Table Of ContentXiaoying Dong · Yanni Hu
Weidong Yin · Estela Kuo
Zhongguancun Model:
Driving the Dual
Engines of Science &
Technology and Capital
Zhongguancun Model: Driving the Dual Engines
of Science & Technology and Capital
Xiaoying Dong Yanni Hu
(cid:129)
Weidong Yin Estela Kuo
(cid:129)
Zhongguancun Model:
Driving the Dual Engines
of Science & Technology
and Capital
123
XiaoyingDong WeidongYin
GuanghuaSchoolof Management ZhongguancunListed Companies
PekingUniversity Association
Beijing,China Beijing,China
YanniHu Estela Kuo
GuanghuaSchoolof Management ZhongguancunListed Companies
PekingUniversity Association
Beijing,China Beijing,China
ISBN978-981-13-2266-2 ISBN978-981-13-2267-9 (eBook)
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Foreword I
In2012,whileridingthehigh-speedtraintoNanjing,YinWeidongandIdiscussed
a report analyzing the overall statistics of 198 Zhongguancun listed companies
(ZLCs): I found the report quite surprising. In the past, discussions about
Zhongguancun focused heavily on its emerging tech companies and their innova-
tions. Although ZLCs’ total market capitalization had already reached 1.3 trillion
RMB at that time, there was a lack of data and integrated information on these
companies.Subsequently,YinWeidongandIsatdownwithanumberofofficialsat
China Securities Regulatory Commission, China Investment Securities, and other
relevantinstitutionstodiscussZhongguancunanditsexcitingachievements.These
meetings eventually led to an annual paper, Competitiveness Report of
Zhongguancun Listed Companies, which provides an independent review of the
latest Zhongguancun developments.
The innovation-driven development strategy, which was proposed at the 18th
CPCNationalCongress,emphasizestheimportanceofscientificandtechnological
innovation in strategic support. At present, during this critical time for China’s
economic transformation, scientific and technological innovation has become an
important driving force for the transformation mode of the country’s economic
growth. As Kang Youwei said, “adopt new thoughts and technology for
self-improvement, abandon old routines for the society’s development.” Scientific
and technological innovation is an expectation for China moving forward and is
being promoted at all levels of government and the public sphere; it is also the
mission of companies and entrepreneurs in Zhongguancun.
MassentrepreneurshipandinnovationisoneoftheimportantenginesofChina’s
economic development. As China’s leading innovators, ZLCs shoulder an impor-
tant responsibility. As of 2015, ZLCs’ total market capitalization exceeded the 4.8
trillion RMB, its net investment reached 200 billion RMB, and its research and
development input exceeded 80 billion RMB. This significant amount of capital
fully demonstrates that technological innovation can drive economic development.
In fact, the scale that ZLCs have achieved is inseparable from China’s overall
emphasisoninnovation.Asthefirstnationalindependentinnovationdemonstration
zone,Zhongguancunbearsanimportanthistoricalfunctionandalsocreatesagood
v
vi ForewordI
environment for innovation and entrepreneurship. This ecosystem is inseparable
from the innate characteristics of ZLCs as companies that remain steadfast when
faced with hardships and the success and failures of start-ups.
When we first founded Lenovo, we met a lot of uncertainties; in fact, we were
only certain about one thing: entrepreneurship is tough. Thirty years later, Lenovo
has carved out a way for high-tech industrialization; further, it is a Zhongguancun
listed companyandamemberoftheFortuneGlobal500.In2015,we(refer tothe
foundersofLenovoincludingLiuChuanzhi)pushedLenovotothecapitalmarket,
thus providing investment services for technological innovation. In fact, many of
Legend Holdings’ investments are in Zhongguancun companies. Lenovo is a real
start-up companywith rich history. Similarly,mostZLCs arealso blazingthepath
of entrepreneurial innovation.
WearegladtoseethenumberofZLCsincreasingyearbyyear.Atpresent,there
are more than 200 domestic listed companies and over 100 overseas listed com-
panies, such as Baidu, BOE, and Lenovo. Scientific and technological innovation
hasnogeographicallimitations;Zhongguancundoesnotonly belongtoBeijing or
China,butratheritbelongstotheworld.Wehaveseentheincreasinglyrapidpace
of Zhongguancun’s internationalization, and, in some areas, we are consistently
narrowing the gap with competitors and reaching global leading standards. In
particular,PresidentXiJinpinghasidentifiedstrategies,suchastheBelt andRoad
InitiativeandthecoordinateddevelopmentofBeijing,Tianjin,andHebeiProvince,
which provides future direction for Zhongguancun companies and offers them
unlimited possibilities for future development.
Technological innovations have brought about disruptive changes to industry
and even to the society as a whole. When it comes to scientific and technological
innovationinChina,Zhongguancunisthefirstentitythatcomestomind.Onemust
observe ZLCs to understand sci-tech, innovation-oriented enterprises. Zhong-
guancun Model: Driving the Dual Engines of Science & Technology and Capital
analyzes the overall situation and presents typical case studies of ZLCs over the
past five years. I hope this book can help you understand Zhongguancun.
