AGUIDE

THE INNOVATIONTOECOSYSTEM

OF

CHINA
BAY AREA

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The guide presents the main business opportunities, the mostimportant leads, and most interesting stakeholders, as seenfrom a Danish perspective. We give you a realistic understanding of the local startup scene based on first-hand experienceand on-the-spot dialogues.
This publication has been developed by Asia House and

PREFACE

TechBBQ as part of a series of guides to innovation ecosystems in the China Bay Area and Taiwan, India, Japan, Korea,
and Singapore.
The series is published as part of the non-profit initiative
Innovation Lab Asia to improve and enhance cooperation be-

This guide gives you a brief introduction to the China
Bay Area innovation ecosystem, with a special focus
on Shenzhen, the hotbed for prototyping and advanced
manufacturing, and Hong Kong, the historic access pointand financial center of the region.

tween Danish and Asian innovation ecosystems. The project is
supported by the Danish Industry Foundation.
For further information and guidance, contact:
ASIA HOUSEPeter Johansen, Project Manager

TECHBBQ
Lisa Mallner, Lead Consultant

MAIL
hello@innovationlabasia.dk

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Photo credits on frontpage and page 23: Julien Lanoo

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WHY THE CHINABAY AREA?

For years, Shenzhen has been known as the global factoryhall for electronics, and Hong Kong the traditional
gateway to Southern China. Now, the Chinese governmentis undertaking an ambitious plan to develop the entire
region into a new economic powerhouse: Shenzhen is
to match the innovation of Silicon Valley while Hong
Kong is to cover international transport and finance.
The giant city of Guangzhou is to become the area’scommercial and industrial engine.

Already, the China Bay Area produces 37% of China’s exports
and 12% of its GDP. With a more integrated approach, theChinese government expects the China Bay Area can boost
this output even further.

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THE

Chinese government expects the China Bay Area to boost this

China Bay Area is also known as thePearl River Delta and covers an area alittle less than Denmark•

The Bay Area has more than 70 million
people (2017), making it the largest
urban area in the world in size andpopulation•

The Bay Area accounts for 12% of
China’s GDP and includes the citiesof Shenzhen, Guangzhou, Dongguan,
Foshan, Hong Kong, and Macao•

The Bay Area has three of the world’s
top 10 container ports•

The Bay Area has more freight traffic
than Tokyo, New York, and the San
Francisco Bay Area combined

output even further.
Danish companies have mainly focused on the Northern andEastern cities of Beijing, Shanghai, Hangzhou, and Ningbo.

AREA

•

Already, the China Bay Area produces 37% of China’s exports
and 12% of its GDP. With a more integrated approach, the

CHINA BAY

However, the China Bay Area - especially Shenzhen - offers
great opportunities within prototyping and manufacturing. In
fact, a fair number of Danish companies are actively using thearea’s manufacturing ecosystem, though they do not have apermanent presence.
Additionally, local investors in the China Bay Area are actively
looking for the next generation of strong startups, and many arelooking into foreign companies in particular. The public sector
is also actively seeking to attract foreign startups to the region,
to realize the ambitious plans of the Chinese government.
With the ongoing trade war between the US and China, Chinese
businesses are increasingly looking for collaborations with
Europe, and Danish companies could take advantage of thiswindow of opportunity.
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MAIN ECOSYSTEM OVERVIEW
BEIJING•CHENGDU•

Chengdu is the international hub of Western
China and has a rapidly growing ecosystem.
Designated a Hi-Tech Industrial Development Zone by the Chinese government,
the city’s startup ecosystem sees plentyof support from the public sector.

Beijing is probably China’s most developed
innovation ecosystem and has given birth to
29 unicorns since 2012, the highest number
outside Silicon Valley. Beijing is particularly
strong in ICT, AI, and Big Data. The proximityof the central government is an added value.

SHANGHAI•SHENZHEN•

8

Shenzhen is one of the fastest growing
innovation hubs in the world. Long famed as
the global hub for hardware manufacturing,
Shenzhen has evolved into a vibrant startup
community and a great place for hardware
prototyping. Proximity to the giant city ofGuangzhou and the gateway city of Hong
Kong adds to the appeal.

