Economics and finance, Government and governance, Trade and industry, Science and technology | Australia, Asia, East Asia, Southeast Asia

12 July 2016

With strong backing from government, China is rapidly becoming the world’s leading innovation nation, write Michael Keane and Ying Chen.

In the current era of volatile economic and political climates many analysts talk about the industries of the future. Along with the rise of China’s large Internet technology companies such as Baidu, Alibaba and Tencent, the search for innovation in China has broadened. In June 2016, speaking at the Summer Davos Forum in the northern port of Tianjin, Premier Li Keqiang said, “We will deeply promote mass entrepreneurship and innovation, combine elites and grassroots online and offline, as well as enterprises and research institutes to form a new power for innovation.”

With the nation’s economy entering tricky waters this is an obvious strategic ploy, if only to reassure the younger generation coming out of universities and training institutes that there is a future for China beyond low-cost manufacturing. The grassroots power of ‘would-be’ entrepreneurs promises to revitalise China’s ‘innovation-oriented nation’ blueprint, first unveiled by Hu Jintao in 2006 at the National Conference on Science and Technology.

Heeding this call, makerspaces have popped up in most cities. Makerspaces are associated with the global hacker movement, which advocates open innovation, peer production and open source software, hardly the kinds of prescriptions one normally associates with authoritarian societies. In China the maker is now officially described as chuangke, a ‘creative professional’.

In January 2015, Li Keqiang visited Chaihuo, a makerspace in Shenzhen, describing it as a model for Internet+, China’s newly unveiled digital innovation strategy that aims to modernise the nation’s manufacturing economy. According to China’s National Work Conference on Science and Technology in 2016, China now has more than 2300 makerspaces.

More on this: China's Internet: behind the great firewall | Jenny Li Jie

The current experimentation with grassroots innovation, aided by the government’s endorsement of Internet+, has seen investment capital flooding into the sector. While most has come from regional and local government agencies, a great deal is now coming from the private sector. Government-backed venture capital funds totalled 1.5 trillion yuan (AUD$300 billion) in 2015. This represents five times the sum raised by other venture firms around the world combined – Silicon Valley included.

Many projects claim to be representative of a new wave of Chinese innovation that taps into grassroots talent. One of these is Inno Way, located in Beijing’s hi-tech district Zhongguancun near Tsinghua Science Park. Inno Way replaced Haidian Book Town, which died a natural death because more people were reading online. Launched in June 2014, the project is described as a new landmark of start-up culture, bringing aspiring grassroots ‘makers’ into conversations with policymakers, venture capitalists and angel investors.

Replicating Beijing, Shanghai offers up a similar version in Yangpu District, part of the Knowledge Innovation Community project, a development kick-started a decade ago by a Hong Kong real estate development company. Called Innospace, it provides mentoring and financial assistance for start-ups in a range of sectors.

Aside from the large first-tier cities of Beijing, Shanghai, Chongqing, Shenzhen and Guangzhou, there are also significant developments elsewhere. A major project, aptly called Dream Town, is taking shape in Hangzhou just a few kilometres from the Alibaba Group’s headquarters in Yuhang District. The district, noted mostly for its farmlands a decade ago, now advertises itself as a digital economy district. On 28 March 2015, Li Qiang, the Governor of Zhejiang Province, proclaimed that Dream Town represents “a new type of mass entrepreneurial space, a giant incubator, a young entrepreneurial community, a new information economy motor, an Internet start-up ecosystem.”

The developments we see in China reflect regional articulations of digital innovation, particularly a newfound fascination with makerspaces and co-working spaces, many of which are public-private projects.

It’s a scenario that appeals to policymakers. Six months prior to the federal election the Australian government unveiled its innovation agenda: Welcome to the Ideas Boom. The blueprint talked about grassroots innovation, venture capital, and makers. In the case of Australia, the context is the post-mining era. Incentives are likely to come in the form of tax breaks for research and development. But the burning question remains: where will the actual investment in ideas come from?

Other countries in Asia are already on the bandwagon. But it seems none can compete with China. South Korea, long known as an innovative nation because of its rapid uptake of fast broadband now has a number of digital incubators such as D Camp and Maru 80 in Seoul, offering similar services, and hoping to compete for venture capital.

Singapore, a small nation with a well-trained population and a helpful government, is tapping into this ‘ideas boom’, rebranding it as ‘Home for Innovation.’ Projects include Block 71, a partnership between the National University of Singapore, SingTel and the government.

Plans have been announced under the Free Trade Agreement to work with Australia in forming a joint ‘creative landing pad’, a test bed for innovative products and solutions. How this takes shape may depend on the capacity of the Australian government to implement its ‘ideas boom’ in the context of competing national agendas. A smarter proposition surely would be to engage with China, the biggest player in the field.

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Keane, Michael and Ying Chen. 2016. "Sino Silicon Valley - Policy Forum". Policy Forum.