Jump to content

Shanghai Built Its Own Silicon Valley, and Very Few Came


Recommended Posts

Chinese President Xi Jinping has a goal of turning a quiet Shanghai suburb into the country’s next Silicon Valley, but more than three years into its making, that vision is facing mounting challenges.

Lingang, a 120-square-kilometer (46 -square-mile) patch of land southeast of Shanghai roughly a sixth the size of Singapore, was designated by Xi in 2018 as the country’s top free-trade area, to be modeled after the likes of Singapore and Dubai. It was also to be a new center for high-end technological industries that would drive indigenous innovation and wean China off its reliance on foreign technology.

As part of a propaganda blitz to mark the third anniversary of its launch, the government is touting Lingang as a huge success, citing the billions of dollars in investment it has attracted. Indeed, the success of Lingang would add another feather in the cap for Xi ahead of a key Communist Party Congress next month when he is widely expected to secure a precedent-breaking third term in office.

Yet Lingang's future as China's new Silicon Valley remains far from certain, despite the Communist Party’s experience in building tech parks and special trade zones to attract investment and drive China’s opening up. As the domestic economy slows and the geopolitical tensions that have hammered China’s tech sector worsen, Lingang is likely to find it harder to attract private capital and talent.

“We can see the current of deglobalization and the rise of protectionism,” said Aoping Zhang, dean of privately run Zengliang Research Institute in Beijing, about Lingang’s challenges.

Lingang, a 90-minute ride from downtown Shanghai, has been able to attract a combined $62 billion into some 300 so-called frontier-industry projects such as chipmaking and electric vehicles, according to state media reports, thanks to low taxes, eased restrictions on cross-border trade and money flows and proximity to the world’s largest container port.

With the exception of Tesla Inc., however, — which broke ground on its new Gigafactory in Lingang in 2019 — the biggest investors in the hub are mostly domestic names such as state-controlled Semiconductor Manufacturing International Corp, AI firm SenseTime Group Inc. and EV battery titan Contemporary Amperex Technology Co. Ltd. Big multinational companies are largely missing from the major investor list amid growing US efforts to curb American investment in Chinese tech.

At present, Lingang remains largely a ghost town, as those marquee tech names are mostly based on the outskirts of Lingang. The town itself still lacks the types of scientists and engineers that it is trying to attract due to a shortage of basic infrastructure and amenities such as apartments, schools and public transportation. Many of those working in Lingang, mostly factory workers and onsite managers, live close to their factories or in nearby districts.

On a recent government-arranged visit, Lingang still resembled a sprawling industrial area with fervent construction underway and few pedestrians. Next to the town’s centerpiece — a giant, circular artificial lake measuring more than 780 soccer fields — a thoroughfare lined with newly planted trees, lawns and low-rise steel and glass commercial complexes was almost devoid of traffic.

“The greatest advantage of Lingang is that it offers relatively great industrial opportunities. It’s hot land,” said Li Jian, a senior researcher at the Shanghai Academy of Social Sciences, a government think tank. But “high-quality talent demands higher quality of life and work. In this respect, there are still some gaps for Lingang to fill.”

To be sure, Shanghai has experience of transforming remote swathes of land into booming business centers. Pudong, the area in the city’s east, evolved from rice paddies into China’s pre-eminent financial district after three decades of development. It also contains Zhangjiang, a technology park home to large multinationals.

Shanghai has set an ambitious goal for Lingang: It will be home to over 1,000 high-tech companies, 100 company-sponsored research and development institutions and eight internationally competitive laboratories by 2025. The value of its chip industry will exceed 100 billion yuan ($14 billion), a 10-fold increase from 2021.

The challenge for Lingang is undoubtedly greater than before, when China’s economic growth was on a tear and relations with foreign countries were less hostile.

“Complex tech companies don’t rise because of a bit real estate becoming available. The overall environment is much more important,” said Andy Xie, a Shanghai-based independent economist. “Shanghai is betting big on it. It will take a long time to work out."

So far, the growing challenges are not giving the government pause.

A top priority is to build more apartments and amenities to accommodate around 800,000 residents by 2025, according to government statements and state media. Nearly 2 million square meters of land have been set aside for residential development this year alone, accounting for one-third of total new land supply for private housing in Shanghai in 2022.

To further lure talent, authorities also lowered the threshold for buying property last month. More importantly, the government said it would grant the all-important “hukou” — residency permits that had traditionally been used by policy makers as a tool to regulate the movement of citizens — for graduates with advanced degrees from top local universities.

Attempting to address concerns over connectivity, the city government has pledged to extend its public transport network to its suburbs, including Lingang, which currently connects to the metropolis by just one station on one metro line. A 26-km railway linking the suburb with Pudong international airport is being planned.

“Lingang may have the potential to be developed into a tech center in the long run. But it’s a daunting task — it’s just too far,” said Pan Jiang, general manager of Shanghai-based hedge fund Kandao Asset Management Co., who had been going to Lingang frequently to play golf — until early this year when the 18-hole course was taken over by the government for redevelopment.




Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Create New...

Important Information

Mugentech.net uses cookies to ensure you get the best experience on our website. By using this site you agree to Privacy Policy