Zhongguancun-based companies garnered business revenues of 380 million yuan ($69 million) in the first quarter of this year, up 12 percent on a year-on-year basis. The State Council recently approved a development plan called the Zhongguancun National Innovation Demonstration Zone (2011-2020) that allows companies in the area to try out new measures and pilot projects. [Photo / China Daily]

Beijing's Zhongguancun area aims for global recognition and growth

BEIJING - Zhongguancun may be hailed as China's most famous village by foreigners. Dubbed as "China's Silicon Valley", the country's biggest high-tech park in west Beijing is not only home to Chinese high-tech companies such as Lenovo, Baidu and Sohu.com, it is also the China headquarters of world-renowned technology companies such as Google, Microsoft and Intel.

As part of China's efforts to build an innovative economy, the State Council, China's Cabinet, recently approved a development plan called the Zhongguancun National Innovation Demonstration Zone (2011-2020) that allows companies in the area to try out new measures and pilot projects.

The plan, which includes a drive to boost the total revenues of companies in Zhongguancun to 10 trillion yuan ($1.8 trillion) in 2020 from 1.55 trillion yuan last year, is designed to help the area become one of the world's most famous technology hubs. The predicted income increase will come from increased sales on the back of tax incentives for companies moving there and research and development subsidies.

"Zhongguancun has entered a new phase of development," said Yang Jianhua, deputy director of the administrative committee of Zhongguancun Science Park. "I think in the next 20 years Zhongguancun will have the three top technology industry clusters in the world and will form a grouping of the world's top technology entrepreneurs."

Zhongguancun's history can be traced back to a crowded electronic avenue in the 1980s. Close to China's top universities and national academies, China's biggest technology hub first emerged as a small market for electronic components and devices for technicians and researchers.

In October 1980, Chen Chunxian, a researcher at the Chinese Academy of Sciences, founded a technological development service department under the Beijing Society of Plasma Physics in Zhongguancun, making it the first civilian-run scientific and technological institution in the area.

As China's economic reform and opening-up policy started to unfold, a group of domestic technology companies including Stone Group, Founder Group and Lenovo Group became established in subsequent years.

In the early days of Zhongguancun, many of the companies in the area had close connections with the country's academic world.

For example, Founder is a technology company that was spun off from Peking University. Lenovo Group was spun off from the Chinese Academy of Sciences (CAS). Liu Chuanzhi, a former researcher at CAS, later led Lenovo's purchase of IBM's personal computer division for $1.75 billion in 2005.

"In China, you can't find another place like Zhongguancun that is so close to the country's technology academia. So when China started to encourage the commercialization of technology after the economic reforms of the 1980s, Zhongguancun became the first place to exploit the opportunity," said Xia Yingqi, former deputy director of the administrative committee of Zhongguancun Science Park.

He said it is Zhongguancun's close connections with China's technology academies that made Zhongguancun become China's most influential innovation center in the next decades.

Unlike many other government-funded high-tech parks, the establishment of Zhongguancun came about as a result of market forces, something unique in China's rigid planning system at that time.

As late as 1988, Zhongguancun was officially recognized by the central government and was given the name "Beijing High-Technology Industry Development Experimental Zone". After that, the administrative committee of Zhongguancun Science Park was established to help coordinate with and service the companies in Zhongguancun.

Since its inception, the Zhongguancun administrative committee has followed a strict policy of not interfering in companies that they serve.

"Unlike many new high technology parks in other cities, we don't have rights in areas such as land-use approval and tax collection. But we did help a lot in creating a regulatory environment that fosters innovation," said Yang.

Since 1988, the Chinese government has given several preferential policies to companies in Zhongguancun such as tax exemptions and research subsidies. It was reported that the administrative committee was willing to help solve problems such as looking for rental apartments for entrepreneurs in the area and even kindergartens for their children.

Last year, Zhongguancun accelerated its growth by building a "special zone of talents", which will give preferential treatment to people, especially those from overseas, who start businesses in Zhongguancun.

The preferential treatment includes registration for a Beijing hukou (permanent residency permit), medical care, insurance and tax incentives.

"Talent is the foundation for the future development of Zhongguancun because it is the top entrepreneurs that will bring about change in the world," said Yang.

According to official figures, 184 companies in Zhongguancun have become public companies, with the number listed on foreign stock markets reaching 73.

This year, many Chinese companies, including Youku, Dangdang and Qihoo360, launched their initial public offerings in the United States. Most of them are based in Zhongguancun.

Xia said the value of Zhongguancun is that the companies focus on providing products and services that solve Chinese problems.

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He said Lenovo started from selling electronic components that enabled early computers to support Chinese language displays and input. Baidu was also funded to provide Chinese language search services.

But Xia said in recent years many Zhongguancun companies started to expand in overseas markets, marking a new stage in the area's development.

Having witnessed the success of Zhongguancun, governments in many cities have tried to follow the same path by establishing high-technology parks in cities including Shanghai, Hangzhou and Chongqing. Some of them have attracted many of the worlds' top technology companies. But Xia said the Zhongguancun model could not be fully replicated.

"Many have asked me whether the Zhongguancun model can be copied. I say that so long as the top academics, scientists and Chinese college students are here, the success of Zhongguancun can never be duplicated," he said.