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Hefei: Towards an Innovative City
Hefei, like Nanchang, is not an especially well-known city but is more representative of the experience of the majority of China’s urban dwellers. In 2016 China had an urban population of over 800 million while its five largest cities (Shanghai, Beijing, Chongqing, Tianjin, and Guangzhou) accounted for only 77 million, or less than 10 per cent of the urban population.
Most Chinese cities, like Hefei, must make their way according to national directives and with lobbying from the city upwards find their own niche following the prevailing priorities. Hefei is a city earmarked for ‘innovation’, with a transition from economic development based on primary and low-end secondary manufacturing to high value-added, research-based, and more sophisticated services. This is an aspiration shared not only by other Chinese cities but also by cities across the world. Hefei is then a case study in the possibilities and problems of implementing this strategy in a characteristic mid-sized city.
An Overview of Hefei
Hefei is the capital of Anhui Province. It is located in the middle of the province, adjacent to the Yangtze River Delta Economic Circle. It is a crucial city in the industrial shift between the coastal areas and the first tier of inland provinces. If Hefei is at the centre of a circle with a 500 km radius, the area embraces seven provinces or directly controlled municipalities. Since the administrational adjustment in August 2011, Hefei itself governs one county-level city, four counties, and four districts. It has three national-level Development Zones and 14 provincial Development Zones. Hefei has an area of 11,434.25 km2 and a regular population of 7,611,000 according to the 2013 census. The constructed area is 339 km2 and the regular urban population is 3.55 million. According to Hefei Overall Planning (2011–20), by 2020 in the central urban area, the resident population will be controlled within 3.6 million and the urban construction land within 360 km2.1
Figure 12.1: Location Map (Hefei)
Table 12.1 shows the GDP and percentage of the three industries from 1978 to 2013.2 From 2012 to 2014, Hefei took, respectively, the twenty-eighth, thirty-seventh, and sixty-second position in the ranking list of China’s Urban Transformation and Upgrading Capability. In 2013, Hefei’s per capita GDP was CNY65,722.
Hefei is still primarily a manufacturing city. The aim is to enhance technological innovation in the industrial structure of the ‘secondary: tertiary: primary’ model.
Table 12.1: Hefei GDP and Its Structure (1978–2013)
Figure 12.2: Swan Lake CBD in Hefei
Building an Innovative City
The Background of Building an Innovative City
Hefei is one of the most important Chinese science and education bases. There are 60 academicians of the Chinese Academy of Science or China Engineering Academy in Hefei, 358 R&D institutions, 199 provincial key labs, 60 universities and colleges including the China Science and Technology University, 113 vocational schools, and 6.5 million university, college, and vocational school students. Although it has distinguished science and technology resources, Hefei’s economic development has lagged behind for a long time. Its main industry was traditional manufacturing at the beginning of the 21st century, and the new industries didn’t match its science and technology resources. Hefei had strong and advanced basic scientific research capability; however, its application capability has been comparatively weak. The task is how to make full use of its advantages.
In 1998, Jiang Zemin, secretary general of the CPC, visited the Hefei branch of the Chinese Academy of Sciences (CAS). He gave high marks to the scientific research and inscribed ‘Science Island’ for the Academy, which became its nickname. The following year, after visiting the science city of New Siberia in Russia, Jiang Zemin suggested to Lu Yongxiang, the president of the CAS, to transform the Science Island of Hefei into the Science City of China. In the first meeting of the Tenth National People’s Congress in 2003, 16 representatives of Anhui Province proposed to transform Hefei into a science city. In November 2004, the Ministry of Science and Technology approved the selection of Hefei as a national pilot city of science and technology innovation following a decision by the State Council.
Figure 12.3: Science Island, Hefei Branch of Chinese Academy of Sciences
The aim was to use existing capability as a springboard to highlighting innovation platforms, enterprises, and a connected innovative industrial chain. Hefei now has a comprehensive industry system, from the traditional to the cutting edge: including automobile assembly and manufacturing, home facility manufacturing, chemical and rubber tyre manufacturing, new materials, electronics information and software, biological technology and new medicine, and food and agriculture product processing. Its strategic emerging industries have expanded rapidly. In 2014, the output of strategic emerging industries reached CNY25.5 billion. This represents a 60 per cent contribution to the rate of industrial development.
The Process of Building an Innovative City
Hefei has set itself a number of targets: to transform the development mode via science and technology innovation, to increase the economic competitiveness via science and technology innovation, to grow into a national science and technology innovation city, and to become a science city with an international reputation by 2020.
Administrative Reform and Building a Service-Oriented Government
The pilot city project has a leading group from within the municipal committee and government. The city also established an operational office – the Hefei National Science and Technology Innovation Pilot City (Innovation Office). The Innovation Office issues an annual Work Plan of the National Science and Technology Innovation Pilot City and allocates tasks to relevant departments. The Innovation Office is responsible for evaluating their performance on an annual basis.
