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Beijing, the Best City to be China’s Silicon Valley

After I wrote my article on “China could be the next Silicon Valley”, I got excited and shared it with my friend Kaiser Kuo, who works as Director of International Communication at Baidu.

In return, Kaiser shared with me a related comment he made via Quora. Kaiser did a more on-the-ground analysis while I did mine based on China’s history, policy and tech trend.

Now, assuming  China is Silicon Valley, which city will it be hosted in? To Kaiser, he felt that Beijing has the best shot to be that key city. It is best to hear from someone who is deep within the Chinese technology scene, published with his permission:

A “Silicon Valley” requires many things. It’s not just great schools and research institutes, not just sources of capital, but also things like law firms and accounting firms. There’s also an important cultural component to it, of course: when so many of your peers–your schoolmates, people in your age cohort or what not–have gone out and founded successful companies, or at least had a hell of a ride trying, it’s just more likely that you’ll feel the better about taking on that kind of risk.

I’m afraid that for now and at least for the next few years, the only city in China where all these things are either in place or are clearly developing and coming together is Beijing. It’s got the strong tech schools (Tsinghua, Peking University, Beijing Polytechnic), a strong PE/VC community (Beijing-based funds, or Sandhill Road VCs with Beijing offices, are still originating like 70% of the deals in China), the placement companies, the law firms that do M&A or know how to structure companies for overseas listings, the major accounting firms (sure, plenty of them in Shanghai too), and the community of second-time or even third-time entrepreneurs. There are more tech returnees in Beijing; Shanghai tends to draw the banker returnee types.

There’s a snowball effect too, where once these things are in place it’s hard for any other geography within the market to catch up. Beijing’s advantages will only be magnified, its existing lead will only lengthen, for at least the near term. Shanghai’s got more (and more successful) gaming companies; Shenzhen’s got some big telecoms network equipment manufacturers and lots of big OEMs/ODMs, but besides Tencent, it can’t really claim any leading Internet companies. Hangzhou’s got Alibaba, Chengdu has some semiconductor action going on, and Dalian has some outsourcing companies doing mainly embedded and mainly for the Japan market, but not much more. High tech parks and nice tax incentives are well and good, but it’s going to be really tough for any other cities to attract real entrepreneurial activity.

Now as to whether Beijing will really become a “Silicon Valley” is another matter entirely. I’m only saying Beijing has the best shot. There’s still a long, long way to go, and lots and lots of impediments, from an outmoded pedagogy to regulatory hurdles that hobble things, to a natural kind of conservatism and risk-aversion (hey, there are lots of easier and more sure-fire ways to make money).



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