Yuehai: Shenzhen’s tech heart

Shenzhen is China’s tech capital, everyone on the planet knows that by now. But it is the tiny Yuehai subdistrict of Nanshan that is actually the heart of the city’s tech industry. Here is a closer look. 

For those who see the US government’s decision to blacklist Huawei Technologies as retribution for many years of alleged intellectual-property theft, there is no need to understand where the company is headquartered or how it has grown. For those who see the decision as a strategic strike against China’s rise as a technology power, however, it is helpful to take a closer look at Shenzhen’s Yuehai district, home to the Nanshan Science and Technology Park. That is where not only Huawei, but many of China’s greatest success stories of recent years are headquartered, and where they began their remarkable ascent.

Yuehai is a 20 sq km area along the southeastern coastline of the city’s Nanshan district. It was established in 1991, when this area was still mostly a home for migratory birds. China’s late paramount leader, Deng Xiaoping, had not yet visited Shenzhen on his famous “southern tour”, and the city’s leadership was thinking ahead but were understandably reluctant to go too far out on a limb. And so, instead of founding a special innovation zone in Luohu, right next to the border with Hong Kong, they put it on the outskirts of the city where land was cheap and mistakes could be forgotten or changed if they failed.

What a bet it was.

Today, Yuehai is at the core of the Nanshan district, surrounded by seven other sub-districts that have grown up around it, facing the still-beautiful Shenzhen Bay. It is the heart of the city’s tech economy, home to Huawei, Tencent, ZTE, DJI, and a host of other companies that are household names across not only China, but the world. 

How many, you ask? Around 10,000 altogether, of which about 1,000 are National High-tech Enterprises – meaning, yes, they are the Grand Poobahs of the tech world in China. Yuehai is today a concentrated cluster of tech industries, higher-education institutions and R&D centers. 

Although there are other superstar tech companies not located here – i.e., those that chose to go elsewhere in the city – this is the home to both the giants of the present and those still to come. No fewer than 83 listed companies were started here (148 altogether from the wider Nanshan district), while nine of Shenzhen’s 14 “unicorns” – startups with billion-dollar valuations – have been set up in Yuehai. Listed companies include global brands, as well as brands that are well known in China but not that well overseas, such as laser-machine manufacturer Han’s Laser, medical device company Mindray, IT service management company Das Intellitech, software company Kingdee, and electronics manufacturer Huaqiang.

From then to now

In the beginning, it was not as simple a task as clearing mangrove swamps and putting up a fence, of course. It took more than a decade before Yuehai’s infrastructure could support enterprise development. 

The city government, in its wisdom, took the time to think far ahead in considering what it wanted to build here. It began with the Nanshan Science & Technology Park where, in 2001, RMB6 billion was committed to build what was then considered a long shot for gritty, hard-scrabble Shenzhen. The city was home to miles and miles of factories dependent on cheap labor to churn out sneakers and other low-tech products. But that was not how the city’s leaders saw their destiny remaining forever. 

Today, their vision has paid off, big time. Nanshan contributes around RMB500 billion toward the city’s total GDP of RMB2.42 trillion. About half of that comes from Yuehai, or 10% of Shenzhen’s total GDP. 

What was the foundation of Yuehai’s success? It cannot be compared to Silicon Valley, that is for sure. It did not have the luxury of being close to the R&D centers of the world’s most advanced military machine, like Palo Alto did in California. It did have government support, for sure. But rather, Yuehai’s success has more to do with its innovative ability to engage with key players in government, academia, and among investors. 

From the start, one of the key areas of focus in the Nanshan STP has been the protection of intellectual property rights. Some international competitors might scoff at that claim, yet it should be remembered that protecting IP back in 2001 was an alien concept in China, one that had no foundation in Chinese history. It took courage and determination for the park’s leadership to create an environment in which innovation could flourish.

Today, the companies’ financial reports tell a good story. Last year, R&D investment made up 4.82% of the Nanshan district’s GDP. This is no longer the China that is renowned for knockoffs, despite what Cisco might say about Huawei. It is the home to many cutting-edge technologies, in both hardware and software. 

Going forward, it seems that a new era awaits the Nanshan STP’s development, as the park forges deeper ties with financial innovators. Last year, the Nanshan Technology Financial City was established here, which is expected to cluster more than 300 finance and high-tech companies by the end of next year. By then, this “city” plans to have created 23,000 jobs and will be contributing RMB80 billion in annual GDP. 

It is not only in fintech that the park is pushing ahead. Clusters have been established in telecommunication, computer science, software, medicine, new materials, and mechatronics. This is one of the reasons why the US ban against Huawei has caused so much of a reaction in China: because it was an attack not only against a revered company, but against an entire supply chain – much of which is based within walking distance of the Huawei campus. 

Can Huawei – and Yuehai – survive what is now being called the US-China Tech War? Perhaps a better question would be: Can a place that was swampland less than 20 years ago be expected to become the world’s leading fintech hub in the next 20? How about the next 2?

Here are additional links for further reading:

Nanshan Government: http://www.szns.gov.cn/

 

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