Hefei’s leaders realised that science and technology innovation is a systematic process and that the pilot work cannot achieve significant progress without the appropriate administrative mechanisms.
Figure 12.4: Hefei Administration Service Centre
In 2006, the relevant officers of the main departments reported their administrational approval items and the legal basis for these items to all the top leaders in Hefei. Each item was evaluated in terms of whether it was legal, reasonable, necessary, or simple, and whether the process was convenient for the public. Only 230 items out of 353 were recognised as necessary. The Science and Technology Bureau became the first department that had no administrative approval items. Then 91 municipal departments made public their commitments about service items, working style, and efficiency.
By 2012, Hefei ranked fourteenth among Chinese cities for its comprehensive business environment according to Fortune (Chinese version).3 Its business costs were the lowest among the top 50 emerging business cities. This is the result of the local government’s efforts on cost control. In recent years, Hefei Municipal Government has vigorously delegated power to lower levels and deepened the reform of the administrative approval system. Therefore, it can increase administrative efficiency and improve government service capability.
Making Related Policies and Fostering an Innovative Environment
Hefei Municipal Government not only builds platforms for innovation investment, but also creates opportunities for the alliance between investors and innovators. This has four policy aspects: innovation, new industrialisation, modern services, and modern agriculture.
The policy system aims to upgrade the industrial structure and to develop the strategic emerging industries. For example, the innovation policy system focuses its attention on developing Hefei’s science and technology industry, on effectively providing industrialisation services for Hefei’s colleges, universities, and research institutions, on fostering new industrial clusters, on constructing innovation carriers, and on creating innovation talent hubs.
In July 2014, the strategy was organised around the ‘1+3+5’ industry support system comprising one overall provision, three methods, and five major policies. The policy system consists of four types of funding support: investment funds, special subsidies, public financial products, and awards for successful fulfilment. For example, Anhui High-tech Power Technology Co., Ltd focuses on the research and development of ‘power battery systems‘. According to the ‘1+3+5’ policy, it got financial support from the local government, which not only reduced the company’s financial pressure, but also speeded up the progress of R&D.
Accumulating Financial Resources and Constructing an Innovation Industrial Chain
Hefei continually increases its public input into science and technology innovation. It actively encourages the initial public offering (IPO) of high-tech enterprises. The Hefei Science & Technology Rural Commercial Bank provides financing services for science and technology SMEs, amounting to CNY2 billion in loans annually. Anhui Industrial and Commercial Bank tries to carry out mortgage loans based on intangible assets and potential. In 2015, Hefei set up an insurance fund, which aimed to encourage insurance provision for scientific and technological innovation, and to share the innovation risk across all the participants.
Cultivating Innovation Enterprises and Strengthening Innovation Main Bodies.
After releasing Science and Technology Innovation Enterprise Cultivation Plans and 100 Enterprises Cultivation Project,4 Hefei selected a group of seed enterprises in selected fields, including new energy vehicles, public security, electronic information, and high-end assembly and manufacturing. It released The Evaluation Index System of Hefei’s Innovative Enterprises,5 which was the basis for appraising the innovation capabilities of such enterprises.
Creating Innovation Platforms and Implementing Key Projects
Science and technology innovation is a complex systematic process, requiring effective public service support. Under government direction, enterprises such as Xunfei, Jianghuai Automobile, Anhui Juyi Automatic Assembly Co., Ltd, and Hefei Forging Group closely cooperate with universities and research institutes. They have formed a series of industry–education–academy alliances in the fields of new energy power supply, electric cars, intelligent transportation, special assembly manufacturing, automatic assembly, and mechanical and electronic integration.
In 2007, Hefei set up an Innovation Public Service Centre to reduce the innovation cost for enterprises. The centre provides a one-stop service for participants to solve problems of equipment purchasing, finding and building partnerships, scientific research achievements, patented rights, government support, and seeking talent and expertise.
In 2009, based on the Innovation Public Service Centre, Hefei initiated three innovation bases for scientific research aggregation, incubation, and industrial upgrading. They are organised around six functions: to display achievements, successful cooperations, public service excellence, mediation between science and technology, purpose-built technology, and enterprise mentoring. In 2015, Hefei started to promote mass entrepreneurship, and the qualified incubators were able to get financial support from the local government.
