SUZHOU, China--(EON: Enhanced Online News)--Chinese firms need to innovate or face oblivion – that was the message from the country’s President Xi Jinping at the G20 summit this year.
“This means investors in the same or supporting industries will be more willing to work together in areas such as strategic alliance, licensing, and joint venture”
He said rising protectionism and a sluggish global economy meant “supply side reform” was necessary.
It is a call to action that has not gone unheeded in Suzhou Industrial Park (SIP), which is staying ahead of the game by rolling out a raft of initiatives to attract cutting-edge tech firms and encourage outdated plants to become cleaner, smarter and faster.
“It’s fair to say that everybody will eventually face these challenges but the eastern coastal areas are the first to see the glass ceilings in this regard,” says Barry Yang, Chairman of SIP.
“Therefore, it’s no surprise that we took a proactive approach to explore a transformation route.”
Coastal cities such as Suzhou are already losing their competitive edge to other cheaper countries and there is also an oversupply of lower end products, which means companies, as well as the industrial parks where they are located, urgently need to move up the value chain if they want to survive.
To make this happen, SIP is dishing out relocation payouts, tax breaks, interest-free loans, R&D grants and setting up incubators for a series of high-value industries, in the hope of becoming the country’s next Silicon Valley.
Out With the Old, In With the New
SIP was created two decades ago as a joint-venture project between the Chinese and Singapore governments and is already an internationally competitive high-tech industrial park that resembles a garden-like metropolis.
High-tech firms and services-based industries now make up about half of all manufacturing there.
Among the latest innovative tenants to choose SIP are the Chinese Academy of Sciences’ electrical institute and nanotech research centre, R&D centers for big multinationals such as Microsoft and Siemens and international collaborations such as the China-New Zealand Joint Center of Innovation and the China-Israel Joint Center of Heathcare Innovations.
Meanwhile the old firms making simple products in polluting factories are on the way out.
“Should tenants fail to upgrade their facilities voluntarily, they will get relocated elsewhere,” says Zhang Dongchi, Director of SIP’s Science, Technology & Informatization Bureau. “Hence we need to ever bring in burgeoning firms.”
Although there has been a steady outflow of tenants from traditional industries over the past five years, the park’s GDP has continued to grow– a testament to the strength of the higher-value sectors, Zhang says.
The park has also launched a range of talent scouting programs and under the latest overseas incubator program launched this year, foreigners can incubate their projects at SIP and tap into its resources without themselves relocating to the city.
“We want to use all available resources to attract innovative professionals from around the world,” says Barry Yang.
“New mechanisms and approaches are critical for this and a more flexible and open mindset will help us bring in some of the world’s best people. This offshore talent incubator program is a showcase of our pursuit in this direction.”
SIP aims to have over 500 projects nurtured in this cross-border program by 2020, and hopes about 30 such companies will eventually become publicly-listed.
Building an Ecosystem
Like any living, breathing organism, businesses need suitable conditions to thrive and SIP is working hard to create the right business ecology to nurture its nascent hi-tech industries.
From setting up a list of world-class research institutes to building state-of-the-art incubating centers that house a mixture of start-ups and mature enterprises, SIP hopes the clustering of academies and companies can help foster innovation and test-bed new ideas.
One of the brightest prospects is the SIP CMO Base at Sangtian Island – a massive pharmaceutical and nanotechnology research and commercialization project whose first phase began operating this year.
It is home to Chinese and international companies including Roche Diagnosis, BeiGene, Zai Lab, Beike Biotech, Beckman Coulter and Hyssen, a bio-nano company incubated successfully by SIP.
SIP has also nurtured vertically-specialized incubators such as bioBAY, Nanotech National University Science Park and Nanopolis, which collectively help spearhead the development of nanotechnology in a wide range of areas including material, energy, environmental protection, biology and medicine and information and advanced manufacturing. SIP is now among the world’s top eight hubs for nanotechnology.
This kind of ecosystem allows entrepreneurs to quickly prototype concepts into physical products, while the presence of more than 300 venture capitalists, private equity and fund management companies means start-ups can easily find financial support that cover all stages of growth.
“A few years ago, most of the high-tech manufacturing plants were based in Shenzhen but we are starting to see more of them spring up in the park and around the Yangtze River Delta region,” says Wu Xiaozhen, Chief Administration Officer & HR Director at Aispeech, which specializes in developing voice control software for smart consumer products, including smart auto-gadgets, robots and home systems. Aispeech sited itself in 2014 at SIP’s Dushuhu-based SISPARK (Suzhou International Science Park).
“One of our clients is a robot maker in the area and we are also looking to partner up with more smart-product makers here. The maturing of the AI (artificial intelligence) industry in SIP is helping to close the loop in commercializing our research and latest technology,” Wu adds.
Smart gadgets are the next big thing and manufacturers around the world are rushing to create voice-activated gadgets that can interact seamlessly with humans and execute tasks smoothly.
This has led to a boom in demand for AI researchers globally and intense competition in this field means companies and industrial parks alike need to be even more creative in attracting talents.
One such initiative allows scientists yet to join the corporate sector to test their work while keeping their academic status by carrying out activity at research labs set up by Aispeech jointly with SIP.
Opportunities for collaboration between local and foreign companies – both looking for technological advancement – are also a catalyst for innovation.
“This means investors in the same or supporting industries will be more willing to work together in areas such as strategic alliance, licensing, and joint venture,” says Deli Yang, R. Burr & D. Clark Professor of International Business at Trinity University.
SIP’s total output is expected to exceed 500 billion yuan by 2020, with electronic & IT as well as machinery manufacturing surpassing 400 billion yuan. The hi-tech sectors, namely biopharma, nanotech and cloud computing, are targeted to exceed 200 billion yuan, compared with 110 billion yuan recorded in 2016.
Golden Age of Innovation
China has since 2008 been drawing hundreds of experts to the country by offering generous relocation and research grants.
The progress achieved has led some industry experts to say China is now at the golden age of innovation and the technological gap between it and the US, Japan and major EU nations, will narrow quickly.
China comes top for the most domestic patent filings the last two years, outstripping the combined total in its next-closest followers, the US and Japan, according to the World Intellectual Property Organization. The number of patent applications received in China was 1.48 million in the first six months of 2016, up 38% from year ago.
“There isn’t anywhere else in the world that is spending as much effort as China to drive R&D in science and technology,” said Du Zhengming, senior vice president of BeiGene, a Nasdaq-listed biopharma company developing molecularly-targeted cancer drugs which is locating in the new SIP CMO Base at Sangtian Island.
Du says China’s maturing system of trading in intellectual property is also boosting progress. He also points out that entrepreneurship is beginning to find its feet in China after defining itself for decades against entrepreneurship elsewhere.
Companies that were founded to do the same thing as their foreign counterparts but better or cheaper still exist, he says, but there is now creative thinking too.
“People here have been isolated for so long time that it takes time to catch up on the journey of being truly original and creative,” says Du, an American citizen who has over 20 years of pharmaceutical experience.
“But there is a lot of exciting work being done and I believe you will see Chinese companies leading in these fields in eight to ten years.”