Since the beginning of China’s economic reforms in 1978, China has conquered the world of low cost manufacturing. Shenzhen has emerged as the epicenter of the global electronics industry, and even inland cities have become export hubs. The next step for China’s economy is its ascent in hi-tech industries. Over the last decade, Beijing has emerged as the Silicon Valley of China. Beijing is the home of Baidu, the google of China, and more unicorns than any other city in China. In today’s podcast episode, I am going to be discussing the historical roots of modern Beijing’s tech industry, the role of the state in promoting technology in China, and some of the innovative companies produced by Beijing’s tech cluster.
Beijing has become China’s most important tech cluster because it is the home to a disproportionate share of Beijing’s most elite universities. China’s two most prominent universities, Tsinghua and Peking, have their origins in the late 19th century, China’s “Century of Humiliation” and are the most elite Chinese universities. Tsinghua and Peking University are the Ivy League of China, and Tsinghua , and Tsinghua produces more high quality academic citations in STEM subjects than any other university aside from MIT. Moreover, 13 of China’s top 65 universities are located in Beijing, according to the Times Higher Education supplement making Beijing China’s greatest concentration of human capital. Chen Chunxian, a leading physicist at the Chinese Academy of the Sciences was the first to see the potential of Beijing’s university district after an official trip to Boston and San Fransisco. Due to his lobbying, the CAS created the Service Department which allowed entrepreneurs to use CAS labs and equipment at below market rates. The CAS helped fund many of the pioneering Chinese tech companies, the most important of which is Lenovo, which was founded by 10 CAS engineers with equity funding by the CAS.
Active intervention by the Chinese state has accelerated the growth of Beijing’s tech industry. The Great Firewall acts not only as a tool for censorship but also restrict American tech companies to operate in the United States. In December of 2009, Google controlled just under 45% of China’s market share. However, an intensification of Chinese censorship laws forced Google to leave the Chinese market, allowing Baidu to gain dominance in China. China’ strict data localization policies force all data storage and cloud computing to happen within China, and only allow Chinese companies to run data centers. The Chinese government is also active in financing the countries tech industry. including a $47 billion fund for advanced semiconductor manufacturing, and various provincial governments have invested billions into AI. Many of China’s leading AI companies are closely intertwined with the state. For example, SenseTime, a Beijing based startup with cutting edge visual processing tools is helping design many tools for China’s surveillance state.
While the Chinese government has assisted the rise of the Chinese tech industry, the driving force has been market forces and a new class of entrepreneurs. Chinese companies are increasingly not just copy-cats but innovators in their own right. An example of this is ByteDance, Bytedance is today the highest valued startup in the world, with a valuation of $75 billion. ByteDance’s primary business is Toutiao, a internet news and content aggregator that is ubiquitous in China. However, TikTok, a popular video sharing platform has surged to over 6 million downloads over the last month. In the case of dockless bycicle and scooter sharing, a Chinese firm, Ofo, was the pioneer. Ofo was founded by students from Peking University with assistance of an alumni funder. Ofo’s idea of dockless scooters and bikes was incredibly popular in China, and quickly expanded to the United States. Firms such as Bird and Lime in the United States are following a business model first pioneered in China. Beijing is the home to one of the most dynamic tech ecosystems in the world. It is the home to more unicorns than any other city in China, and any other except than Silicon Valley and its environs.