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October 31, 1999

China Seeks $24bn to Build Zhongguancun “Silicon Valley”

By CBR Staff Writer

Zhongguancun, the Beijing high-tech park which the Chinese government hopes will be the epicenter for the country’s IT future, will be looking for investments worth 200bn yuan ($24bn) over the next 10 years. The greatest lack in the Zhongguancun hi-tech park is capital,” said Zhao Fengtong, director of the park’s management committee. And the capital will mainly have to be raised from private-sector investment, he said. Zhao was addressing a two-day Beijing-Hong Kong seminar on how to develop the zone into China’s own Silicon Valley. More than 100 executives and officials from Hong Kong’s top companies, think tanks, financial institutions and government attended.

Founded last June in an seen as the traditional heart of China’s high technology industry, the Zhongguancun Park covers 350 sq km of northwest Beijing and is home to 68 universities, including Peking University, and the Chinese Academy of Sciences. It also houses the headquarters of most of China’s top computer and IT firms such as the Legend, Stone and Founder groups.

Speaking after the seminar James Liu, chief executive of the Hong Kong Industrial Technology Center, said: There will be three Silicon Valleys in the world. One already exists in California, the second will be in Europe, in Germany or Britain, and the third will be in Zhongguancun. It has 5,000 companies and is adding about 500 a year. When it reaches 10,000, that will be the critical mass.

What it has is talent and the potential of the Chinese market, with 35 million users of the internet by the year 2003. What it does not have is an efficient system for using capital, management and the right business model. The Chinese Academy of Sciences has 120,000 members but why was a Microsoft not created here? he said.

Duan Yongji, general manager of Zhongguancun Technology Development, said: When I meet the heads of Peking and Qinghua universities, they talk about using science to build the nation. But which one – China or a foreign nation? In Qinghua, 82% of graduates of some science faculties leave for developed countries and in Peking University it is 76%. The talent we have is not being well used. We must create conditions in which people feel they can fully use their abilities and get a proper reward or all this will be empty talk.

In the near term, the park management plans to spend 22.9bn yuan ($2.76bn) to build a software park and a science park, and 6.3bn yuan ($760m) on a light railway. It has promised software firms a break on value-added tax which they will pay at a rate of 6% compared with 33% for most state firms. The management has also filed applications with the government to allow foreign law and accounting firms and foreign asset appraisal agencies to set up shop.

Management predicts the park will generate its own gross domestic product of 130bn yuan ($15.7bn) by 2010, up from 15.7bn yuan ($1.9bn) last year.

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