No, Shanghai Isn’t The Next Silicon Valley — Watch Shenzhen & Beijing Instead
There’s this article that’s been flying around lately: “Why Shanghai is the next Silicon Valley — and why you should care”
The article is framed from the perspective of the writer’s own experience in China, which was very brief. The guy touches down in Shanghai in the summer of 2017 and decides that Shanghai is going to be the next tech-capital of the world upon leaving by the end of summer. But it’s not even the tech-capital of China.
The article reads as if some guy got off a plane in Shanghai, saw a bunch of people using cool local apps and making mobile payments, and then decided right then and there that Shanghai is the epicenter China’s technologic revolution.
Shenzhen is pretty much hands-down considered the Silicon Valley of China. A number of Chinese tech-giants are based in Shenzhen and it’s the epicenter of hardware development. Beijing is another Silicon Valley of China, with its Zhongguancun neighborhood hosting giants like Baidu and Lenovo.
Now, the writer did give lip-service to these cities, but in a very naive sense that would make anyone familiar with this place cringe: “And while Shanghai may be China’s innovative technology leader, cities like Shenzhen and Beijing are quickly advancing as well.” Dude, Shenzhen and Beijing are leading tech in China!!!!
Nothing personal against the writer of this piece, but it’s annoying that this article is getting so much attention and amplification when it’s so wrong. Fake news, anyone?
There’s other cities in China that have burgeoning tech-scenes that could be considered more impactful than Shanghai. So Shanghai might not even be #3 in terms of Chinese tech-hubs. I’ll give a brief overview on each city below.
Shenzhen is home of some of the biggest names in tech today. Huawei was founded here in 1987. Tencent was founded here in 1998. So already, we have China’s leading hardware and software companies based in Shenzhen. Huawei is China’s top smartphone brand and by far the most impactful Chinese tech brand on the global stage. They provide a lot of networking infrastructure to countries across the world and give Samsung a run for its money with their mobile devices.
Tencent has revolutionized the lives of the average Chinese citizen with WeChat, the most popular social platform in China and one of the most popular channels for mobile payments in the world. And before that, it was Tencent’s QQ, formerly the most popular chat service in China (that’s more of an MSN Messenger at this point). They’re also huge in mobile gaming now, with Wang Zhe Rong Yao (王者荣耀), known globally as Honour of Kings, being a huge source of Tencent’s revenue stream. Moreover, Tencent is working to lead China’s AI space, rivaling Baidu.
While not based in Shenzhen, BBK Electronics plays a significant role in the Chinese smartphone scene today. They currently own some of the top Chinese smartphone brands, which are now a force to be reckoned with on the global stage, especially in developing markets like India and Thailand. These brands are Oppo, Vivo, and OnePlus. Oppo and Vivo are based in Dongguan, along with BBK — a mere 88km drive to Shenzhen. OnePlus is actually based in Shenzhen, and is quickly becoming a fanboy favorite in the smartphone scene, globally. They have some wicked global ads as well.
Shenzhen is also home to ZTE, another major smartphone brand. Its former sub-brand, nubia Smartphone, is also based in Shenzhen.
Dà-Jiāng Innovations Science and Technology Co., Ltd, better known as DJI, is another Shenzhen native. They’re known for their consumer drone products, i.e. the DJI Phantom.
Chinese tech companies that aren’t based in Shenzhen still tend to maintain a huge presence in Shenzhen. This includes TCL Corporation, one of the biggest TV manufacturers in the world. While based in Huizhou, 92km from Shenzhen, they have a giant campus in Shenzhen. TCL is also a smaller player in the smartphone scene under their own name, but they are Blackberry’s hardware development partner and own Alcatel Mobile, formerly a French brand and still a global player in the affordable smartphone market. You’ll often see TCL and Alcatel share booth space at trade-shows like CES.
Some lesser known smartphone brands such as Technology Happy Life (yes, that’s their name) and Gionee hail from Shenzhen, and they are making moves to expand in developing markets like India and Nigeria. The mysterious Sugar Phone also comes from Shenzhen, a smartphone brand positioning itself as more of a piece of fashion rather than tech. Their flagship product features Swarovski Crystals around its frame, and comes packaged in a decadent crystal casing.
While Shenzhen is most notable for its hardware, startups are another component to its tech space. The local government is working to attract startup talent with incentives such as housing subsidies and million dollar payments for top-talent.
