A new powerhouse to be reckoned with

Published on 05/07 2019  Source: China Daily

Traditionally known for its finance and shipping industries, Shanghai is now carving out a name for itself as an influential global tech hub

When Shanghai's Vice-Mayor Wu Qing made the world's first 5G video call during a ceremony in March, he was turning the "high resolution, low latency" technological rhetoric into reality.

The deployment of the superfast mobile network is already redefining life in Shanghai. Today, residents are able to watch live broadcasts of town hall meetings and enjoy lightning-quick downloads of high-resolution movies in public areas such as railway stations because of this new technology.

On a larger scale, this accomplishment has affirmed Shanghai's reputation as a major technology hub and an attractive place for coders, algorithm engineers and startup firms with technological breakthroughs to work in.

But Shanghai was not always viewed as a tech powerhouse in China. For years, there was an unspoken sense of disappointment in the city's technology circles about it not being home to any of the companies within the coveted tech trinity - Baidu, Alibaba and Tencent.

But instead of simply trying to lure big names, the municipality crafted industry plans that have played to its strength "with both discretion and foresight", according to industry experts.

"Shanghai is not lagging behind, but sticking to its own pace," said Hsiao-Wuen Hon, vice-president of Microsoft and managing director of Microsoft Research Asia.

"In fact, government officials here were engaged in discussions of developing artificial intelligence at a time when nobody really took it too seriously."

Shanghai's efforts to become a global tech hub started gaining steam in 2016 when it officially announced its ambition to transform itself into a science and technology center of core functions with global influence by 2030. Four major tasks, including establishing a comprehensive national science center and implementing basic projects and strategic programs, were identified as being crucial to the achievement of this goal.

The city then stepped on the gas pedal by unveiling a string of measures such as improved talent policies, preferential taxation, the identification of more high-tech enterprises and the enhancement of tech-related infrastructure.

This science and tech ambition then came into full swing when its Party Secretary Li Qiang introduced the concept of promoting the city's four brands in late 2017. Through this initiative, Shanghai would encourage the incubation of core technologies and uphold Shanghai manufacturing as a core pillar in its development.

The municipal government also released new industry guidelines to bolster the development of emerging industries like medicine, smart manufacturing and intelligent cars.

The numbers show that Shanghai has spared no effort in driving technological breakthroughs. Last year, research and development spending in Shanghai accounted for 4 percent of its GDP, which was worth 3.27 trillion yuan ($488 billion). The number of patents per 10,000 residents had surged to 47.5, up from 13.3 in 2011.

The pursuit of its ambitions has also boosted the city's economic output. Shanghai's GDP broke the 3 trillion yuan threshold in 2017 and reached 3.27 trillion yuan last year. This figure is a whopping 1,000 times more than that of 1949, the founding year of the People's Republic of China, and 100 times that of 1978, when China first introduced the reform and opening-up policy.

Shanghai's per capita GDP, a broad gauge of living standards, jumped 250 times from 1949 to reach 135,000 yuan in 2018, exceeding the $20,000 threshold of a developed economy for the first time.

In addition, the bustling metropolis is a hotbed for venture capital investment and is regularly ranked second to Beijing in number of unicorns - startups that have a market valuation of $1 billion and up - according to a report by the Ministry of Science and Technology published last year.

Local advantages

LAIX, an app that uses algorithms to help improve a user's pronunciation of English words, is one of the beneficiaries of Shanghai's quest to become a leading tech hub.

"The local authorities are very practical and are clearing administrative hurdles every step of the way," said LAIX CEO Wang Yi, who used to work at Google.

Citing perks such as subsidies for hiring locals and housing benefits, Wang pointed out that Shanghai's international appeal and inclusive culture makes it attractive for talent around the world.

The strides made on the tech front are compelling on major domestic players to join in the action. Since the second half of 2018, Baidu, Alibaba and Tencent have been scrambling to ink strategic partnerships with the municipal government, hoping to capitalize on the city's vast talent pool, policy incentives and access to international resources.

Business executives have also singled out Shanghai's industrial strength as a key element in its pursuit of tech innovations.

