For most of the past eight-hundred years, Beijing served as the political centre of China. The governing leaders of world’s third largest country by area issue central commands from this city, including guidance on local laws, taxes, and direction on spending, such as research and development. I spoke with a government-backed fund and incubator, as well as a notable local corporate, to learn more about Beijing’s innovation specialization and how foreign companies can leverage the local ecosystem.
Beijing Ecosystem Background
Beijing is home to most of China’s state-owned enterprise headquarters. These state-owned enterprises are concentrated in supplying and managing strategic necessities such as telecom (China Mobile, China Telecom), banking (Bank of China, China Development Bank, China Construction Bank), natural resources (China National Petroleum, China Minmetals, Sinochem, Sinopec), and basic infrastructure (China Railway, China Post, State Grid).
As a single-party government, state-owned enterprises as well as private enterprises set company strategies to be in sync with objectives and regulations set by the central government. Key policies such as Made in China 2025 have spurred a flood of investment into ten key sectors, including robotics, information technology, advanced materials, new energy vehicles, biological medicine and medical devices, as well as equipment for agriculture, power, rail, aerospace, and ocean. Its key objective is to encourage Chinese companies to control core components and materials technology for self-sufficiency. Though the plan met backlash amid the current political landscape, we expect the overall objective for self-reliance will not change but the timeline may be pushed back and goals may be diluted.
In addition, the Chinese government released several policies to encourage for entrepreneurship and innovation that created historical highs in 2018 for investment activity in many areas. During 2018, Beijing had total investment value of RMB 200 billion (RMB 2545.88亿) from 1,041 cases of equity investments, nearly double of the next highest – Shanghai , with 665 cases, according to annual report from PE Daily. According to Hurun’s 2020 Global Unicorn List, Beijing is home to 93 unicorns, making it the city home of the highest number of startups with over a billion dollar valuation not only in China but worldwide. San Francisco had 68, follow by Shanghai, New York, Shenzhen, and Hangzhou.
Within Beijing, Zhongguancun zone, also known as China’s Silicon Valley, is the hotspot for startups and incubators. It has 83 universities, including the top Chinese universities Peking University and Tsinghua University. This zone alone had 70 unicorns in 2017, which accounted for 43% of unicorns in the country that year. These included Didi, Xiaomi, Meituan, and Toutiao, with all four achieving valuations above USD 20 billion.
Beijing Startup Specialization
We spoke with a leading incubation ecosystem company backed by Beijing municipal government and an Intralink Innovation Network partner, to learn more about the trends of Beijing startups. Its director,Tim Luan, said “due to 2018 policies to move manufacturing companies out of the city, Beijing startups are becoming more specialized in digital innovation. This includes AI, deep learning, big data, cloud computing, and mobile internet. Compared to other cities such as Shenzhen, which is strong in manufacturing and supply chain, or Suzhou, which is strong in med and pharma, Beijing’s startups are concentrated on virtual and digital goods and services.”
As a result, Beijing’s unicorns include Sensetime and MEGVII, which use AI for facial recognition, entertainment group Bytedance, which has video and news platforms Tiktok and Toutiao, TalkingData, which supplies consumer big data, and Bitmain, the world’s largest cryptocurrency mining equipment maker. The digital services and products in these sectors also tend to be closely monitored by the central government, therefore are highly concentrated in Beijing.
Other notable incubators and venture capital funds in Beijing include Cyberagent, Microsoft Accelerator, Intel Accelerator, Y Combinator, IDG, Sequoia, KPCB, and Lab 1886 of Daimler. China’s top university, Tsinghua, also operates Tsinghua University Science Park (TUS Park) through Tsinghua Holdings Capital, which has over RMB 10 billion in assets under management.
How to Leverage Beijing for Open Innovation
We spoke a Chinese consumer electronics multinational company that is headquartered in Beijing and an Intralink Innovation Network partner , to learn about its innovation activities. Ray Lv, its director of investments, said “Chinese companies are typically strong in applications but weak in foundational science and research. We are very interest in partnering with Japanese and European companies for sensors and advanced materials, which require high level of precision and strong basic science research that we currently lack. However if you are looking for innovation around ways to apply new technology and build viable business models around it, Beijing is a leader globally”
In summary, with a high concentration of startup companies, capital, and talent, Beijing is a great starting point to find Chinese innovation for digital products and services, as well as novel applications and business models for existing innovative technologies. Local companies, including startups and corporates, are openly seeking partnerships from overseas to accelerate its advancement.
About the Author
Emma Hsu is the Program Manager of Open Innovation Group at Intralink’s Shanghai office. She was born in Taiwan, grew up in Canada, and has worked in China for the past 10 years. If you have any comments, questions, or suggestions, please email her: firstname.lastname@example.org.
Intralink’s Open Innovation Group is privileged to serve the Open Innovation programs of NTT Data, NSSOL, Chubu Electric, Fujitsu, Hitachi, Mitsui Chemicals, and many more. For more information, visit: www.intralinkgroup.com.cn