While Shenzhen is often considered the Silicon Valley of China, Beijing could easily contend that title. Beijing is home to so many Chinese tech giants, especially in the software and platform space.
JD.com launched in Beijing in 1998 and are now one of China’s biggest e-commerce contenders. JD is where most Chinese people will go to buy electronics online. It tends to be more trusted for high-ticket items when compared to Alibaba’s Taobao, China’s most dominant e-commerce player. They’re also well known for providing super fast same-day delivery. JD also partnered with Walmart in China, when Walmart sold its Yihaodian stock to JD, the biggest Chinese online grocery store. This has also opened the door for Walmart to put its own Sam’s Club brand in the Chinese e-commerce space, where users can buy Sam’s Club products at Sam’s Club prices on JD and Yihaodian without being members.
China’s biggest video platforms are also from Beijing. Youku was founded here in 2003, and is often considered the YouTube of China. China’s online video space isn’t as centralized as global, ironically. There’s no one platform to rule them all, like YouTube on the global stage. iQiyi is another major video platform from Beijing, and positions itself as a more premium platform than Youku. You could say it’s more of a cross between YouTube and Netflix. They pioneered China’s original online premium content scene, pushing out dozens of original productions. They’ve also recently brokered a deal with Netflix to launch its original content in China (with Chinese censorship characteristics of course).
Baidu is another Beijing native, and is often dubbed the Google of China. Baidu actually owns iQiyi along with a number of other popular applications and platforms. Baidu is China’s biggest search platform, but it’s not anywhere as good as Google. Baidu tends to replicate the types of services Google has as well. There’s Baidu Map, Baidu News, and Baidu Netdisk (like Google Drive). They also have a number of other product equivalents to popular global services. Baidu Baike is the Wikipedia of China. Baidu Post Bar (百度贴吧) is a popular forum and query-based searchable community. Baidu Knows (百度知道) shares similarities with Quora. Baidu is also one of the leaders of China’s AI space. Baidu’s AI program made headlines by bringing in Andrew Ng as their Chief Scientist, former professor at Stanford University Department of Computer Science and founder of Google Brain, but he ended up leaving in the spring of 2017.
Sina Corp is another major player in Chinese tech. I consider them more of a Yahoo of China, as they used to be a much bigger deal and ended up losing ground to Tencent. Sina is best known for Sina Weibo, China’s most popular microblogging platform. It started out as the Twitter of China, but it’s changed a lot since then. WeChat is more of a closed-network social platform and although much more popular than Sina Weibo, Weibo differentiates itself by being a public and open space, much like Twitter. It’s the go-to platform for influencers in China. Video has been incorporated into Weibo with Miaopai, one of China’s most popular social-video platforms, which essentially started out as the Vine of China. Weibo has also incorporated live-streaming and viewers can send money directly to streamers as digital “red packets” or hongbao (红包). In addition, Weibo incorporated the popular Stories function, made famous on Snapchat and Instagram.
Didi Chuxing, the Uber and Lyft of China, is based in Beijing. They were founded in 2012 and quickly rose to dominate the Chinese ride-sharing space. They provide transportation services for more than 400 million users across China, with both regular taxis and private cars providing rides through the app. They actually merged with two of their former competitors, Didi Dache and Kuaidi Dache, to dominate the market. They also acquired Uber’s China unit in 2016. Didi is so big, Chinese citizens are complaining that’s it’s harder than ever to hail a ride, with less competition in ride-share services and fewer opportunities to simply catch a cab on the street the old-fashioned way.
China has made headlines recently with its bike-share services. The two biggest players, Ofo and Mobike, are both based in Beijing. Ofo and Mobike have grown so fast, their bikes literally litter the streets of cities across China. They’re both aggressively expanding globally. You can now find the iconic yellow Ofo bikes in cities outside of China such as Singapore, Cambridge, Seattle, Vienna, Milan, and Worcester. Mobike has expanded into Singapore, Manchester, Florence, Milan, and most recently, Washington DC. Ofo and Mobike have rapidly changed Chinese cities in the past year. It’s a standard way to get around now, as opposed to more traditional public transportation options like buses, subway, and taxis. WeChat and Alipay have streamlined this with their mobile payment systems. Alipay invested in Ofo and you can now ride Ofo bikes simply by being an Alipay user — no need to download the Ofo app anymore. WeChat and Mobike now have a similar arrangement.
