Top: Zhongguancun is known as China's Silicon Valley, which is the cradle of many technology companies. Above: More than 10,000 high-tech companies are located in Haidian Science Park. Photos Provided to China Daily

Managers of a science park who could justifiably be popping champagne corks to celebrate its success are instead reflecting on what it will do next

It has long been renowned for its technological innovation and is widely known as China's Silicon Valley, but Zhongguancun, in northwestern Beijing, is now pondering its future.

At a recent meeting of the country's high-tech parks, participants brimmed with optimism and compared notes about their latest deals and rising revenue, but Haidian Science Park, at the center of Zhongguancun, delivered a far more measured report.

"I think we have to look once again at basic concepts that have been taken for granted," said Zhang Xiuying, deputy director of the park's administrative committee. "For example, what is a business? What are industries? Why don't we use social media to build better next-generation government services?"

Those self-reflective, modest remarks belie the sparkling results the park has turned in over recent years. Last year more than 10,000 high-tech companies and 73 overseas listed companies were located there, generating revenue of 1.07 trillion yuan ($160.6 billion; 120 billion euros), 21.4 percent more than in the previous year.

And yet the park's management seems to be beset by doubts about where it should go next. One question it is asking is how the park should adapt to new central government policies allowing the park's administrators to adopt innovative approaches in areas such as high-tech firms' financing methods and stock rights incentives.

Under policies that came into force 25 years ago, the park's high-tech firms have enjoyed generous corporate income tax breaks, paying 15 percent, after a full exemption in the first three years of the company's operation and a 50 percent cut in the following three years.

More broadly, Haidian Science Park is pondering how it can move from being a science park with a fairly limited focus on industrial high-tech to a world-class innovation center that brings together the worlds of academia, commerce, industry and research.

That goal seems entirely plausible given the park's location in northwestern Beijing, where many colleges and universities rub shoulders with one another, something that has given the park an unparalleled advantage from the start.

A roll call of institutions in the area yields a long, impressive list of prestigious institutions: 78 colleges and universities, including Peking University and Tsinghua University; China's two major academies, the Chinese Academy of Sciences and the Chinese Academy of Engineering; 312 research institutes; 69 research and development institutes set up by multinational corporations; and 49 laboratories.

No other Chinese city could hope to match this array of knowledge and expertise, so it is little wonder that the country's first shopping strip devoted to electronics sprang up here in the 1980s without any government planning. In May 1988 Zhongguancun's status was officially cemented when China's first science park was built here.

Brand names that have since become well known, such as Lenovo, Stone, Founder, Tsinghua Tong Fang and Netease took their first footsteps in Zhongguancun, and by the late 1990s it was being compared to Silicon Valley. As neat as the comparison may seem, it is wide of the mark in at least one respect: Haidian Science Park did not, unlike its Californian counterpart, spring up as the result of hi-tech startups spontaneously setting up shop in close proximity to one another in an effort to reap the benefits of industrial agglomeration.

"We felt our model should be different to other economic development zones that were popular at the time," says Zhang, who joined the park's administrative committee 25 years ago. "We also felt that though we should learn from overseas, their models could not be directly copied. We felt that the challenges we faced were enormous."

The book, Paving Stones, compiled by Hu Zhaoguang, the first director of the Beijing New Technology Industrial Development Experimental Zone, documents how the first administrators changed the way they worked to fit in with the needs of enterprises.

The first thing the administrators did was to streamline the process of approval for companies wanting to set up in the area, something that required many months and involved several government departments. Those kinds of delays served only to dampen applicants' initial enthusiasm and put chances for companies to work together in jeopardy. Zhang says that when the administrators complained that government officials assigned to the park lacked the authority to approve companies being set up, the Beijing Administration for Industry and Commerce gave the official assigned to the job a higher ranking so he could issue approvals.

The committee also came up with ways of encouraging firms' innovation, mainly by using tax rebates to fund corporate research, and by providing scientists and technicians with housing. The committee also strengthened cooperation among universities, industry, and research institutions.

By the end of last year, Haidian Science Park had set up 35 incubators, 13 of them at a state level. They now host 3,531 companies and have incubated 6,579. These incubators have created 250,000 jobs, almost 4,000 of them filled by students returning from overseas, the committee says.

As Zhang Xiuying's recent ruminations illustrate, there has never been a lack of soul-searching about what the park is and what it should become.

In a provocatively titled book in 2005, The Death of Zhongguancun, Fang Xingdong, an IT writer, asked: Who are the main agents of innovation in the park? Established companies or grassroot companies? Who should play a greater role in the park? The government or the market?

For Ernst Nilsson, a PhD in industrial economics who has researched science and technology parks, the answer is clear: governments are bad at running businesses because they often have goals other than innovation, competition or satisfying customers.

"Government cannot pick firms the private sector has to do that," Nilsson says. "Governments can provide an environment through rules, regulations, access to financing, access to facilities and services. Governments can also identify new areas such as biotechnology, nanotechnology, green technology, smart grids, high-speed trains and the like, for societal reasons, or because it seems like a promising area for future growth, or because competition can stimulate research, encourage links to innovators."

Liu Ying, an economics professor at Tsinghua University who specializes in innovation and entrepreneurship, says the role of administrators of science and technology parks should be similar to that of Jack Ma of Alibaba.

"Ma built a big stage. The actors need to play a role that follows the rules of the market, rather than of the government."

Zhang also reckons that what the government can or should do is limited. The role of park administrators is to support and advise companies, and provide links so that they can put their heads together, rather than telling them what to do, she says.

For example, in 2009 Zhongguancun National Innovation Demonstration Zone was set up as the first of its kind in the country, with endorsement from the State Council. One of the zone's aims was to encourage firms to expand overseas.

However, Zhang says that three years earlier she had been looking at helping corporations with their ambitions of expanding overseas. In 2006, she helped set up a fund to promote such an endeavor. The three-year trial project, said to be the first of its kind among the 105 high-tech zones in China, offered an initial 5 million yuan to support corporate activities such as international personnel exchanges and intermediary services related to internationalization.

The initiative appears to have paid handsome dividends. Before the fund was set up, the companies involved had annual revenue of 22.1 million yuan; after it was set up this had shot up to 105.7 million yuan.

"Businesses that receive money from us can also use that to vouch to overseas investors that they have government backing," Zhang says.

Many companies in the park are keen to go global, but do not know how to handle the matter correctly, she says.

Internationalization is not about how much has been invested overseas, but about the thinking of those who run the companies, she says.

zhengyangpeng@chinadaily.com.cn

(China Daily European Weekly 08/30/2013 page16)