Guangzhou and Shenzhen: International venture capital gathers in Guangzhou and Shenzhen

 

“China’s venture capital investment enters a new era”, “international venture capital accelerates influx in the Chinese market”, concluded by some authoritative experts at the 2016 China Venture Capital & Private Equity Forum held in Shenzhen.

 

By the end of 2015, the venture capital firms active in the private equity investment market of China increased by 25% year-on-year, and the institutional operation also experienced “qualitative change”. Behind the changes, capital swarmed in the coastal developed areas such as the Pearl River Delta. There are obvious signs that China becomes the “wind inlet” of the new round of the venture capital investment.

 

Night view of Guangzhou from the peak of Baiyun Mountain: the dazzling landmark buildings such as Canton Tower, West Tower, East Tower and CITIC Plaza. Photo by Mo Weinong

 

The world’s second largest private equity market takes shape

 

The data shows that the number of venture capital firms has multiplied in recent years. Take Shenzhen for example, the city has 46,000 registered companies by the end of 2015, an increase of nearly 26,000 companies in a single year.

 

A more profound change is that the targets of venture capital have expanded to the startup businesses, paid more attentions to the source innovation and transformed from the simple investment to “enterprise consultant” and from loose cooperation to close intervention. 

 

At present China has about 13,700 active private equity companies which manage about RMB3.28 trillion of capital. “The qualitative change of the venture capital shows that China has become the second largest private equity market of the world in terms of the number of companies or the investment scope and operational modes,”said Jin Liyang, deputy vice manager of Shenzhen Stock Exchange.

 

International venture capital swarms in the Pearl River Delta

 

Recently the world famous venture capital company IDG settled its south headquarters in Guangzhou. Baring Capital, Nomura Asset and Value Partners and other international venture capital firms have also settled in Shenzhen.

 

The Pearl River Delta is becoming a hot land of venture capital attracting eyesight of the world.

 

HSBC Group’s global strategy occurred meaningful change recently. Montgomery Ho, Deputy CEO of HSBC Bank (China) Company Limited said that HSBC had accelerated its steps of presence in the Pearl River Delta against the global layoff. “Behind the swarming in venture capital, we have noticed the results of transformation and upgrade of the Pearl River Delta and the new round of industrial agglomeration,” said Ho.

 

In this round of the industrial agglomeration, the Pearl River Delta will show unprecedented changes in the economic forms. In Guangzhou, the clusters of smart manufacturing and robots, energy saving and new energy automobile, bio-medicine and health and medical services have taken shape while the new powerhouse and growth poles are forming. In Shenzhen, the output of the seven strategic emerging industries such as biology, Internet and new materials has reached RMB2.3 trillion in 2015, growing their proportion in GDP to 40%. “The traditional industrial clusters face rapid upgrade. In future the economic increment of the Pearl River Delta will center on the strategic emerging industries,” said Xiang Xiaomei, director of the Institute of Industrial Economics of Guangdong Academy of Social Sciences.

 

China becomes the “wind inlet” of the new round of investment

 

According to the data released by Zero2IPO, the venture capital firms from home and abroad raised 597 new funds, newly increased capital RMB199.636 billion that can be invested in the Chinese mainland, and launched 3,445 investment projects, up 79.7% year-on-year.

 

The overseas capital has a high confidence in China’s development. In April this year, the international communications giant Cisco Systems, Inc. settled its innovation center (China) in Guangzhou after comparing different cities and signed the agreement with the local government to jointly develop a cloud-based global leading smart city with annual output value exceeding RMB100 billion.

 

Ho said that although China’s economic growth has slowed, China is undoubtedly the most beautiful touch compared with the other economies, “very attractive”.

 

The data shows that with the supply-side reform and other measures, China has stood up to the challenges of weak overseas market demand and gradually bottomed out. In 2015 China stood on the world’s top of the total amount of import and export and the exports accounted for 13.8% of the world’s total, up 1.5 percentage points. “A combined Pearl River Delta and Hong Kong would rank as the world’s largest banking city cluster by 2025,” according to McKinsey. “China is growing into the ‘wind inlet’ of the new round investment of the world. However, China needs more knowledge and technological agglomeration to fly upward in the wind inlet,” said Jin Liyang.

 

Beijing: “Public Maker” grows by nearly 12 times in a year

 

According to Beijing Municipal Science & Technology Commission, the “public makers” recognized by Beijing showed an explosive growth and grew from 11 to 141 in the past year, an increase of nearly 12 times. Of them, nearly 70% public makers based in Beijing established branches in various cities, becoming the new characteristics of the capital resources driving the national growth, reported by the Xinhua News Agency on June 11.

