Services pumping in hi-tech Guangzhou

More detail is dribbling out in local media after Guangzhou reported strong GDP numbers last week. One of the clear standouts was growth in the services sector, especially the so-called “modern services industry”, which is dominated by software and other IT-related services.

Although the city is often thought of as a bastion of heavy industry and manufacturing, while Shenzhen is usually described as the “tech hub”, Guangzhou’s economy is increasingly being driven by software and other IT-related services. According to official data, this sector accounted for 68.6% of Guangzhou’s GDP in the first three quarters, an increase of 0.1% over the first half of the year. Its added-value was up 15.5% YoY.

One local analyst said the surge should hardly be surprising, as the city has been upgrading its industrial structure rather than building new industries from scratch, as was the case in Shenzhen. Guangzhou’s large-scale traditional enterprises have been a fertile ground in which to plant IT services, in other words. This has seen heavy investment in communication and navigation, smart city, interactive entertainment, telecoms, and intelligent manufacturing, among others.

According to forecasts from the Guangzhou Software Industry Association, the sector will see growth of more than 20% this year.

New sectors are growing strongly, too. Although Shenzhen-based Tencent is the country’s star online-gaming brand, Guangzhou has its champions, too. NetEase is only the best known. Others include Sanqi Mutual Entertainment, Baitian and 4399.

The catch-all sector of “Internet companies”, which includes all kinds of e-commerce groups, is also strong here. There are more than 3,000 companies registered in Guangzhou, from all of the country’s biggest brands. Kugou Music, YY Live, Tiger Tooth, and UC are all household names in China, even if not well known in the global scene.

Then there is the animation market, where Guangzhou-based companies are estimated to account for about one-third of the national market. Many popular cartoon stars are characters born in Guangzhou studios.

There is a lot of government support behind this tech rise, of course. It is felt strongest in the resources being poured into scientific research. This goes hand-in-hand with private-sector funding, such as the Greater Bay Area Open Fund, which invests RMB 80 million a year in basic research support. At present, the city has 20 national key laboratories, 234 provincial key laboratories and 165 key city laboratories.

The numbers keep rising. As of August, 168 industry-university-research innovation alliances have been formed in Guangzhou, with five incubators winning Class A ratings in state-level evaluations last year.

R&D investment has grown substantially, above the industry average. In recent years, Guangzhou science and technology enterprises such as Jinyu Medical, have frequently undertaken key national projects.

One of the biggest areas of focus at the moment is the blockchain industry. Last year, the city established a special “pioneering zone” for blockchain in the Huangpu District. The government has provided specific policy support for it in areas such as healthcare, supply chain management, product traceability and anti-counterfeiting.

Today, there are more than 300 blockchain enterprises in Guangzhou. Clusters have sprung up in co-working buildings with names like Boao Latitude, Aerospace Information, and Zhuozhi Supply Chain.

There are many areas where Guangzhou is blazing new trails, especially where the state and private sectors overlap. For instance, it set up the country’s first electronic invoice blockchain platform, known as the “tax chain”. The city also promoted the construction of a “policy credit chain” and an “arbitration chain”. And in March, the Guangzhou Internet Court “Netcom Law Chain” smart credit ecosystem was officially launched. It’s not all being driven by the state. The Guangzhou City Blockchain Association has established a blockchain “self-discipline committee” to keep a watch out for illegal activities such as cryptocurrency development.

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