HONG•

Shanghai is China’s financial center andmost internationalized city, with 250,000
expats. By extension, it has China’s mostdemanding and sophisticated consumer
base, making it the ideal spot to locate forforeign companies with high-end products.
The Shanghai ecosystem is particularly
strong in Fintech, Gaming and E-commerce.

KONG

Hong Kong is the historic gateway to South
China, and one of the world’s leading financial centers. A high proportion of expats anda small domestic market has paved the way
for a strong international outlook. Fintech
and E-commerce are the two most prominent sectors.

THE
ECOSYSTEM
AT A GLANCESHENZHEN

40 years ago, Shenzhen was no more than a collectionof sleepy fishing villages overshadowed by wealthy
Hong Kong. Today it is a global powerhouse for
hardware manufacturing, with a skyline that (nearly)
rivals Hong Kong

The startup ecosystem in Shenzhen is characterized by a“maker culture”, with a multitude of small, agile makerspaces
for rapid prototyping and product optimization. In Europe
it may cost 20 euros and take 1-2 days to assemble a basic
PCB (printed circuit board); the same device can be made inShenzhen in 20 minutes for less than 1 euro.

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A

LITTLEBIT

OF

HISTORY

In 1980, Shenzhen became China’s first Special Economic Zone, a free market laboratory
in a communist country, where foreign investments and entrepreneurship was encouraged.
Shenzhen was to become a prototype for
economic and urban reform in China. Perhaps
this explains that special Shenzhen-vibe, where
pragmatic regulations and an international outlook is the norm.

Naturally, the startup scene is rather hardware focused. Most of
the successful local startups revolve around “remixing”, addingor altering features of existing products. The presence of
unicorns Tencent, Huawei, and DJI also shapes the ecosystem,
much like Google and Facebook have done for Silicon Valley.
They support the local ecosystem, acquire many startups,

THREE

and entrepreneurs aspire to make products with the goal of

WORDS

OF

REASON

partnering with one of the giants.
•

The level of English spoken
is still higher in Hong Kong.

•

Many co-working spaces and “startup support” businesses don’t really offer support.
They’re just fronts for getting subsidies.

•

Many so-called “incubators” are nothing but
empty coworking spaces with a couple of
3D printers.

Shenzhen is also characterized by strong funding opportunities.
It is part of a special free trade zone that provides extra
support for foreign businesses and gives startups access toventure capital from government funding schemes and private
investors. The city is home to 30% of all Chinese VCs and justaround the corner (literally two train stops away) lies Hong
Kong, one of Asia’s main financial centers, and China’s historicalwindow to the world.
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A

MAIN LEADS
Rapid prototyping and manufacturing are the great
attractions of Shenzhen for Danish early stage startups.
However, the rapid pace of things only benefits theentrepreneurs who already have connections in place andknow where to go. In this section, we highlight threeleads on-site in Shenzhen with strong connections to theNordics specialized in helping early stage startups.

•

Troublemaker is a makerspace that was founded•

HAX is the world’s first and largest hardware accelerator,•

with a competitive 2-stage program that begins with

headquartered in Shenzhen that invests seed capitalCompanies pay a membership fee to get access to theprototyping in Shenzhen and ends in San Francisco,

into Nordic tech scale-ups with upstream production

workspace, which has everything you might need towhere companies are expected to work on businessor downstream market acceleration potentials in China

hack a basic prototype, including CNC machines and 3D

development, fundraising, and growth. They accept

and Asia. nHack typically assists Nordic companies

printers. The space is affiliated with a few factories forcompanies on a rolling basis, who will typically spend

in connecting to the right local partners within rapid

those who are ready for manufacturing. Troublemaker isbetween 4-6 months prototyping in Shenzhen before

prototyping,also an anchor for the international startup community

moving onto the next phase.

and manufacturing. nHack´s team also assists withproductvalue

engineering,sourcing,

in Shenzhen, hosting numerous events and workshops,

contract negotiations, supervision and quality control

and provides consultancy services to companies looking

before product distribution in China or globally, allowing

to, for example, set up local companies or access Chinese

the startups to benefit from the Shenzhen hardware

public grants.

ecosystem without having to establish a presence in

FACTS

ON

SHENZHEN•

Shenzhen is the youngest city in China, withan average age per resident below 30 years.

•

Shenzhen has the highest population of
migrants in China.

