Employees will manufacture photovoltaic cells on the production line on July 21, 2020 at Longi Green Energy Technology Co.’s plant in Xi’an, China.

Qilai Shen | Bloomberg | Getty Images

BEIJING – As US increasing pressure pushes Beijing to build its own technology, local systems are disrupting.

For the past forty years, experiments with business-friendly policies in the southern Chinese city of Shenzhen have helped it become the Silicon Valley equivalent with domestic tech giants like Tencent and Huawei. However, so far, other cities have not replicated Shenzhen’s success.

Meanwhile, the national urgency for technology self-sufficiency is central to a five-year development plan announced in March with ambitious goals for research and development in seven “frontier” technologies such as semiconductors.

The central guideline stipulates that local governments do their part.

Xi’an City is a 4.5-hour flight north of Shenzhen and has many of the right elements for technological innovation: research or manufacturing centers for semiconductors, aerospace, and other high-tech industries; Talent from local universities; and significant foreign investment. Both Samsung and the US chip maker Micron operate in Xi’an, which was also the fastest growing city in China last year.

Xi’an Mayor Li Mingyuan said in a statement to CNBC last month that technological innovation is at the top of its list of quality developments as part of Beijing’s five-year plan. He said that by 2025, Xi’an will have advanced manufacturing output of more than 1 trillion yuan ($ 153.85 billion) and more than 10,000 high-tech companies with a total GDP of more than 1, Wants to support 4 trillion yuan. That’s about 40% growth over Xi’an’s GDP in 2020.

But analysts say the state is stifling Xi’an’s potential.

The biggest difference between Shenzhen and Xi’an is that corporations make up most of Shenzhen, while Xi’an needs to reduce the role of government, said Qu Jian, vice director of the Shenzhen-based think tank China Development Institute.

While each city has to determine its own path, the market has to play a bigger role if Xi’an is to follow Shenzhen’s, Qu said. Innovation is difficult to realize even for one country alone and more efficient in international cooperation, he added .

A rough comparison of the companies listed on the mainland A-share market in the two cities reflects the different state dominance. About a third of the 40 or so shares located in Xi’an were privately held, compared with about two-thirds of well over 300 Shenzhen-based stocks.

When describing Xi’an’s pursuit of technological innovation, Mayor Li referred to contributions from the city’s non-governmental and overseas corporations. He noted how a local solar company called Longi Green Energy Technology became the largest publicly traded company in western China last year, claiming it was the world’s largest manufacturer of monocrystalline silicon wafers.

Li added that Micron has invested a total of $ 1 billion in its Xi’an facility, which represents 90% of the company’s global manufacturing capacity. Micron did not immediately respond to a request for comment.

However, if you look at China’s national history more broadly, several state-led efforts to build the local semiconductor industry have struggled, according to McKinsey analysts in 2014.

As the ancient capital of China, Xi’an is also facing physical constraints on city expansion due to historical structures and artifacts, said Perry Wong, research director at the Milken Institute. He expects the Chengdu-Chongqing metropolitan area in southwest China to have a better chance of becoming a center for technical innovation.

Shenzhen “also enjoys a high level of political freedom that no other city in China has,” said Wong, noting that Xi’an would need to think creatively to mimic this type of growth. “You can’t duplicate Shenzhen.”

Drawing from Hong Kong

One advantage of Shenzhen is its proximity to Hong Kong, a semi-autonomous region just across the border that has greater democratic freedoms and alignment with international business standards than the mainland.

As Beijing strengthens its control over the region, it will be inevitable for Hong Kong companies to do more with the mainland.

Hong Kong companies can share their experiences and talents to contribute to China’s development, said Tu Haiming, a Hong Kong member of a national political advisory body known as the National Committee of the Chinese People’s Political Consultative Conference. Tu spoke of greater integration with the mainland in areas such as finance and science.

When it comes to technology, that talent doesn’t have to look all the way to Xi’an. Chinese semiconductor giant SMIC announced last month that it was building a new $ 2.35 billion factory in Shenzhen.