The Achievements and Features of Building an Innovative City
The Achievements of Building an Innovative City
Figure 12.5: Chaohu Ecological Demonstration Zone
In January 2008, Hu Jintao, as secretary general of the CPC, visited the city, and said that ‘Anhui has rich education resources and powerful science and technology capability. Anhui should achieve more from innovation’.6 In response, Anhui Province set up the Hefei–Wuhu–Bengbu Testing Areas of Independent Innovation, as a practical expression of Hefei as a pilot city. The role of the Testing Area is to eliminate obstacles that hinder innovation, and to explore an innovation-driven development mode to replace a factor-driven mode. On 17 October 2008, central government approved this proposal. Hefei took the lead in this new round of reform and experimentation. According to the blueprint issued by Hefei’s science and technology conference held in 2013, the goal is for Hefei to become the national innovative city in 2015, and for the output value from high-tech industry to reach CNY1 trillion in 2017. Hefei is to become a global innovation centre by 2020.
Updating the Economic Structure and Changing the Development Mode
As noted, an upgraded secondary sector is to be the dominant element of the industrial structure (a ratio of 5.3:55.3:39.4). Hefei has become the new growth pole in the Yangtze River Delta and already per capita GDP has exceeded US$8,000.
This growth and upgrading goes alongside significant achievements in energy saving and environmental protection via ‘light’ and ‘green’ industrial development. In August 2011, Hefei started to construct the Chaohu Ecological Demonstration Zone – the most important project of Hefei’s ‘Great Lake City’ strategy. In July 2014, Chaohu was approved in the first group of National Ecological Demonstration Zones.
Supporting the Strategy of Being an Industry-dominated City
Traditional industry and enterprises such as Hefei Forging, Heli Forklift Trucks, Meiling, and Rongshida have benefited from and been reinvigorated by the overall upgrading strategy. They now sit within the structure of energy-saving, environmental protection, and supportive government policy. The same overarching framework is the solid basis for the development of financial services, logistics, exhibition facilities and tourism, and creative cultural industries. It also encourages the development of SMEs in the relevant industrial chains and clusters.
Accumulating the Potential for Leapfrog Development
Since 2008, the number of authorised patents and patents of invention in Hefei has increased annually by 101.6 per cent and 36 per cent respectively. In 2014, expenditure of research and development in Hefei was 3.1 per cent of the total GDP, ranking it fifth among provincial capital cities. Patents on inventions were 12,929, ranking Hefei sixth among provincial capitals.
Increasing academic research is now translated into industry locally. Examples of leading technologies include voice synthesis, car and mechanical engineering, information home appliance manufacturing, radar manufacturing, traffic accident prevention, biological medicine, nanomaterials, and plant breeding. For example, iFlytek Co., Ltd has developed intelligent speech products and Jianghuai has developed Extended Range Electric Vehicles (E-REV).
Promoting the Aggregation of Innovation Resources
Hefei is becoming a locus for both national and international enterprises. Multinational high-tech enterprises and R&D organisations such as the Microsoft Technology Center, German Continental Tyres, and the Device Engineering Technology Research Center of National Biological Protection are settled there. National enterprises such as Haier, BOE, and Midea have joined them. This will lead to further inward migration of companies and talent.
Figure 12.6: Exhibition Hall of BOE Technology, Hefei
The Features of Building an Innovative City
Attracting External Investment and Developing Local Companies are Equal Priorities
The city especially encourages large-scale innovators which can also enhance local competence – together incubating high-tech enterprises. Attracting investment is seen as directly attracting talent.
Hefei Constructs Innovation Platforms to Nurture an Innovative Environment
Innovation platforms are a key mechanism in linking intellectual and research gains with industrial capability and financial vehicles. This requires a joint effort from government, universities, and enterprises to bring research to the market.
The Method of Fostering a Regional Innovation Ecology is to Apply the Experience from One Unit to a Whole Area
Anhui’s regional innovation strategy has gone through three phases. In 2003, Anhui put forward the concept of ‘Science City in Hefei’. This would only take up a few km2. At the next stage, the Science and Technology Innovation Pilot City covered the whole geographical territory of Hefei. However, Hefei is not big and strong enough to drive the innovation activities of the whole Anhui Province on its own. It needs support from other cities in Anhui so, in a third stage, Wuhu and Bengbu joined Hefei in activating the science and technology resources throughout Anhui.
Hefei–Wuhu–Bengbu Innovation Comprehensive Reform Pilot Region is not only a geographical expansion for innovation, it also embodies a systematic network of resources, institutions, and organisations. More widely still, in September 2014, Hefei was positioned as the sub-centre of the Yangtze River Delta according to the Yangtze River Economic Belt Comprehensive Transportation Corridor Planning (2014–20). Thus, Hefei is now associated with Shanghai and the key provinces of Jiangsu and Zhejiang which make up the economic powerhouse of the lower Yangtze area. In turn, Hefei and Anhui become a key stepping stone in the implementation of the One Belt and One Road Initiative as a link between the more open economy on the coast and the hinterland of China.
Figure 12.7: Institute of Advanced Technology, University of Science and Technology of China