On July 21, 2020, employees produced photovoltaic cells on the production line of the Longi Green Energy Technology Co. plant in Xi’an, China.
Shen Qilai | Bloomberg | Getty Images
Beijing-With increasing pressure from the United States pushing Beijing to build its own technology, the local system is gradually becoming a reality.
In the past four decades, Shenzhen, a city in southern China, has experimented with business-friendly policies, which has made it the Silicon Valley of local tech giants such as Tencent and Huawei. But so far, other cities have not repeated the success of Shenzhen.
At the same time, the country’s urgency for technological self-sufficiency is at the core of the five-year development plan announced in March. The ambitious goal of the plan is to study seven “frontier” technologies including semiconductors.
The central directive requires local governments to do their part.
Xi’an Mayor Li Mingyuan said in a statement to CNBC last month that in Beijing’s five-year plan, technological innovation is the top priority for its high-quality development. He said that Xi’an’s goal is to achieve an advanced manufacturing output value of more than 1 trillion yuan (153.85 billion US dollars) by 2025, and support more than 10,000 high-tech companies with a total GDP of more than 1.4 trillion yuan. This is an increase of about 40% over the GDP of Xi’an in 2020.
But analysts say the state has stifled Xi’an’s potential.
Qu Jian, deputy director of the China Development Research Institute, a think tank based in Shenzhen, said that the biggest difference between Shenzhen and Xi’an is that enterprises are a major part of Shenzhen, while Xi’an needs to reduce the role of the government.
Qu said that although each city must determine its own path, if Xi’an wants to emulate Shenzhen, then the market needs to play a bigger role. He added that it is also very difficult for a country to complete its own innovation, and innovation is more efficient in international cooperation.
A rough comparison of companies in the two cities listed on the mainland’s A-share market reflects the difference in national dominance. According to data from Wind Information, out of about 40 Xi’an stocks, about one-third are private stocks, while out of more than 300 Shenzhen stocks, only two-thirds are private stocks.
When Mayor Li described Xi’an’s efforts to promote technological innovation, he mentioned the contributions of non-state-owned enterprises and foreign companies in Xi’an. He pointed out how a local solar company called Longi Green Energy Technology became the largest publicly listed company in western China last year and claimed that it is the world’s largest manufacturer of monocrystalline silicon wafers.
Li added that Micron has invested a total of US$1 billion in its Xi’an plant, which accounts for 90% of the company’s global production capacity. Micron did not immediately respond to a request for comment.
McKinsey analysts wrote in 2014 that, however, looking at China’s national history from a more general perspective, the state-led effort to establish a local semiconductor industry has been difficult to achieve.
Perry Wong, research executive director of the Milken Institute, said that as the ancient capital of China, Xi’an also faces material restrictions on urban expansion due to historical structures and artifacts. He predicts that Chengyu City in southwestern China will have more opportunities to become a technological innovation center.
Huang said Shenzhen “also enjoys a high degree of policy freedom that other cities (in China) do not have,” he pointed out that Xi’an will need to think creatively to mimic this growth. “You can’t copy Shenzhen.”
Drawing from Hong Kong
One of the advantages that Shenzhen has is that it is close to Hong Kong, and Hong Kong is a semi-autonomous region adjacent to the border. It enjoys greater democracy and freedom than mainland China and is in line with international business standards.
As Beijing strengthens its control over the region, the inevitable choice for Hong Kong companies will be to develop more cooperation with the mainland.
Du Haiming, member of the Hong Kong member of the National Political Consultative Organization and member of the National Committee of the Chinese People’s Political Consultative Conference, said that Hong Kong enterprises can share experience and talents and contribute to China’s development. Tu Dazhi spoke extensively about greater integration with mainland China in the financial and academic circles.
In terms of technology, these talents do not need to go to Xi’an. Chinese semiconductor giant Semiconductor Manufacturing International (SMIC) announced last month that it will build a new $2.35 billion factory in Shenzhen.