Science Parks and their Role in China’s Economy

Updated: Jan 27

Phoenix Centre © David290 / CC BY-SA 4.0 / Wikimedia Commons

China has been associated for several years with the image of low-cost production. Now it is taking its revenge. The government is increasingly investing in innovation as economic development’s driving force and it has every intention of being a battle hardened warrior in the fight for domination in research & development. The push for a knowledge-driven economy has been sped up by the compelling need for a combination between theoretical aspects linked to research and business practice, and the need for a strengthening of the cooperation between two different sectors: academic and industrial. Science Parks have been recognized as a tool that promotes this collaboration. A Science Park is “an initiative for the establishment and growth of technology-based enterprises formally and operationally linked to at least one centre of technical expertise, and an organization which provides management support for its tenant companies.” A Science Park is a business support and technology transfer initiative that provides an environment where larger, international and cutting-edge businesses can develop specific and close interactions with a particular centre of knowledge for mutual benefit.

The role of Science Parks in the promotion of economic and innovative development in China has been the focus of studies and researches for many years and today’s challenge is to understand their role in facilitating technology transfer. In 1988, the State Council approved the establishment of the Beijing Experimental Zone for New Technology and Industrial Development, the predecessor of Zhongguancun Science Park, the first Science Park in China. At the end of 2014, there were 115 national university science parks in the country. Within China, much attention has been given to the role of Science Parks in regional development, which is not so surprising considering the pressure the Chinese Government feels in solving regional income inequality.

The most famous model of Science Park is undoubtedly Silicon Valley, in California, but China is committed to replicate the models of Science Parks that achieved success and it already has its “Chinese Silicon Valley”: Zhongguancun Science Park, the hub of Beijing hi-tech industry. It was founded in 1988 and it was originally only located in Haidian district, but now it includes 16 sub-parks deployed throughout Beijing. Zhongguancun Science Park is home to over 20.000 high-tech enterprises. Founder and Legend, the two giant’s representative of computer enterprises in China, have their headquarters inside Zhongguancun Science Park and many foreign-funded enterprises such as Motorola, Microsoft and IBM have R&D centers and laboratories in Zhongguancun Science Park. Hi-tech industries located in Zhongguancun Science Park benefit from an annual growth rate of over 25% in the last decade and the Science Park’s contribution to Beijing’s Industrial economic growth is over 60% for many years running.

So what’s the key behind the success of a Science Park?

A clue is given by the fact that Founder spun off from Peking University and Lenovo Group spun off from Chinese Academy of Sciences. Zhongguancun Science Park is a model of innovation driven by the technology transfer from universities and research centers located nearby. Haidian District, which is the area where Zhongguancun Science Park is located, is historically known to be home of two of the most famous universities in China: Peking University and Tsinghua University. Universities often play a very strong role in the emergence of Science Parks, indirectly and directly. Besides being a central source of new knowledge, universities provide a central resource for the well-functioning of a Science Park, i.e. advanced human resources and strong influence in the capacity of the Science Park to attract new talent. Additionally, universities often contribute to a wider intellectual environment that favours the establishment of Science Parks. But if these are essentially indirect modes universities impact on the emergence and dynamics of Science Parks, higher education institutes often have more direct interventions in this process. Besides the wider activities of technology transfer, the creation of Science Parks - directly by universities or through formal agreements with these by their promoters (in the business or governmental sector, typically at the regional level) - have a strong contribution to the visibility and attraction of research intensive firms and of new knowledge, to a given region.

Nevertheless, even if a strong science base is necessary, there are other factors contributing to the success of a Science Park: an entrepreneurial culture is one of the attributes of a successful Science Park: an innovative leadership and management of a Science Park can make the difference because it could create an environment for the cultivation of leading enterprises. For this reason, it is important to have a highly professional and fully committed management team. Premises and wider infrastructure, as well as support or complementary services, such as incubators and technology brokering, are also central to the dynamics of a Science Park. In 2018, according to data from the “China Business Incubation Development Report 2019” (中国 创业 孵化 发展 报告 2019), the country was hosting 11,808 Technology Business Incubators. Recently, the Torch Center of the Ministry of Science and Technology announced the results of the 2018 national technology business incubator assessment. The Haidian Park Entrepreneurship Service Center of Zhongguancun Science Park won the rating of "Excellent". Up to now, the Entrepreneurship Center has incubated more than 2,000 enterprises, of which more than 200 are national high-tech enterprises. With respect to available services, the European Union’ science parks provide a very similar array of supporting services to the Chinese’s ones. But Chinese Science Parks put some extra emphasis on training; they often have many training and research centres.

Another difference can be found in the access to funding. European Union’ Science Parks have an advantage over China’s Science Parks when it comes to access to funding. In China, a large financial dependency has existed on the government over the years. On‐site qualified firms in China’s Science Parks obtain government R&D funding as a type of government support. To demonstrate how serious the Chinese government is in promoting Science Parks, one can look at the rapid growth of the government expenditure on R&D in general. China continued its long run of double-digit percentage increase in spending on R&D in 2019. Total public and private science and technology expenditures in 2019 rose 12.5% over the previous year to 2.21 trillion Chinese yuan ($322 billion), as reported from the National Bureau of Statistics. As a percentage of GDP, the spending amounted to 2.23%, surpassing that of the EU (2.1%). The last decade has also seen the emergence of alternative sources of early-stage finance, which are radically changing and reshaping the start-up ecosystem. These include business angels, incubators and accelerators. Lately the Chinese government has set the goal to establish a better functioning financial system, with emphasis on venture capital.

In order to build such a functional financial system the legal framework has to be improved. China is now the second-largest venture capital market in the world and has seen VC fundraising more than double in the last two years. Promoting R&D activities can increase the probability of venture capital presence. Venture capital and research result commercialization are inextricably intertwined. If a technology is at advancing edge and can be commercialized, it can attract venture capitalists’ attention; reversely, a venture capitalist’s investment to a technology commercialization will greatly accelerate developing technology into real products or goods, achieving “innovation”.

Science Parks also rely on a supportive regulatory framework: favorable government policy may positively stimulate the development of Science Parks. Provincial and local governments may provide extra preferential policies often in the form of lowering taxes on sales or construction of buildings. Knowledge transfer between universities and industries can also be greatly stimulated by trust and flexible university policies on intellectual property rights, patents and licenses.

In an era of historical transition and rapid changes such as the current one, also in light of the recent launch of the Made in China 2025 political program, industrial clusters and Science Parks are often presented as a tool that can give substantial support to Chinese economic development. One of Made in China 2025's main goals is to create globally competitive companies in the field of Information Technology. Chinese Science Parks alongside most of their industries operating in this sector are following the same path. For the centenary of the foundation of the People's Republic of China in 2049, China aspires to become a superpower in the fields of global manufacturing, cyber technology and science and technology innovation. Science Parks act as mediators between the world of research and of industrial application, they are centres where science, technology and innovation meet, interact and work in symbiosis to develop cutting-edge technologies. The enhancement of knowledge for economic and production-related purposes and the support of innovation and R&D policies increasingly become a strategic need for a country like China, where the economy is more and more based not only on the efforts made by individual companies, but on synergies between institutional, research, economic and industrial actors.

Vania Tabanelli is a young sinologist passionate about the Chinese economy. She is a student in International Management from ICN Business School and ECUST Shanghai, China. You can find her on Instagram and LinkedIn.

The opinions expressed here are those of the writer and do not represent the views of European Guanxi.

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