 

Beijing Municipal Science & Technology Commission worked with Beijing Business Incubation Association and Beijing Public Makers Alliance and others to release the Report on the Public Maker Development in Beijing in 2015. According to the report, the public makers in Beijing experienced explosive growth. At present a total 141 innovation and startup service institutions from 14 districts have been recognized as the “public makers”, and 56 of them registered with the Ministry of Science and Technology.

 

The public maker is a professional service platform recognized by the central government for promoting the market forces to serve the innovation and business startup. The private capital has become the business entity of various public makers in Beijing. The total operating area reaches about 560,000 square meters, serving nearly 10,000 enterprises and teams.

 

The data shows that 66.7% of the public makers in Beijing have set up branches in various cities to serve the local innovation and business startup, forming the structure of close interaction with Beijing, Tianjin and Hebei and the whole country in the innovation and startup services.

 

The public makers in Beijing have been further closely combined with the technological result transfer and characterized by the systematic combination with the quality and efficiency improvement of the real economy, said Yan Aoshuang, director of Beijing Municipal Science & Technology Commission. For example, Beijing has more than 40,000 newly established technology enterprises, and 12,000 national high-tech enterprises in 2015, and formed the new startup teams best represented by the “entrepreneurs born in 1990s”, “department of business startup”, “consecutive business startup entrepreneurs” and “overseas entrepreneurs”.

 

In China’s first independent innovation demonstration area Zhongguancun, the scientific and technological innovation is driving the regional economy to develop rapidly. In the first four months, the enterprises above the statistics threshold in Zhongguancun demonstration area realized the total revenue of more than RMB1.1 trillion, up 15.6% year-on-year and the technological incomes, high-tech services and granted patents grew by more than 30%, respectively.

 

The latest data shows that in the first four months Zhongguancun demonstration area enjoys growing incomes and the enterprises above the statistics threshold realized revenue of RMB1.11798 billion, up 15.6% year-on-year, 2.8 percentage points higher than that in the same period of the previous year, up 0.2 percentage point compared with the first quarter.

 

In the first four months, Zhongguancun demonstration area realized the technological revenue of RMB155.19 billion, up 32.0% year-on-year, 15 percentage points higher than that in the same period of the previous year, contributing to 24.9% of the total revenue.

 

Shanghai: Building into a “world city” by 2040

 

The newly released Yangtze River Delta City Agglomeration Development Plan set forth to “improve Shanghai’s world city functions” for the first time, attracting wide attentions. The “world city” has become a specific vision in the new round of urban planning of Shanghai. The brand-new positioning means that Shanghai will further “jockey for position” in the future international competition and play a more significant role in leading the regional development and serving the national strategies.

 

According to the Outline of Shanghai Urban Master Plan (2015-2040), “Shanghai will grow into a comprehensive world city on the basis of basically completing the construction of “four centers” by 2020, and the international economic, financial, trading, shipping and technological innovation center and international cultural metropolis by 2040”.

 

What’s a world city? Zhou Zhenhua, director of Shanghai Economist Association who started the related research early, pointed out that under the combined forces of the economic globalization and informatization, the economic network among cities domains the global economic lifeline. And the major cities which have space power beyond the country borders are the world cities, which are outstanding in the economic strength, resource accumulation capability and global influence, said experts.

 

According to the ranking of the Globalization and World Cities Research Network (GaWC), London and New York are the recognized world cities while Shanghai, Hong Kong and Singapore rank among the second echelon, showing obvious gaps with these two cities.

 

“World city” is the development goal of Shanghai towards 2040. The Outline deepens the meaning and functional support of world cities, and put emphasis on advantage integration and short slab improvement, strengthens shaping of the external influence and enchantment of the city and defines the development goals of Shanghai from three dimensions, namely the competitiveness, sustainable development capability and enchantment.

 

With regard to the competitiveness, “Shanghai will focus on the construction of scientific and technological innovation center with global influence....build Shanghai into one of the important hubs of the global innovation network and one of the main sources of the key technologies, and drive the comprehensive innovation of the whole city with scientific and technological innovation”. As for the sustainable development capability, Shanghai aims to “take a lead to reduce the energy consumption and the carbon emission as a large city” and “build a public transit metropolis”. And Shanghai will “continuously enhance the sense of belongings, sense of identity and happiness of all citizens and outcomers” and “build international cultural metropolis and international tourist destination” on the dimension of enchantment.

 

Source: Translated from Invest Guangzhou, June 12, 2016