Toutiao, China’s hottest news aggregator, is another Beijing tech company. Toutiao literally means “Today’s Headlines” and they’ve become quite the platform, grabbing headlines regarding their rise in the tech space. Toutiao is powered by AI and algorithms, providing users with curated news-feeds. They also created a news-writing AI called Xiaomingbot, which published 450 articles during the 2016 Olympics alone. This little news app is making Baidu sweat with its rapid rise and is also becoming a choice platform for digital advertisers.
Beijing native, NetEase, is another smaller player that packs a big punch. They got their start providing email services (those ubiquitous @163.com addresses) and massively multiplayer online role-playing gaming services. They also provide one of the best Chinese dictionary services: Youdao. Youdao also features a cloud note-taking service. Their music app, NetEase Cloud Music, rivals Tencent’s QQ Music and KuGou (the biggest music apps in China), and is often lauded as a better app by hardcore music fans. You could say it’s the Soundcloud or Spotify of China (along with QQ Music and a few others).
China’s Groupon, Meituan, is another Beijing tech company, which merged with Dianping, the Yelp of China. Meituan-Dianping is now one of the top on-demand delivery platforms in China. On-demand delivery is huge in China, with Baidu Waimai as another Beijing-based competitor. Although not based in Beijing, the Alibaba-backed app, Ele.me, is the most popular delivery platform. I order a meal or convenient store delivery on Ele.me just about everyday, myself.
Beijing is home to Kingsoft, which has more influence than you might expect. They own Cheetah Mobile, creator of some of the world’s most popular apps such as Battery Doctor, Clean Master, CM Locker, and Piano Tiles. Kingsoft was also traditionally a big provider of antivirus software in China and focused on development for internet and Microsoft Windows systems. In 2015, they partnered with Dropbox, placing the service prominently in Kingsoft’s WPS Office mobile app. Ironically, Dropbox is blocked in China.
Beijing-based Qihoo 360 is one of China’s biggest internet security companies, most famous for its 360 Safeguard and 360 Mobile Safe products. They also made a move to rival Baidu in 2012 with so.com, a search platform. They were in talks to acquire Sohu’s Sogou.com in 2013, another Beijing-based search engine, but it didn’t pan out. Qihoo 360 and Sohu remain dwarfed by larger Chinese tech companies, although they provide a number of services still widely used in China today.
Brands like Qihoo 360, Sohu, and even Sina Corp seem like dinosaurs in China’s tech-space. Another old one is Beijing’s Renren, formerly known as the Facebook of China. It had its start with students in China (known as the Xiaonei Network at the time — literally meaning “On Campus Network”), much like Facebook when it first started. It differs from Facebook in that no one uses it anymore.
Like Shenzhen, Beijing also has a number of hardware providers. Lenovo is based in Beijing and they make a whole lot of computers. Lenovo acquired IBM’s personal computer business in 2005, including ThinkPad. They remain a huge contender in the global laptop scene. Lenovo also owns ZUK, a Beijing-based smartphone company. China has a lot of smartphone brands, and this one chose an “interesting” name that they’ll assure you doesn’t suck.
Xiaomi is another big Beijing-based hardware provider. They’re one of the top smartphone manufacturers in the world, but also develop a lot of smart-home technology. They make Mi TV (smart TV’s), MiBox (an Apple TV equivalent), and Mi Band (a Fitbit equivalent). They make smart air filters and consumer-friendly home-surveillance systems with a mobile app to pair, so you can watch your pets while you’re outside or make sure your nanny isn’t up to no good on your smartphone. Their offerings tend to be pretty affordable, and you can find their smart products just about everywhere in China. You may have heard of those cheap Chinese GoPro-equivalents, such as the Yi Technology Action Camera. Also by Xiaomi. They make laptops too, notably the Mi Notebook Air.
So right about now, Beijing is really looking like the Silicon Valley of China. There’s just so much that’s going on in tech here. It’s also a great city for startups and finances more than $41.8 billion USD in venture capital. It helps that China’s top schools are in Beijing, such as Tsinghua, the MIT of China, so top-talent is a plenty. The government also wants to keep tight control of tech in China, and keeping it centered in Beijing makes that a lot easier.
Hangzhou can’t be considered the Silicon Valley of China, but it’s a significant tech-hub. This is where Alibaba is, China’s biggest e-commerce provider. Alibaba started with Alibaba.com back in 1999, which is a B2B trading platform. Alibaba.com connects Chinese manufacturers with foreign buyers. It also has its domestic counterpart, 1688.com (saying the numbers in Chinese sounds like “Alibaba” — yao liu ba ba).
