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Beyond Beijing: Finding Hidden Gems in China’s Investment Landscape

Remember the 2008 Olympics opening ceremony? Hundreds of synchronized dancers illuminated the night, each representing a piece of China’s vast, intricate tapestry. It wasn’t just a cultural spectacle; it was a glimpse into a nation on the rise. For investors, China has long been a behemoth, its skyscrapers and stock exchanges glinting with promise. But beneath the headline acts of Shanghai and Shenzhen lie hidden pearls, lesser-known regions brimming with untapped potential. Forget the well-trodden path; let’s venture beyond Beijing and explore the lesser-known gems waiting to be discovered in China’s investment landscape.

Nanjing

The next Silicon Valley? Probably. A home of cultural essence, the city of Nanjing is a mix of modern tech and ancient markings of culture, nature and aesthetics. Famed for important places such as the Ming Palace, Chaotian Palace, Porcelain Tower, Drum Tower, Stone City and City Wall, Nanjing is a masterpiece of beauty. Match that with its famous cultural sites such as the Nanjing Library, Nanjing Museum and Jiangsu Art Museum and you will wander this city all year long wishing that you only have holidays to attend to. But is Nanjing only known for its great natural and cultural features? Maybe in the past but at present the city has something new to talk about.

Nanjing has become what it aspires to be, China’s Silicon Valley. Information technology, biotechnology, computer software, pharmaceuticals and electronics are the new culture of the city. Its latest positioning has attracted many global companies to settle in the city. Some of the giants that found love in the city include Huawei, ZTE, and Lenovo; all from China. Then Siemens, SAP, Sharp, Volkswagen, Samsung and IBM among others have set up Research and Development (R&D) centres in the city.

Qinhuai He River also known as Nanjing's mother river
Qinhuai He River also known as Nanjing’s mother river

Apart from already-established brands finding joy in the city, new ones are springing up every day. BYTON, Iluvator CoreX, Carzone, YOHO, Bioheng, Zimi, Yunzhangfang and Meipian are among some of the top startups in the city of Nanjing. These have all attracted top local and global investors including Rakuten, Goldman Sachs, the Alibaba Group and Hillhouse Capital among others.

But is Nanjing positioned to meet the talent demand just like Silicon Valley? Nanjing is probably the best-stocked city in the whole of China when it comes to talent growth. The city has the highest density of students in China. According to Cameron Johnson, a partner at TidalWave, “There are more than 800,000 students at any given time in the city. That’s the most of any city. Even a large city like Shanghai doesn’t have that many.”

Additionally, Nanjing’s local government has supported talent development by establishing incubators, maker spaces and engineering and research centres.

Cameron Johson shed more light on the figures surrounding the local government’s efforts. She said “The local government has introduced over 150 incubators, too. So, there’s a lot of talent, especially in terms of high tech, that’s being procured. There are also 60 maker spaces and over 800 engineering research centres. So, all of that is driving the talent workforce.” Cameron Johnson attributes those interventions as the catalyst for the smart vehicles and TV market growth in the city.  “This is one of the reasons you see large investments and growth in the Smart TV and Smart Vehicle areas or the biomedical field because there’s just so much talent,” Johnson noted per Site Selection.

So are you thinking of a city that serves as a tech hub but away from the crowded streets of Beijing and Shenzhen? You should think of Nanjing.

Hangzhou

You got that right. Hangzhou grew into prominence for being the southern terminus of the Grand Canal. It is one of China’s most prosperous cities but outside its fame and riches, it has new gold ready for mining. Hangzhou is the 4th best startup ecosystem in China, 6th in East Asia and 35th globally. According to Crunchbase, the city has more than 1200 startups headquartered there. Most of the companies started just about 10 years ago with top funding options being Series A, Angel investors, Series B and Series C.

Among its list of top startups include Xie Teng Medical Technology, Chituo Technology, Linhuiba and Intelligence Indeed. Also, BestSign, EMQ Technologies, Broadlink, Hunliji, Lianlian Pay and Souche are all headquartered in Hangzhou and are thriving in their respective industries. Involving a total of over 2,295 funding rounds, startups in Hangzhou have together raised at least US$53.2 billion in funding. Sequoia Capital, 500 Global, Plug and Play, Ant Group and Intel Capital are among some of the top investors in startups in Hangzhou.

Hangzhou, China
Hangzhou, China

But is Hangzhou so green for tech investment? The city has many attractions to lure tech investments. It is ranked as part of the top 100 financial centres in the World according to the Global Financial Centres Index. It also ranks as the 16th best for scientific output, globally.

Hangzhou’s history as the founding city of Alibaba is a big argument in its favour but beyond that, the city hosts a 10th of the headquarters of Fortune 500 Global companies, the most of any city in the world.

Side attraction to investing in Hangzhou is not limited to its pool of talents and technological innovations only. Policies in China have in the past decade been liberal towards foreign investment. The Chinese government’s efforts have pushed to making its doors open for foreign investment. Economic policies such as a technology achievement transformation fund and increased incentives for venture capital firms have all widened the doors for investing in China and Hangzhou.

Government tax incentives and a conscious drive towards promoting foreign investment have yielded results for the city of Hangzhou. For instance, in 2022, foreign investment in the city amounted to US$7.81 billion with US$4.59 billion going into hi-tech industries. Of the 840 foreign investment projects in the city in 2022, per China Briefing, 97 of them had values of at least US$30 million while 29 had values crossing US$100 million each.

Though still in the dark with Shenzhen, Beijing and Shanghai being the most attractive destinations for venture capital firms, the turn of Hangzhou is not far from now.

Conclusion

Beyond the glamour of Beijing, frenzy about Shenzhen as China’s Silicon Valley and Shanghai as the showpiece of China’s booming economy, there are real gems hidden outside the doors of this trio. So, if you are thinking of making inroads into China as an investor, your best bet would be to go to either of these duos where doing business is less expensive. That creates a perfect fit for many young talents to start businesses, allowing you to select from among the hundreds available the one best deserving of your investment.

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