•… as a result, Shenzhen is almost empty
during Chinese New Year, as most residents
travel home to their families.

•

Foxconn, the world’s largest producerof electronics, has its largest factory inShenzhen, where 250,000 employees(some say 450,000) assemble iPhones
and Kindle devices around the clock.

•

90% of the world’s electronics are
manufactured in Shenzhen, including
cell phones and TVs.

•

Shenzhen ranks amongst the top 12 upcoming ecosystems (Startup Genome 2019).

•

Shenzhen is the first city in the world with an
all electric bus fleet. Taxis will soon follow.

•

On the soft side, Shenzhen has the highest number of gardens per capita in China,
and its mountains and beaches are popularhangouts.

nHack is a Nordic Venture Fund and accelerator

three years ago by four European expats in Shenzhen.

FEW

China.

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OTHER LEADS
Innovation Lab Asia has established contacts withseveral interesting organizations in Shenzhen thatmight prove relevant for Danish startups. We canfacilitate further contact if needed.

•

Startup Grind is an international startup event with an•

SLUSH Shenzhen held its first event in Shenzhen in

active chapter in Shenzhen that has been running for overAugust 2019, in collaboration with Intebridge. More than

5 years. Hosting both online and offline events, Startup

2,500 tech-savvy experts from corporations, investment

Grind is one of the top ways to meet people working in theagencies, startups, and media will gather in the Pingshan

startup ecosystem in Shenzhen.

High-tech Zone to discuss various topics related to thestartup ecosystem including Medtech, Smart manufactur-•

Tech Temple Tech Temple is a co-working space that of-ing, and Greentech.

fers consultancy services for early stage startups. The
space hosts many startup community events and has a•

UNLEASH is a global innovation lab event, which gathershigh amount of software startups and local entrepreneurs

selected attendees in Shenzhen to collaborate on tangible

as well as many foreign companies. Every May, they hostsolutions to meet the UN Sustainable Development Goals.

the Global Entrepreneur Open Platform Summit, which

The event covers all travel expenses for those who are ac-

helps international companies connect with services that

cepted and is geared specifically at young entrepreneurs,

can help them scale into China.

people thinking of launching a company, and top academics interested in entrepreneurship. The application portal•

Brinc Brinc is a reputable hardware accelerator that fos-

for the 2020 iteration opens in March.

ters startups through the prototyping phase and helps
scale companies into China and the Middle East.
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OTHER GATEWAYS &ACCESS POINTS•Startup Salad is an international organization that acts as
an “innovation center” in each of their chapter cities, andthey are extremely active in the Asian region. Their primary event is a 52-hour hackathon with combined innovation
activities and innovation courses. Though they do not invest or incubate projects, they help serve a lot of “wannabe
entrepreneurs” looking to test their ideas before making
the jump into starting a company.

•

Startup Weekend forms part of a global event series witha chapter in Shenzhen. Startup Weekend mainly focuses onconnecting novice entrepreneurs with mentors from thestartup community. The event is supported by Techstars,
who help source mentors.

•

InteBridge is a government agency focused on bringing
overseas companies to Shenzhen. They host the office of
the China Europe Innovation Center, and organize numerous events and startup competitions that have both local
and international participants. For entrepreneurs landingin Shenzhen from abroad, they can provide free services
helping companies get information about China’s business
policies.

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STRONGHOLDS& OPPORTUNITIES

Shenzhen is often called the “Silicon Valley of hardware”.
There’s hardly an electronic component that can’t be acquired
here rapidly, and as a center for mass production, Shenzhen isunrivaled. Hardware production is therefore Shenzhen’s absolute major stronghold, and is the focus of this report.
In doing so, we disregard the numerous other opportunities
that exist in the China Bay Area, both in terms of funding andmarket access.
However, startups going to Shenzhen to access a cheap andrapid prototyping ecosystem may find reasons to continue toengage with the region as a springboard for growth both inChina and globally. Shenzhen can be seen as a path not justfor product prototyping and iteration, but as the first step in acomplete global manufacturing setup.