Chen Yujun, head of the strategy department at Shanghai Huahong Integrated Circuit Co Ltd, said that the city's rich industry resources have enabled it to become one of the world's most comprehensive chip clusters.

"We've seen the mushrooming of 239 chip design companies, nine wafer fabrication foundries and a number of world-leading integrated circuit packaging firms in Shanghai's Zhangjiang Science City," he said.

The science city is a special zone dedicated to developing strategic emerging industries.

During his keynote speech at the inaugural World Artificial Intelligence Conference in Shanghai in September, Tencent Chairman Pony Ma echoed this sentiment, saying: "The mature industrial chain of smart chips and software and hardware services have equipped Shanghai with an exceptional advantage in AI development."

This factor has been important for social media and gaming guru Tencent, which has been shifting its focus toward providing industrial-oriented solutions, as its consumer-end business faces increasing regulatory pressure and a saturated internet penetration rate.

In 2016, Tencent set up YouTu Lab, its in-house AI arm, in Shanghai, in the hope of devising more tangible solutions for a variety of real-life scenarios.

"While pure-play internet companies can benefit from AI adoption across a number of customer-facing scenarios, AI can also be better employed to facilitate business-to-business sectors in Shanghai and the neighboring Yangtze River Delta region, which is home to numerous small and medium-sized high-tech enterprises," said Li Zhu, founding partner of venture capital firm Innoangel.

SenseTime, a Chinese tech unicorn, has taken the same approach. The company recently made its foray into the public transportation sector by teaming up with E-Drive, a Shanghai bus operator that uses new energy vehicles. As part of the partnership, E-Drive's buses will be equipped with SenseTime devices that detect drivers' fatigue levels through facial scanning technologies.

This bus project is part of a broader collaboration between SenseTime and SAIC, E-Drive's parent company, to construct an intelligent municipal transport system. SAIC, the operator of the city's largest car manufacturing base, has a campus that is equipped with tracks for self-driving automakers to run tests.

But it is not merely the tech enterprises that are contributing to Shanghai's reputation and development as a tech powerhouse.

Huang Jia, partner and general manager of global consultancy PwC in Shanghai, noted that companies from industries that the city is renowned for, such as high-end manufacturing, have also been lending a helping hand as they upgrade their infrastructure and systems to stay relevant in the digital age.

For instance, Shanghai Zhenhua Heavy Industry Co Ltd, the world's largest port machinery manufacturer, kicked off production of a fully-automated container terminal last year.

According to company chairman Song Hailiang, the terminal features the use of the internet of things and machine learning, both of which help to improve the efficiency of operations and lower the site's downtime and costs.

A magnet for big names

Microsoft is among the global tech powerhouses riding the waves generated by Shanghai's ambitions, bringing to the city some of its most advanced research facilities.

The company's latest move includes the opening of an AI and IoT lab in May 2019, the largest of its kind in the world. According to Microsoft, the facility will help about 300 local clients turn their prototypes into products each year.

Such developments are heartening news for the city, said Yuan Tao, chairman of Shanghai Zhangjiang Group, the operator of the Zhangjiang Science City.

Yuan currently oversees the 66,000-square-meter AIsland, which hosts a slew of AI-related research labs. The first batch of 20 companies includes global organizations and local startup firms such as Microsoft, Alibaba, CloudWalk Technology and a research facility affiliated to Tongji University.

"The profile of these companies, together with the cluster of companies from the upstream and downstream sectors will help AIsland lead the national AI pack and secure Shanghai's position as a budding center for tech innovation," said Yuan.

He added that AIsland, which also acts as an incubator for AI companies, will also pave the way for the development of a wellspring of Shanghai tech firms known for their business model innovation.

Of the most prominent examples is social e-commerce startup Pinduoduo, which took just three years to reach a gross merchandise volume of 100 billion units. In comparison, Alibaba and JD took five and 10 years respectively to reach the same milestone. Pinduoduo's social media-anchored model helps people in rural areas sell local specialties, which has in turn alleviated poverty levels.(Source: China Daily)