It is my hope that in the next five years, Zhongguancun’s total market capital-
ization doubles and its new model will be even greater!
Beijing, China Mr. Liu Chuanzhi
September 2017 Chairman of Legend Holdings
Foreword II
Weareinagreateramarkedbychange,creation,anduncertainty.Forenterprises,
this era presents both great challenges and unlimited opportunities.
Generally speaking, this era has three important characteristics: First, the
explosion of science and technology has caused dramatic changes in enterprises’
development models and in our way of life; second, global economic integration
and development has led to a dynamic and constantly evolving global economic
structure and competition; third, the interaction and competition between the fic-
titious and real economies has led to subversive innovation in market behavior. In
the face of these new characteristics, How should enterprises make strategic
adjustments? How should they change their development path? How can they
continue to drive innovation?
Ialwayssaythatthereiscommonalityinthefailureofenterprises,butsuccessful
enterprisesaredistinct.So,thefirstthingwemustaddressispreventingenterprises
from making common mistakes that lead to failure. Then, on this basis, we must
continuouslyinnovateandchange,inordertopromotethesuccessofenterprises.In
ordertoachievethisend,enterprisesmustengageinlearninganduselearningasa
source of inspiration and reference. It is my belief that gaining insights from the
experience and lessons of other enterprises is a very effective learning method.
Zhongguancun Model: Driving theDual Engines ofScience & Technology and
Capitalisaninvaluablebook.ItincludesanoveralldataanalysisofZLCsandcase
studies from a variety of industries with detailed information and comprehensive
analyses.Itisworthreadingandisagreatreferencetomacroeconomicresearchers
and entrepreneurs, as well as government officials and young scholars.
AstheoldChineseproverbsays,“Stonesfromotherhillsmayservetopolishthe
jade of this one.”
Beijing, China Mr. Xu Jinghong
June 2017 Chairman of Tsinghua Holdings
vii
Preface
In a March 2009 investigation interview with Guo Jinlong, Mayor of Beijing,
(ZhongguancunScienceParkhadjustbeenapprovedasthefirstnationalinnovation
demonstration zone)1 he asked me: “In ten years from now, what would be the
marker of Zhongguancun’s success? I answered: if Zhongguancun had produced
ten more enterprises like Lenovo, then Zhongguancun would be considered suc-
cessful.Now,ithasbeenlessthantenyearsandZhongguancunhasproducedmore
than tenlistedenterprises with amarket capitalizationofover50billionRMBand
dozens more enterprises with a market capitalization of over hundreds of billion
RMB,suchasBaiduandJD.com.Zhongguancunhigh-techenterpriseshaveshown
explosivegrowth;theirscientificandtechnologicalinnovationsareremarkable,and
countless scientific achievements have emerged. Indeed, Zhongguancun is now a
powerhouse of technological innovation.
Atpresent,Zhongguancunhasproducedmorethan20,000enterprises.Asallof
its enterprises focus on innovation, ZLCs demonstrate typical innovation-driven
development. As public companies, ZLCs have made fruitful achievements in the
globalcapitalmarket:In2015,Zhongguancun’stotalmarketcapitalizationreached
4.8 trillion RMB, net investment reached 20 billion RMB, and research and
development input reached over 8 billion RMB. ZLC’s total market capitalization
increased from 1.3 trillion RMB in 2011 to 4.8 trillion RMB in 2015, thus
achieving over 50% growth for three consecutive years. I think this remarkably
rapid growth is primarily due to scientific and technological innovations. In 2013,
whentheCPCCentralCommitteePoliticalBureauconductedacollectivestudyon
the implementation of innovation-driven development strategy, President Xi
Jinpingemphasizedtheimportanceofcomprehendingtheglobalinnovation-driven
development trend and effectively implementing its strategy. In the future,
Zhongguancun should strengthen the implementation of innovation-driven devel-
opment strategy and increase the speed of its efforts to establish a science and
technologyinnovationcenterwithglobalinfluence,inordertoplayaleadingrolein
1“Zhongguancun”mentionedbelowreferstoZhongguancunNationalInnovationDemonstration
Zone.
ix
x Preface
implementinginnovation-drivendevelopmentstrategyacrossthecountry.President
Xi’sspeechencouragedmanyboardmembersoflistedcompaniestoreportontheir
business innovation. The policies of the Party Central Committee have provided a
newworldfortherapiddevelopmentofinnovativetechnology-basedenterprisesin
Zhongguancun. In the transformation of China’s economy, Zhongguancun has
pioneeredaneweconomy,characterizedbytheInternet’scross-borderintegration,
innovation and economic sharing, and a new land to explore. Statistics show that
Zhongguancun’s contribution toBeijing’s economicgrowth increased from 17.9%
in 2010 to 36.8% in 2015—accounting for nearly 40% of Beijing’s economic
growth in 2015. Technological innovation drives economic development, and
Zhongguancun’s innovation has become an engine of new economic growth in
China.Howmuchdisplacementdoesthis“engine”have?Howmuchenergydoesit
consume? How fast can this engine grow?
