Chang (
An important spiritual element in the success of hi-tech businesses in America's Silicon Valley is a generous, open-minded attitude that allows for failure. At the present time, in which China's modern corporate culture has yet to be established, the rise and fall of "hot" hi-tech companies must become the focus of attention. An invisible challenge facing China's hi-tech development is whether an adventurous entrepreneurial culture can cast off psychological limitations imposed by tradition, and create new job values in China's hi-tech industry.
Apart from issues concerning the hi-tech industry itself, the interaction between hi-tech industry and local society is another issue that has become the focus of attention. In this respect, Zhonguancun and the Hsinchu Science-based Industrial Park are very similar. Taiwan's park, which operates under the guidance of the central government, is surrounded by walls that form both a visible -- and invisible -- barrier between it and the local community. The Science Park brings in a large population from other areas, adding to existing strains on the local transport and water resources. Taxes derived from the park, moreover, go directly to the central, and not the local, government. In Beijing, similar rumblings are beginning to be heard. Districts in Beijing are already extremely unbalanced in their development, both in terms of income and physical landscape. The government's numerous preferential policies with regard to Zhongguancun create an even deeper sense of inequality. Additionally, some people feel that the Zhongguancun model is another incarnation of Beijing's "bigshot" personality.
Areas in southern China have already begun to join the ranks of the hi-tech industry. Businesses in the south, however, do not have a bloated image of themselves and fully understand that their competitive advantage lies in cheap labor. As a result, these firms do only low-end jobs, making use of their advantage. Beijing, on the other hand, proposes a set of macro plans whenever it wants to develop something and then tries to keep the whole nation's resources in its grip.
Will Zhongguancun become"China's Silicon Valley?" Or is it just a concentration of hi-tech talent? The challenge, it seems, has only just begun.
Hsu Tung-ming is a freelance writer based in Beijing.
Translated by Scudder Smith
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