Can China Go High-Tech When Exports Slump?

As the financial Tsunami batter China’s exporting hubs, everyone is wondering how well China can weather the storm in the next couple of years, but a more important question is how China’s economy will emerge after the crisis. As a result of extensive research, I argue that there have been sustained forces pushing China’s industry to more innovative fields with a stronger orientation to the domestic market. The crisis will only strengthen the shift in a more dramatic manner. This conclusion is based on my research in Beijing’s Zhongguancun, a region dedicated to innovative industry and domestic market. I started to do research in Beijing’s Zhongguancun in 2000, at a time when few foreigners had ever heard of the place. But most Chinese had, due to the hype from the official media that Zhongguancun was going to become China’s Silicon Valley. Yet, knowledgeable Chinese knew that Silicon Valley had grown up around such technology giants as Intel, HP, or Google. Zhongguancun, in contrast, seemed to be a collection of gigantic electronic markets and untold numbers of venders parading pirated CDs. They are very skeptical of this government claim. Undaunted, I continued to collect information and interview all sorts of companies in Zhongguancun, private, foreign-owned, state-owned, returnees owned, and I found that there indeed was more to Zhongguancun than meets the eyes. I had grown up in this region in the 1980s and witnessed its first transformation from a quiet suburb of universities and research institutes to a bustling high-tech commercial center. By 2000, it was gathering energy again with the internet boom. My fascination and research in this region lasted for six years and resulted in a book: The Inside Story of China’s High-Tech Industry: Making Silicon Valley in Beijing. Today, Zhongguancun is still far from Silicon Valley, but it has put its name on the international map. A number of companies started there have gained international attention, such as Lenovo and Baidu, and venture capitalists from California flood into China’s most promising land for innovative business today