Until now, there has been little to no literature on Zhongguancun that provides
itsreaderswithacomprehensiveaccountandanalysisofthisinnovativespace.Asa
scientific researcher specializing in bioscience, I have devoted my life to the
research and development of vaccines for more than 30 years. I formed my first
team, started a business in Beijing, and finally established myself and the business
inZhongguancunastheChairmanofalistedcompany(NASDAQ:SVA).In2012,
I, along with dozens of other ZLCs’ Chairmen, established the Zhongguancun
Listed Companies Association, and I have the fortune to serve as the association’s
president for the past five years. It is precisely because of my rich experience and
dynamic identities as a researcher, entrepreneur, and president of an NPO that I
have the understanding of the language and data needed to accurately describe the
recent the development of Zhongguancun. I hope that this book’s account, along
withawealthofdatasetsandgraphs,providespeoplewithatrueunderstandingof
Zhongguancun.
Each year, the Association’s research team publishes The Competitiveness
ReportofZhongguancunListedCompanies,whichisbasedonthefinancialdataof
listedcompanies.Wehavefoundthatthedatasetshavesignificantlychangedover
thepastfiveyears.WiththeuniqueaccesstoZhongguancun’sdata,Ibelievethatit
is imperative to conduct research and analysis on the Zhongguancun’s innovation
phenomenon. With this aim in mind, we collaborated with Dong Xiaoying, an
Associate Professor at the Peking University, Guanghua School of Management,
and his academic team in order to leverage the strengths of both parties in con-
ducting the study.
The majority of the existing literature on research on development patterns and
strategiesfocusesonmacrofactorsandvariables;thisbook,however,drawsfroma
large amount of basic data, takes 238 listed companies as the research object, and
examines these high-tech enterprises, all of which are active in global capital
markets,inordertoprovideacomprehensiveoverviewofZLCs’developmentover
thepastfiveyearsthroughanobjectiveaccount.Inaddition,theresearchteamalso
conductedanumberofinterviewsandresearch.Duringthestudy,theresearchteam
selected eight listed companies to serve as a typical case. These companies, while
not the largest or the fastest growing, they are an accurate representation of
Preface xi
Zhongguancun enterprises across a wide range of industries; they reflect and
highlight the development of Zhongguancun’s science and technological trends.
Through the combination of quantitative research and qualitative descriptions, this
book presents a thorough analysis based on the capital market valuation of enter-
prises, quantifies the contribution of science and technology innovation to the
economy,andexploresthecirculationofR&Dandhumancapitalinvestmenttothe
improvement of products and service levels to access to capital markets to the
promotionoffinancingandfinallytodrivinganewroundoftechnologyinnovation
investment. In this book, Zhongguancun’s innovative ecology is explored; this
innovative ecology has not only promoted the development of ZLCs over the past
five years, but also continuously affects the operation of Zhongguancun.
ThisbookplaysavaluableroleinsparkingfurtherdiscussiononZhongguancun
and will hopefully lead to increased research in this area. Firstly, we hope to
increasethenumberofexpertsthatconductresearchonZhongguancunandanalyze
the development zone as a new economic engine with different research perspec-
tives. The increased research in this area will further the general understanding of
Zhongguancun as a whole.
Secondly, we hope that this book will serve as a reference for all levels of
government as they develop science and technology innovation strategies.
Zhongguancun is the first independent innovation demonstration area approved by
theStateCouncil.Throughthispilot,anumberofinnovationandentrepreneurship
projects have taken root and blossomed; further, similar policies have been
implemented in other national demonstration zones for the development of inno-
vation. In the process of development, which is driven by science and technology
innovation,theZhongguancunAdministrativeCommitteehasgivenitsfullsupport
andahighdegreeofindependenceandfreedomtoitsenterprises,thusformingthe
area’s unique innovation ecology. We hope that such a model can be replicated.
Thirdly,wehopethisbookcanserveasa“textbook”forZhongguancunscience
and technology innovation-oriented enterprises and entrepreneurs. Success or
failure is never the only criterion in Zhongguancun; however, it is essential for
enterprises to reflect and adjust its means of survival, as it moves forward in the
tides of innovation and entrepreneurship. To some extent, this book is also a
textbook for Zhongguancun enterprises; through the book’s lens, they will be able
to identify themselves and understand others in relation to the area’s five-year
history of development.
Fourthly, we hope that more investors can understand and discern ZLCs’ dis-
tribution in various capital markets. Zhongguancun has now become the most
active venture capital zone in China, and venture capital investment has played an
important role for ZLCs as they enter the capital market and increase in scale and
size.Thebookalsoallowsinvestorsto“diagnose”ZLC’sdevelopmentprospectsin
relationtoitshistoricaltrends,whicharebasedonobjectivedata,inordertorefuel
Zhongguancun technological innovation.
As an experimental mechanism of innovation and policy implementation in
China,Zhongguancun,nowwithover20yearsofdevelopment,hasgrownintothe
first national independent innovation demonstration zone. It has always been
