From shanzhai city “the home of fakes” to China’s “innovation capital,” Shenzhen has gone through more than its fair share of changes to become the sleek modern city it is today. On 20 November, the Director of Nanshan District’s Science and Technology Innovation Bureau, Liu Shiming, spoke to participants of TechCrunch Shenzhen 2018 about the district’s tech journey.
“As a promoter of Shenzhen innovation and entrepreneurship, this event is right up my alley,” said Director Liu. “I see myself more as a spokesman than as an official—someone who serves industry and science. This informal cooperative environment is the just the kind of place to get across my message.”
Talking about how Shenzhen has changed over the past four or five years, Liu Shiming does not characterize development as either fast or slow, but rather as a set of responses to changing societal conditions.
“China’s reform agenda is now 40 years old,” Liu said. “We’ve had a rapid growth spurt, beginning right here in Shenzhen.”
Liu believes that Nanshan has become the hub it now is thanks to municipal government support.
“We have upgraded from being a city that develops in stops and starts to one that is confident enough to transition away from traditional sectors,” he said. “We are now able to reduce the excess capacity left over from the 1990s, a strategic yet risky move.”
Liu added: “We’ve transitioned boldly and rapidly, and now find ourselves with a booming high-tech sector. The city government plans are aligned with those of the Nanshan high-tech zone. We are fully tuned into our opportunities. It is based on everyone’s dreams that we’ve built our success.”
“It didn’t happen all at once,” he said. “It has been a long-term process, and we’ve ridden the wave of opportunity.”
‘One more, one less’
For the government, dealing with entrepreneurs and investment bodies, what is the biggest difference between Nanshan District and other local authorities? Director Liu Shiming summed up as “one more, one less.”
The “more” refers to increased IP protection. The emphasis on strong intellectual property rights protection has helped turn Shenzhen from “rip-off central” to “innovation city,” but it has not been easy. People have the idea that the Huaqiang North area only manufactures knockoffs, but actually, there’s more to it.
“First of all, Huaqiang North did not begin with shanzhai culture. It began with the chip. When I was in technology 10 or 20 years ago, I came to Shenzhen. Not for Window of the World [tourist spot] or the zoo, but for the innovative atmosphere of Huaqiang North.”
This is what it was famous for, and where prototypes of high-tech businesses and supply chains were incubated. Later, the development of new machinery and electronic products resulted in a period of rapid imitation. For a while, shanzhai was what everyone did. As a form of adaptability, why not? Soon people realized they needed an atmosphere in which IP was protected.
They realized that quality suffered. As the economy grew up, shanzhai culture passed away. The government crackdown and the emerging generation of talented innovators left no place for piracy here. Consumers also abandoned shanzhai, and this is an important factor. For Nanshan, success followed this transformation.”
The “less” refers to less government control. “Some local governments put a lot of emphasis on management. We don’t. We are all about service,” he said.
“The government is not about managing people but about serving them. It sets up public platforms and services. Through these services and trust mechanisms, a good market environment can develop. Everything we make, all our competitiveness, relies on cultivating a strong market. With this, we can win in China and abroad,” said Liu.
Liu added: “We work with Shenzhen Investment Holdings to set up five centers for entrepreneur services in a 30,000 square meter space. The government has invested more than two billion yuan to build a joined-up science and technology exhibition center, administrative service hall and public security office. This will support innovation and IPR, and safeguard employees’ livelihoods.”
Rapid economic development has led to rising housing prices, as well as rising costs of starting a business. This is the major problem for entrepreneurs and Liu did not skirt the issue. He agreed that improving the entrepreneurship environment would inevitably grow the value chain and have other positive effects. Although many factors are responsible for rising house prices, the government is consistent in applying countermeasures, he said.
“First, we will insist that state-owned enterprises give preferential treatment to private businesses. Second, we need to ensure that the government rents out empty spaces at between 50% and 30% of their market value. If your company is doing well, we will support you in this way. We will also contribute by increasing the space available, using ‘hubs’ to incubate labor-intensive industries in an orderly fashion. Inside the city, we have applied subsidies to reduce costs to businesses.”
He said that in recent years, Nanshan District rarely touched the market. Beyond regulations, everything was down to market demand.
“Nanshan District gives more than 4 billion yuan (around $575.3 million) a year in rent subsidies. We have also introduced talent hothouses and tried to reduce the pressure on entrepreneurs through various means. Only by working together with entrepreneurs, markets, society and government, and state-owned enterprises can we solve entrepreneurs’ problem once and for all. Through our support, we can reduce the hardships of starting a business,” said Liu.
Billionaires in sneakers
When it comes to internationalization, many people first think of Shanghai. Liu believes that Shanghai and Nanshan are very different from each other. He joked that while Shanghai is seen as the city of the besuited multinational company, Shenzhen is full of billionaires in sneakers.
“Nanshan may not compare with Shanghai (in terms of multinational companies), but the products we make here reach the whole world. At the annual US electronic expo, Shenzhen firms are ambassadors of Chinese private business, making us proud. Although our university can’t compare with those in Shanghai, our research institutes are up there with the best in China,” Liu said.
He believes that Shenzhen’s internationalization is reflected in its companies’ global vision. Their research and development capabilities are truly international.
“Our internationalization is all about entering and being accepted by the market. No matter which country you come from, Shenzhen welcomes everyone. It is this openness and inclusiveness that fosters internationalization. We don’t need to be in the Top 500 to be global. Being open to the world is represented in culture, products and the system of innovation we have built. We want to host more world-class summits and help more organizations settle here. This TechNode summit is a good example. I believe these are ways to show how international we are at heart. [In] Practical ways,” he said.
Liu may be busy, but he often takes the time to talk to entrepreneurs. He is most happy when he sees them flourish.
“I have many entrepreneurial friends who share their stories with me. Their growth, their sales, the awards they’ve won. I am happy when they get results. I may not be young, but I take a lot of energy from young people,” he said.
How does he see Nanshan District developing? Liu wants there to be better services for entrepreneurs:
“After two or three years, the ecology for innovation and entrepreneurship is going to be much richer than it is today. It will also be more diverse, with more foreign countries represented. We’ll have more allies, more innovation parks, and more service platforms. What we lack now is a comprehensive public service platform, which means costs for entrepreneurs are overly high. Besides free space and rent subsidies, we will help people speed up their own business development. We are all about helping to reduce costs and improve efficiency.”