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THE CONCEPT OF SHANZHAIHARDWARE
MANUFACTURING•

Shenzhen’s interstellar growth within hardware manufac-•

Shanzhai refers to counterfeit consumer goods,
including imitation and trademark infringing
brands, particularly within electronics•

Shanzhai literally means “mountain stronghold”
and refers to regional warlords or living outside
official control•

Producing low-cost imitations was the original
driver behind the tech ecosystem of Shenzhen,
and the culture lingers on•

A more positive version of Shanzhai is “openinnovation”, where the maker’s community
actively modifies and improves inventions byothers

The hardware industry of Shenzhen has an endless range

turing builds on long term planning by the Chinese gov-of subsectors. Some of the strongest and most famous

ernment and tremendous support from the public sector.

include Drones, Robotics, Wearables and Advanced Manufacturing but perhaps the all-encompassing nature of the••

The biggest attribute of Shenzhen’s hardware industry is

sector is more telling than highlighting the specific sub-perhaps its unparalleled speed in moving from blueprint

sectors.

to product. The manufacturing processes are extremely
efficient and optimized to accommodate all types of elec-•

In recent years, Shenzhen’s hardware industry has shiftedtronic hardware. Add to this a great deal of flexibility, start-

its focus. Home to some of the world’s largest tech com-

ups have a fast and cheap way to test and modify theirpanies, product and manufacturing innovation is a major

hardware.

priority. Products are now also being designed locally withsome of the most advanced manufacturing technology to•

Shenzhen has a favorable location in terms of its hard-

be found in the world.

ware industry. There are several satellite cities within a
few hours’ drive that each specialize in supplying certain
components and raw materials quickly and at a low cost.
In total, there are more than 500,000 individual component manufacturers in the supply chain of Shenzhen.

2223THE HISTORICACCESS POINT
HONG KONG

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Hong Kong is the historic bridge between China andEurope, and a key access point to other Asian markets.
Many European companies prefer locating here rather
than mainland China, as it’s often considered a safer
and more transparent location from which to access the
Chinese market.

Hong Kong has excellent infrastructure and fast internet, and you

From a cultural point of view, Hong Kong may seem more familiar

can register as a limited entity and open a bank account remote-than mainland China. There is a high number of expats living inly. Perhaps most importantly, Hong Kong has a legal system thatHong Kong, and most people speak English. In fact, the local start-

partially originates from the English legal system, making it easierup ecosystem in Hong Kong is mostly driven by foreigners, manyfor foreign companies to navigate. IPR is also considered stronger

of whom have chosen Hong Kong as a market access base, or asthan in mainland China.

a logistical hub for shipping or E-commerce.

However, the Chinese government is increasingly providing effec-

Being a financial center, there is no shortage of funding in Hongtive IP protections, and many concerns raised by foreign compa-

Kong, but HNW (High Net Worth) individuals here still prefer tradi-nies have now been addressed through new legal reforms, leading

tional investments, and there is less VC capital available here than

to a growing number of foreign companies opting for Shanghaiin Singapore. Nonetheless, in 2019, Startup Genome ranked Hongover Hong Kong.

Kong as one of the best emerging startup ecosystems.
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LEADS IN HONG KONG
There are many respected global accelerators, incubators and VCs based in HK, including 500 Startups,
Betatron, and Techstars. This section introduces two
important stakeholders.

•

The Nordic Innovation House Hong Kong provides workspace, knowledge, and network to the entire China Bay Area, and can connect you to relevant
ecosystem stakeholders. The house also helps maketailor-made programs for visiting companies. Membership is open to startups at any stage from all Nordic countries and costs approximately USD 130.

A SHORT NOTE ON IPR•

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China has a reputation for weak IPR, but there isreason for optimism. China is becoming a global
innovator and is now more interested in protecting IP for both domestic and local entrepreneurs.
Also, a bad reputation within IPR has madeit harder for China to attract talented foreign
entrepreneurs. Chinese IP laws are improving,with new enforcement mechanisms available toforeign companies.

•

StartmeupHK (InvestHK) offers free advice and services to support companies planning to land in Hong Kong
even at early stages, and works as a portal for startup
events, grants, and other business services. StartmeupHK
is a publicly funded initiative, and meant to be a one-stopshop for startups landing in Hong Kong.

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This report has beendeveloped by

In a collaboration
betweenWith support from

Asia House
28|

Indiakaj 16, Copenhagen|www.innovationlabasia.dk|

hello@innovationlabasia.dk