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2018-07-13 12:47:23 Commentary

For hundreds of years, Guizhou was a multi-ethnic, semi-autonomous territory located on the southwestern edge of the Chinese world. Even after being formally incorporated as a province under direct imperial control in 1413, it has remained one of the poorest parts of China.

Although China’s former president Hu Jintao declared Guizhou a priority region in his western development plan ten years ago, much of the province still remains mired in poverty. As of the end of 2017, 2.8 million Guizhou residents were living below the poverty line — defined as living on less than 95 cents a day. And in 2015, just four industries — coal, electricity, tobacco, and spirits — comprised more than 60 percent of the province’s GDP. In an effort to diversify its economy, three years ago the provincial committee of the CPC decided on a new strategy: developing the province’s big data industry.

Today, visitors strolling along Changling Road — which stretches across three administrative districts in the province’s capital of Guiyang — might mistake it for Shanghai’s famed Pudong business district, considering its glass curtain walls, beautiful walkways, and streams of white-collar workers.

The numbers help back up this impression. Guizhou is home to the fastest-growing digital economy sector in the nation, which grew by 37 percent in 2017 — compared to the national average of 20.3%. In the Guiyang Hi-Tech Zone — which is located along the aforementioned Changling Road — 16,000 tech companies, 155 research institutes, and 49 tech incubators were registered in the first half of 2018 alone. During that same period, the zone attracted 85,000 professionals from around the country. Guiyang is only one of several high tech hubs planned for Guizhou province — a list that also includes Gui’an New District and other, smaller tech parks, such as Bainiaohe Digital Park in Huishui county.

Yet Guizhou’s big data bet is not without risk. Currently, China’s big data industry is in danger of being caught in a race to the bottom, as more and more regions and cities compete to lure in businesses. But while many of these would-be centers of innovation lack the constellation of critical elements — favorable policies, access to universities and R&D institutions, cultures of entrepreneurship, and availability of venture capital and white-collar professionals — needed to transform themselves into vibrant, economically viable tech hubs, Guizhou seems to have stolen a march on at least two of these fronts.

The first involves policy. Guizhou took the lead in offering tax deductions, rent-free office space, and talent recruitment bonuses designed to subsidize and nurture the growth of high tech enterprises. Thanks to strong State support — Guizhou was home to the first experimental big data district in the country — it was able to attract dozens of globally renowned tech companies, including Alibaba, Intel, and HP. Numerous startups mushroomed in their wake, and the initial contours of a regional tech hub began to take shape. Although the central government soon instituted other big data hubs and equivalent policies were adopted elsewhere, Guizhou had already established a sizable lead over its competitors by that point.

Guizhou's big data bet is not without risk, as China’s big data industry is in danger of being caught up in a race to the bottom.

A number of managers I interviewed during my field research attributed Guizhou’s success to the local government’s commitment to the industry. The province’s big data program began as an attempt to consolidate government data. The plan was to move, reconfigure, and integrate all provincial and municipal information platforms to Guizhou-Cloud Big Data — a newly established, cloud-based platform. This integrated government platform — alongside the establishment of a State-owned enterprise specializing in cloud computing services — not only provided proof-of-concept, it also created plenty of niches for complementary enterprises to appear.

On the second front, the province has also successfully fostered the growth of an entrepreneurial culture. Food Safety Cloud — a joint venture run by the Guizhou Academy of Testing and Analysis, the Beijing Institute of Nutritional Resources, and two private testing companies — is among the ambitious new companies that are sprouting up around big data. China has been plagued by food safety scandals over the past decade, and Food Safety Cloud is filling a need for reliable and inexpensive food testing. In 2017, they raised an additional 23 million yuan ($3.45 million) in venture capital.

Another example of Guizhou’s growing startup scene is Global Big Data Exchange (GBDEx), which is located in Guiyang. GBDEx — which helps facilitate data transactions — has built an independent transaction system, recruited 225 premium members, and developed 4,000 categories of tradable data products. By doing so, the company has played a role in the formation of a market for big data products and has inspired copycat companies elsewhere in China, such as Shanghai Data Exchange Corp. In addition to creating a market for big data, GBDEx has also contributed to the big data professional pool by training more than 100 big data professionals, many of whom went on to work at other exchanges.

Yet while the province has made great strides toward becoming a big data hub, it continues to struggle to attract high-end jobs. Beige Big Data, a data analysis and platform architecture firm based in Shanghai, set up a branch in Gui’an New District in 2016. Beige's Gui’an office, however, is largely focused on data cleaning — a labor-intensive procedure involving “cleaning” records of personal information so that they can be used for analytical purposes. Meanwhile, the company’s tech and sales departments have remained in Shanghai, Beijing, and Shenzhen, which offer better access to the country’s talent pools and potential clients. Similarly, although China Data Pay — which provides data mining, data integration, and related services to State-owned enterprises — did place one of its sales departments in Gui’an, the majority of its technology team has remained in Shanghai and Hangzhou. Even the tech teams for Food Safety Cloud and GBDEx are located elsewhere.

Although the aforementioned enterprises have the potential to make major contributions to the local economy and tax revenues in the near future, it may take years for Guizhou to become a center for innovation. After all, the development of the big data industry — and by extension the digital economy — is by no means detached from the real economy. Rather, it relies on the real economy for data generation as well as its applications — primarily through how it interacts with, elevates, and transforms traditional industries.

Meanwhile, the fact that Guizhou developed later than other parts of China can be seen both positively and negatively. On the one hand, Guizhou is less burdened by vested interests and red tape. It also has the luxury of being able to design its regulatory apparatuses around the tech industry, rather than trying to fit them around outdated regulations designed for the manufacturing industry. On the other hand, it lacks the technological, industrial, and organizational infrastructure that can only be found in more developed regions.

The role of the Guizhou government in fostering the development of the province’s big data industry calls to mind a debate between Justin Yifu Lin and Zhang Weiying — two of China’s most well-known economists. Zhang favors market forces and hence has contended that climates conducive to a given industry’s success cannot be constructed through government intervention. Lin, on the other hand, believes that governments can play a role in giving local industries a leg up and can even foster new industries through effective industrial policy. At first glance, Guizhou seems to support Lin’s argument, but the reality is much more complicated.

It took decades for Silicon Valley to develop into a tech hub and surpass Cambridge to become the center of American innovation. The building up of R&D capacity, the assembly of a deep pool of talented young professionals and entrepreneurs, and the cultivation of a culture of innovation cannot be planned — although governments can play an important role by offering incentives such as office space and tax deductions. If bets like Guizhou’s are to pay off, they will require cooperation between the State and society.

Editor: Yang Xiaozhou and Kilian O’Donnell

This article was funded by the Sixth Tone Fellowship. In 2018, Sixth Tone sponsored eight young scholars to come to China for a six-week research trip to conduct fieldwork in eight provinces all over the country.

(Header image: A security guard walks past a big data research center in Guiyang, Guizhou Province, July 7, 2018. Stephen Shaver/UPI/VCG)