Can China build its own Silicon Valley?

“Zhongguancun” doesn’t roll off the Western tongue easily, but it will soon be an address that technology investors must learn. For 25 years, locales from Singapore to the south of France have tried to create their own Silicon Valleys, but the original’s remarkable spirit has never been duplicated. China, however, is putting the finishing touches on its own Silicon Valley —  and this time, they may have found the recipe. 

The Zhongguancun district is in the dusty northwest corner of Beijing not far from the old Chinese emperors’ Summer Palace. It is already populated by thousands of high-tech companies —  local firms large and small, as well as international outposts of companies ranging from Microsoft and Sun to Siemens and NEC. But now, in the heart of Zhongguancun, sleek new buildings are rising around prestigious Tsinghua University, creating what will be a world-class technology incubator.

In Beijing last month I met with Meng Mei, a Tsinghua University professor and the managing director of the Tsinghua Science Park. As we stood at a tenth-floor window that looked out over hundreds of acres under development, Meng explained that the Science Park facilities weren’t just for research. Tsinghua is building an entire infrastructure of business support, from venture capital to legal services to property management. There are even support groups for entrepreneurs.

“We need a culture,” says Meng, “that gives small companies the confidence to succeed.”

That, of course, is part of Silicon Valley’s secret sauce — an entrepreneurial infrastructure that can take a company from napkin doodle to business cards and a health plan in a week. 

The other ingredient is a strong academic institution. Silicon Valley was born at Stanford and some of its first companies were launched in an industrial park that Stanford built in the early 1950s. Tsinghua University is arguably China’s single most prestigious school: out of the 7 million Chinese students who qualify for college each year, only two thousand are admitted to Tsinghua. And while Tsinghua is best-known for science and engineering, like Stanford it also offers a top-drawer business school. And, just as does Stanford, Tsinghua not only allows but encourages its professors and students to start companies.

Unlike Silicon Valley, however, Tsinghua is starting with another strong advantage: “sea turtles.” That’s the local nickname for the native-born Chinese who receive educations in the United States and return to start companies in China. Ahmad Bahai, chief technologist for National Semiconductor and also a professor at Stanford and Berkeley, says: “Recently I’ve had some very good Chinese students whom I offer jobs at National. But instead they want to return home.”

One reason is that it’s much cheaper to start a company in China than in Silicon Valley. The classic sea-turtle is Charles Zhang, who graduated from MIT in 1994 and returned to China to launch Sohu.com with a few hundred thousand dollars; the Internet portal is now worth half a billion dollars. I met one sea-turtle at last month’s Asian Technology Roundtable in Beijing who explained his departure from Silicon Valley very simply: “Chinese engineers work harder for less.”

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