Hangzhou is the city of DeepSeek, Alibaba and Unitree without any of the typical Silicon Valley ingredients. His secret is another
Hangzhou, a city of 12 million inhabitants 180 km south of Shanghai, is home to a striking number of powerful technology companies: Seven reference technologies (the six ‘little dragons’ plus the giant Alibaba) in a city that does not have any of the elements considered essential in Silicon Valley: Abundant venture capital. Leading universities. Links between university and industry. And a robust industrial structure. How could you then Hangzhou emerge well? The facts. Venture capital is plummeting in China. Funds in yuan have fallen from 88.42 billion dollars in 2022 to 5.38 billion in 2024. Funds in dollars, from 17.32 billion to 750 million. Hangzhou has not been a major recipient of investment until last year, when its province –Zheijang– stood out with 41 new corporate venture capital funds. But it was only after Unitree or Game Science had gained national attention. Missing. Hangzhou has only one elite university – Zhejiang – compared to 26 in Beijing, 11 in Jiangsu or 10 in Shanghai. The admission rate at Tsinghua and Beijing Universities for students from the capital (0.85%) is almost ten times that of students from Zhejiang (0.09%). None of the founders of “the six little dragons” or Alibaba created their company directly from university. Liang Wenfeng founded High-Flyer, the hedge fund after DeepSeekeight years after graduating. Jack Ma was rejected for 30 jobs after finishing his studies. Yes, but. The city has innovated by doing away with those ingredients. The explanation offered by Zilan Qian, a researcher at the Oxford China Policy Lab, points out ChinaTalk to “flexible governance”: a model where officials adopt “waiters” and “babysitters” mentality that facilitate rather than control. The context. Hangzhou does not have the political, financial or industrial importance of first-tier cities, which has given it greater local autonomy to shape its technology sector. Zhejiang province was a pioneer since the 1980s in promoting private enterprise during the early phases of Chinese economic reforms. Jack Ma He tried to establish Alibaba’s headquarters in Beijing or Shanghai, but failed due to the cost of rent and bureaucratic barriers. In 2015, Ma explained her decision: “Beijing favors state-owned enterprises, Shanghai favors foreign companies, and Alibaba was nothing in their eyes. If we return to Hangzhou, we become the local only child who receives all the attention and support.” Hangzhou is part of the sometimes called “chinese technology triangle“(sometimes also”golden triangle“) along with Shanghai and Shenzhen. More than a geometric reality, the functional metaphor describes the complementarity of three cities: Shenzhen provides industrial capacity and hardware. Shanghai concentrates finances and internationalization Hangzhou stands out in the internet, AI and an ecosystem favorable to private companies. Each vertex of the triangle has different strengths that, combined, generate an ecosystem where geographical proximity facilitates collaboration and flow of talent between the three poles. Between the lines. The model is described as “market-oriented” but maintains a level of centralized governance. The Hangzhou government sees quality of life as a strategy to attract businesses and talent, but positions itself as an enabler, not a controller. The absence of state-backed research institutes and a strong industrial base contributes to the government’s humble attitude. If Hangzhou were more strategic or more industrial, DeepSeek might not have had the creative space to emerge and provoke the earthquake that caused in January. The narrative of “self-made industry” and “entrepreneurial bureaucracy” admits conflicting readings. What some interpret as facilitation, others read as a euphemism for “dirigiste intervention by the State”, with a very defined plan of action and long-term objectives. “Flexible governance” can be both real local autonomy… and dirigisme disguised as pragmatism. At least it is no longer “a city south of Shanghai” but “Alibaba City” or “DeepSeek City”. In Xataka | China is selling us a future full of humanoid robots. We have (many) doubts Featured image | JinHui CHEN in Unsplash