Taobao is Alibaba’s most famous product, and was founded in 2003. It’s China’s largest consumer-to-consumer online shopping platform. It’s essentially the Amazon and eBay of China, all wrapped into one. Tmall.com is a subset of Taobao, which provides official shops for major brands. China’s famous 11/11 sales (the Black Friday of China) is most famously held on Tmall. Alibaba has also taken its consumer-oriented e-commerce offerings global with AliExpress.com, a foreign-facing equivalent to Taobao. They also have their own advertising tools for marketers to promote products within Taobao and Tmall.
Alibaba’s influence doesn’t stop here. They run Alipay, the mobile payment system that’s only rivaled by WeChat. Alipay pioneered mobile payments in China after launching in 2004 and only started losing market-share when WeChat made its move in 2014. You can read about how WeChat became a force to be reckoned with in another article I wrote here.
Alipay can help you take care of a lot of business all within its interface. You can activate Ofo bike-shares along with a few other bike-share brands. You can pay your utilities all within the app. You can book flights and train tickets. You can hail taxis, make investments, top up your phone data. The list goes on. WeChat often gets lauded for being the all-in-one app, but Alipay does much of the same. It’s just not nearly as social as WeChat.
Alibaba acquired Youku and Tudou in 2015, popular Chinese video platforms, similar to YouTube. This allowed Alibaba to connect its vast e-commerce network with video content. Watch a video on Youku, see a product featured in it you like — go directly to Taobao to buy it.
Alibaba continued to expand its media empire in 2015 with the acquisition of the South China Morning Post (SCMP), Hong Kong’s premier English-language newspaper. Alibaba also has its own media portal, Alizila, which provides news from the company as well as stories regarding China’s role in global commerce.
Alibaba has made its owner, Jack Ma, the richest man in China. His empire puts Hangzhou on the map for technology-greatness, but he’s not alone in the scenic city. Security technology giants, Dahua and Hikvision, are also based in Hangzhou. You’ve probably been recorded countless times on their devices and you didn’t even know it. They are some of the biggest manufacturers of security cameras in the world. They get elaborate with security tech too. Dahua provides industrial surveillance drones, for instance.
Chengdu isn’t home to any of the giants, but it has ambitions. Chengdu is pushing to become a central tech-hub. Many of the giants covered above have large operations in Chengdu. They also have a burgeoning startup scene.
Tianfu Software Park Lab is home to 110 internet start-ups. The space offers $15.4 million USD in total annual subsidies to early stage start-ups. It’s part of the local government’s push to put Chengdu on the map for innovation and technology. One noteworthy creation in the space is Camera 360, a popular photo editing app.
Chengdu also hosts a lot of high-tech manufacturing. Foxconn makes iPads in Chengdu. Intel chips are made here. Chengdu Raja New Energy Automobile develops electric vehicles here, the self-proclaimed “Tesla of light trucks.”
Nowhere near being the Silicon Valley of China, Xiamen still boasts an impressive portfolio of one tech company: Meitu.
Meitu is most popular for its selfie and photo-editing app, Meitu XiuXiu, aka MeituPic. Any Chinese girl who likes to take selfies will likely have MeituPic and will likely use it on just about every selfie they take. That’s a lot of Chinese girls. MeituPic boasts 456 million users who post more than 6 billion photos every month. Although it’s been popular in China since 2013, the photo-editing app also managed to become a fad in the Western world in late-2016-early-2017.
Meitu also owns Meipai, an innovative social-video app, similar to Miaopai. Meipai launched in 2014 and was another sort of “Chinese version of Vine,” but it did so much more than Vine at the time. The app allowed you to shoot short bursts of video like on Vine, but then it auto-edited them into short music videos with elaborate filters. Meipai was ahead of its time and is still very popular. It now includes live-streaming. It’s a choice-platform for online video influencers and has a very active user base, making Meipai a top platform for Chinese UGC. If you make your own videos in China, you better be on Meipai.
Meitu also has a line of smartphones. Their most famous device is the very cute Sailor Moon phone, which comes accompanied with a kitschy selfie-stick. You have to be a Sailor Moon fan to appreciate it.
It feels good to be back in Shanghai. After all, I live here and love this city. Still, Shanghai is no China-equivalent to Silicon Valley. We’ve gone over this. But Shanghai still has its contenders in the tech space.
