Shenzhen – Innovation Hub

Source: The Economist, Apr 2017

Between 1980 and 2016 Shenzhen’s GDP in real terms grew at an average annual rate of 22% and today stands at 2trn yuan. The city’s Nanshan district, home to about 125 listed firms with a combined market value of nearly $400bn, has a higher income per person than Hong Kong. Unlike Beijing, which has many top-flight universities, Shenzhen has only a handful of lacklustre institutions of higher learning; but so many graduates from all over China flock to the city that they make up a greater share of its population than do graduates in Beijing.

Shenzhen spends over 4% of its GDP on research and development (R&D), double the mainland average; in Nanshan the share is over 6%. Most of the money comes from private firms. Companies in Shenzhen file more international patents (which are mostly high quality, unlike many of the domestic Chinese ones) than those in France or Britain (see chart).

The common perception that China is incapable of innovation needs re-examining. According to a widely quoted study published earlier this decade, the value added on the mainland to Apple’s iPods (nearly all of which are assembled there) represents less than 5% of the total, reinforcing the stereotype of Chinese factories as low-end sweatshops. However, a more recent study by Britain’s University of Sussex and others for the European Commission concludes that the iPod example “is far from representative”. These researchers calculate that the average value China adds to its exports is 76% (the EU’s is 87%). The World Bank reaches similar conclusions.

Shenzhen has done more than any place on the mainland to debunk the outdated myth of “copycat China”, becoming the global hub of innovation in hardware and manufacturing. Its entrepreneurs are coming up with entirely new industries. It has been the driving force behind the upgrading that should help the PRD withstand competition

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