Beijing's High-Tech Boomtown:
Expanding at Home - and in the Silicon Valley

Another of China's burgeoning boomtowns is expanding, this one with a decidedly high-tech edge: Responding to strong demand, the Beijing-based Zhongguancun Technology Zone is doubling its space to accommodate additional high-tech firms.

At the same time, the area is expanding its U.S roots by setting up a first-of-a-kind operation in Silicon Valley.

260-Plus Companies Already
Located in Shangdi Base

The Zhongguancun Technology Zone is part of the Shangdi Information Industry Base (www.strong.com.cn), the Beijing area targeted for high-tech industry. The Zhongguancun expansion will cover 20 acres (50 hectares), said Liao Guohua, president of the Beijing Strong High-Tech Development Co., which handles the zone's development and management.

Opened nine years ago, the Shangdi Base has attracted 264 foreign and domestic firms, including "more than 20 of the world's top 100 high-tech firms," according to Beijing Strong High-Tech Development Co. officials. That high density of high-tech firms has prompted some observers to dub the Shangdi Base "the Pearl of Zhongguancun."

High productivity has also typified the companies that have located operations in the Chinese special economic zone (SEZ), asserted Beijing Strong High-Tech Development officials. Last year, for example, operations in the Shangdi Base turned out US$1.7 billion worth of products -- an average output value of $40.96 million per hectare ($102.4 million per acre) of the existing space in the park, according to Liao.

New Space Will Accommodate 150 Firms;
Marketing Begins Later This Year

The park's success spurred the expansion, said Beijing Strong High-Tech Development officials. All of the Beijing Shangdi Information Industry Base's existing land is now occupied, they explained.

The new space will provide space sufficient to accommodate some 150 additional companies, they added. Marketing of the additional acreage will begin later this year.

Officials hope to attract a broad range of high-tech functions to the new space, including management, capital-raising, product development, and display and marketing. The Shangdi Information Industry Base was founded in 1991 to focus on electronic information services. Cai Junyi, the lead developer on the Zhongguancun Technology Zone expansion, said the project will require some five years to complete. Resettling local residents and building the infrastructure for the expansion will be completed in two years, he added.

Area Opens Silicon Valley Office

Earlier this summer, the Shangdi Information Industry Base completed another expansion project designed to boost its location appeal:

It opened a liaison office in Silicon Valley, the first such link between a China-based technology zone and California's fabled high-tech epicenter. The new office is designed to promote Zhongguancun's U.S. image and to attract more experienced high-tech operations to locate in the Beijing zone.

The Zhongguancun area's success is part of China's track record in creating SEZ boomtowns. The SEZ program began modestly in 1979, with the creation of four zones in southeastern coastal China. Those SEZs' singular success in attracting investors soon prompted the Chinese government to dramatically increase the total number of zones.

(A full list of China's current SEZs, including links to each, is online at www.sezo.gov.cn - but be forewarned that the English-language version of the site has not always come up for us during our visits to this site.)

Local governments in SEZs are allowed to offer tax incentives to foreign investors. They are also allowed to develop their own infrastructure without central government approval. Foreign ownership is allowed for enterprises locating in a special economic zone, and business enterprises are free to make most of their own decisions in areas including investment, production and marketing.