How Shenzhen is taking on Silicon Valley at innovation

Once seen as a haven for cheap manufacturing and knock-offs, China’s Shenzhen has become a mecca for entrepreneurs, innovators and tech firms.

May 18, 2018

The city is already home to some of China’s biggest and most renowned tech giants from Huawei to Tencent. Airbus also selected Shenzhen as the site of its China Aviation Research Center in November, following the footsteps of Apple, which is opening a Research and Development Center in the city.

Shenzhen-based companies are turning up the heat on their Silicon Valley rivals in areas including hardwareand mobile technologyFacebook and Kik, for example, are attempting to replicate Tencent’s WeChat game-changing functionalities. And the Chinese city is keen to keep boosting its tech credentials by luring top talent away from Silicon Valley by offering wages close to those on offer in San Francisco.

“Shenzhen is firmly establishing itself as one of the world’s top technology and finance centers,” says Jeremy Kelly Director of Global Research at JLL. “Its strong talent base and its rapidly growing economy point to its continued rise as a destination for global capital, commerce and innovation.”

In fact, Shenzhen is trailing just behind Beijing and Shanghai, two cities which are fast gaining on the established global leaders including Tokyo and Singapore, according to JLL’s latest China 12 report, analyzing how Chinese cities gaining influence and going global.

Forging a path

Shenzhen has come a long way since it was appointed China’s first Special Economic Zone in 1980.

Its success boils down to four factors, according to Silvia Zeng, Head of Research, JLL South China. Firstly, the city has built up a strong foundation in manufacturing, as part of the “World Factory” in Pearl River Delta since the 1990s.

“It also has a strong focus on constantly improving efficiency and creating new revenue streams by developing new production techniques and new technology products along with a supportive government and lastly, a risk-taking, entrepreneur culture that comes from being a city of migrants.”

And Shenzhen has high hopes for the future. It continues to invest to move up the value chain in the region, focusing on building its innovation competencies such as industrial design and R&D capacity.

While China boasts other cities with a similarly strong technology and innovation background such as Beijing – the home of Didi Chuxing and Baidu, and Hangzhou – the birthplace of juggernaut Alibaba – the high-tech sector in Shenzhen is better developed and wider ranging than that of its domestic competitors.

“Shenzhen can leverage its unparalleled R&D capabilities, its highly competitive tech services, its industrial design skills and strong manufacturing base to create a formidable pool of expertise and innovation to drive its growth.

In addition, the wider Pearl River Delta region gives Shenzhen extra scope to scale up hi-tech production, where necessary, at lower cost,” points out Zeng.

Dressed for success

Shenzhen’s rapid rise and its growing confidence are playing out across its skyline. Ping An Finance Centre, which reaches 599 meters, is the fourth tallest in the world and stands along other recent additions such as Kingkey and Di Wang Building. There are dozens more under construction.

“The booming hi-tech sector in Shenzhen enables many tech companies to grow very quickly in terms of both employee numbers and profit, while at the same time attracting more tech start-ups. As a result, we expect growing leasing demand from tech companies expansion in both office and business parks, as well as from new tech start-ups in incubator and co-working space,” says Zeng.

Yet it’s not all work; the city is also boosting its cultural appeal to help attract talent with the new Sea World Culture and Arts Centre housing a Victoria and Albert museum and a cutting-edge contemporary art space, the Overseas Chinese Town Contemporary Art Terminal. In addition, plans for the Greater Bay Area, comprising Hong Kong, Macau and nine cities in Guangdong Province including  Shenzhen,  are poised to transform it into China’s equivalent of New York or San Francisco Bay Area

Zeng believes the city will continue to get more innovative, diverse and cosmopolitan as the city’s strong economic growth, driven by both tech and finance sector, further builds its reputation with companies and highly skilled tech workers both within China and worldwide.

“Moreover, the development of Greater Bay Area will attract more multinational companies, especially Fortune 500 companies, setting up their regional headquarters in Shenzhen,” she adds.

For now, Shenzhen may be known as China’s Silicon Valley but in years to come it could well be looking to challenge for the title of the world’s most renowned tech and innovation hub.