“Every innovation system is unique. It's not a zero sum game. China’s Greater Bay Area doesn't need to be like Silicon Valley,” said Micah Weinberg, president of Bay Area Council Economic Institute on Saturday.
China’s Greater Bay Area has always been compared with economic areas in San Francisco, New York and Tokyo. The idea of “Greater Bay Area” first appeared in central government documents in 2015, and was written into China's 13th Five-Year Plan released in 2016. The initiative aims to merge Hong Kong, Macau and nine mainland cities in Guangdong province including Shenzhen and Guangzhou, into an innovation hub and an economic powerhouse.
In a speech given at the Peking University Global Finance Forum in Guangzhou, Micah Weinberg introduced the key to Silicon Valley’s continuing economic growth to Chinese financial industry practitioners and policymakers. He emphasized the importance of talents, capital, industrial diversification and openness to the world.
Dr. Weinberg noted although Silicon Valley model is built on an open, global model with little or no n-government leadership or planning, China doesn’t need to replicate that mode. In China’s Greater Bay Area, the cities and systems to be integrated and resources to be optimized are far more diverse and complex. He pointed out that some central planning can help to reallocate resources and combine the strengths of each city when receiving an interview from the student journalist of Peking University HSBC Business School.
What can China learn from Silicon Valley
There are some lessons China may learn from its American counterpart, the nine-county San Francisco-Silicon Valley Bay Area. According to Dr. Weinberg, the first widely acknowledged law is that education and research institutions are primary assets in all innovation economies, providing highly-educated labor force for the regional high-tech companies. Government should make the foundational investment in higher education and research centers in the area—not only the universities like Stanford and Berkeley, but also university affiliated, independent, and corporate innovation centers—which then pay dividends over time.
The low barriers to the movement of people and information also contribute greatly to the instant waves of innovation. Dr. Weinberg introduced that California doesn’t recognize non-compete agreements—which prohibit employees from working for their employer’s competitors, or setting up a competing business themselves. That enables the labor force to move fluently in the eco-system of innovation. “Silicon Valley minimizes institutional barriers to collaboration, and advocates openness to sharing,” said Weinberg.
Difference may also work to the area’s advantage
Challenges do exist in fulfilling the ambition of Greater Bay Area: political, jurisdictional and economic systems differ greatly in the nine cities of Pearl River Delta China, and the special administrative regions of Hong Kong and Macau. China needs to consider how to lower the cost of people, capital and information circulation among different regions.
But Weinberg viewed the difference as diversity—which in his term, can be an “asset” instead of “drawback”, or “strength” rather than “weakness”. “Because you can do more or less central planning of those three different economies to optimize it,” Weinberg told the student journalist of Peking University HSBC Business School.
“Each city in the Greater Bay Area has its own strengths,” Weinberg continued, “Hong Kong, as an international financial center, has better engagement with foreign companies and investment. Macau is hub of entertainment and tourism, with more connection in the Portuguese-speaking countries. Shenzhen is the base for technology giants like Silicon Valley. It has Tencent, Huawei and DJI.” Besides, Guangzhou is a transportation junction connecting to other major cities of China; and other cites—Foshan, Zhaoqing, Jiangmen, Zhuhai and Huizhou—are famous for their manufacturing industry.
San Francisco Bay Area, despite being strongly identified with technology industry, actually has strong industry diversification across its top-performing companies compared to other economic centers. Companies in Bay Area also thrive in energy, financial service, media, biochemistry, consumer goods and other sectors. Weinberg regarded the diversification as a chance for the economy to reinvent itself over time.
“It’s not a zero-sum game”
“A lot of people would like think to think of economics in zero-sum term: that if China does well, the United States can't be well; if London is a more innovative economy, then it will come at the expense of the Silicon Valley. Nothing could be further from the truth,” Weinberg said.
On the contrary, the collaboration between San Francisco Bay Area and other international gateway cities contributes to its continuing economic growth. Silicon Valley is never disconnected from the rest of the global economy. “At a very basic level, there are more companies using products that our companies create—collaboration creates a market more than a domestic one,” he explained. Although competition is unavoidable, Dr. Weinberg insists there are plenty of opportunities for places to exploit their comparative advantages.
He believes China’s Greater Bay Area is never going to be a replica of Silicon Valley. “It's not only that China and the United States are very different, but also there are things that China does extraordinarily well that we don't do well at all, and vice versa,” he added.
What China and the United States should both be cautious about is the steep rising in the cost of living in the bay areas. “A high cost of living has created a significant barrier to moving into the Bay Area from other regions,” the report published by Bay Area Council Economic Institute says. Dr. Weinberg admitted that figuring out how to manage the cost of living, especially in a capitalistic country like the United States, is a huge challenge, and the population in San Francisco Bay Area just stop growing. “But Shenzhen is growing very quickly,” he continued, “if you're going to have economic growth, you need to make sure that it has a social safety net, like guaranteeing universal access to quality health care and affordable housing.”
Dr. Weinberg also gives some suggestions on China’s Greater Bay Area project. He pointed out that manufacturing bases in cities like Foshan and Huizhou will not create plentiful employment in the future, as most of the production will be automated. “The rest of these cities should stop thinking of themselves just as the back office of the Greater Bay Area, and really regard themselves as a part of the innovation hub,” Weinberg said at the end of the interview.