I mentioned Ele.me earlier, the leading on-demand delivery app. This innovative company is actually based in Shanghai. The company was founded in 2008 by Mark Zhang and Jack Kang in the Minhang Campus of Shanghai Jiao Tong University. Ele.me literally means “you hungry?” Their branding is on-point, and they easily dominate competitors like Baidu Waimai.
I can get just about any cuisine from around the world delivered to me in my neighborhood in Shanghai. Mexican, Turkish, Italian, American, and any of the various Chinese cuisines. You name it. I can also get cat litter delivered along with mouthwash, a tea kettle, and a jump rope from a nearby shop — no exaggeration. Anything I want is pretty much minutes away from me, using Ele.me. It’s not expensive either.
I’ve previously mentioned Tudou, the video platform. Although it merged with Beijing-based Youku in 2012 and was later acquired by Alibaba, it was established in Shanghai in 2005. Tudou has always been my preferred Chinese video platform. The interface was always nicer than Youku’s and they’ve done more to foster a community, compared to its counterparts. Tudou essentially wants a UGC creators community, like YouTube has. They’ve worked hard to foster this and even put on an annual festival for its community in Shanghai — giving its top UGC talent a live stage to connect with fans and other creators.
Unfortunately, UGC isn’t taken as seriously in China as it is on YouTube. Viewers tend to go to popular video platforms to watch TV shows and movies instead. As state-run Chinese television lacks in entertainment value, video platforms come to the rescue with better content. This leaves less room for smaller-time creators. Tudou has tried, but social-video platforms like Meipai & Miaopai and live-streaming apps like Yizhobo have now taken a good share of the UGC space from Tudou.
Shanghai tech companies still have their role in UGC though, it just happens to be global. Believe it or not, musical.ly is a Shanghai-based company. The app allows users to create fun music videos with all sorts of special effects like speed options (time-lapse, slow, normal, fast, and epic) and pre-set filters.
The app was launched in 2014 and now has over 200 million users, globally. It’s also recently announced a partnership with Apple Music. The app is home to fresh influencer talent such as teenager, Ariel Martin, who has over 15 million followers on the platform. Like Vine before it, Musical.ly is launching young talent into stardom.
Ctrip is another major company in the tech space that’s based in Shanghai. Ctrip is like the Expedia of China. It can be used to book flights, hotels, and tour packages. They also acquired a competitor, Qunar, in partnership with Shanghai-based private equity firm, Ocean Link. Ctrip pretty much dominates travel in China now. There’s still some remaining competition, including Fliggy, Alibaba’s own travel service, but acquiring Qunar really locked things in for them.
So there you have it. Shanghai has some tech, but nothing compared to the Shenzhen and Beijing behemoths. Like the two major Chinese tech-hubs, Shanghai also has its own burgeoning startup scene. It tends to be a bit more globally-oriented in Shanghai, and less “Chinese.” Shanghai also technically has a shared Sina HQ with Beijing, but that’s not saying a lot when they’re the Yahoo of China. So all in all, Shanghai is not the Silicon Valley of China and doesn’t seem as if it will be anytime soon.
China’s tech-scene is impressive and growing, hence that article that spurred me to write this response. The writer was simply looking at it in the wrong places.
One thing that’s allowed China’s tech-scene to develop like it has is the government. Chinese technology has been forged in protectionism. The Great Firewall of China has kept out Silicon Valley’s heaviest hitters. Local companies have been given this safe-space to develop. It helps that they have over a billion people to choose from in terms of a contained population.
China’s Silicon Valley(s) will facilitate one of the biggest social experiments of the 21st century, all thanks to China’s protectionism. Already, credit scores for citizens are being rolled out. For example, I can only ride an Ofo bike-share using Alipay because my Alipay Sesame Credit is at a certain level. The government is planning their own citizen Social Credit System, which will no doubt be facilitated through popular digital tools such as Alipay and WeChat.
China is known for its media censorship on the public-stage, but already, WeChat is cracking down on activities within private group chats on the government’s behalf. All your WeChat data belongs to the Chinese government and you can be easily monitored without any sort of warrant. And as WeChat takes over every bit of your life, the government now has full access.
Now imagine if your credit score is affected by every little thing you do in your life, as everything is being tracked through your digital activities. The people you associate with, the food you order, the things you shop for, the music you listen to, the games you play, etc. The government could create incentives and disincentives that affect your credit score in all of these areas. How far will China’s Silicon Valley go in overtly micromanaging the life of a Chinese citizen?