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China's tech push gathers momentum

AAP logoAAP 13/10/2016 Prashant Mehra

A south western Chinese city, best known for its wildlife and cuisine, is turning into a hotbed of start-up activity since a project to support budding businesses was launched last year.

More than 200,000 companies have mushroomed in Chengdu, the capital of China's Sichuan province, since the launch of 'Venture Tianfu' in February 2015.

Under the initiative, local authorities offer grants of up to CNY1 million ($A190,000) to innovative entrepreneurs. The city also provides tax incentives and covers the cost of renting offices, while promising start-ups and companies that support them become eligible for further subsidies.

Further government subsidies are offered to promising start-ups and to companies that buy products from these start-ups.

"There is a lot of government emphasis on developing internet and technology services. We have seen a very obvious change in business since we moved here," says Wen MingJun, co-founder at animation company Tinman Technology, which moved to the Thinkzone tech park two years ago.

The state-backed focus on technology is reflective of a broader push across China into the services sector, amid slowing manufacturing growth. Jobs in technology companies, for instance, are helping replace losses of manufacturing jobs.

According to statistics reported in media, the number of manufacturing workers in Chengdu fell 7.7 per cent to 2.89 million in 2014 , even as employment in the services sector rose 8.8 per cent that year.

Entrepreneurs are also being drawn by lower wages - often 30-40 per cent cheaper compared to eastern centres like Shenzhen and Beijing - as well as a steady supply of graduates from Chengdu's colleges and universities.

Co-working business Work+ set up shop at the Thinkzone tech park late last year.

Itself a start-up, the company offers working areas, conference rooms and dining areas to other fledgling businesses. It also takes care of administration, accounting and HR services for them.

Such is demand, a company executive says, that within six months of starting operations, 48 companies have signed up and more than 800 of its work spaces are already occupied. It now plans to expand to other Chinese cities.

The start-up boom is helping prop up Chengdu's economy, which grew 7.5 per cent in the first six months of 2016, according to government officials.

Chengdu already boasts of a strong connection to the information technology industry. Nearly half of all laptop chips in the world are estimated to be manufactured here, and more than 260 Fortune 500 companies have a presence in the various industrial parks dotting the region's landscape.

Last year, the city found itself in the spotlight as a geographical link between two of China's major economic development initiatives.

That means it is eligible for funding under President Xi Jinping's One Belt-One Road policy - which seeks to develop cities along the old Silk Road route to Europe, as well as under the Yangtze River Economic Belt plan - which will develop trade and transport hubs along China's longest river.

The city is targeting a sharp expansion in the value of the services sector and retail trade as it prepares to grow into the largest transport and logistics hub in western China.

Those ambitions are being given shape through the Chengdu Tianfu New Area project - a national-level industrial complex under construction just outside the city precincts.

Its centrepiece is a new 'science city' spread over 25 square kilometres that will house dozens of office buildings for tech firms, residential areas, a huge convention centre and a trade show building.

Companies from Europe, South Korea and Singapore have already signed up to come to the area, officials said. While some buildings are nearly complete, the complex will be fully operational by 2020.

"Although China will remain a big exporter and continued urbanisation means there is still significant infrastructure investment needed, more growth is now starting to come from China's services sectors," HSBC economist Paul Bloxham noted in a report last November.

The services sector accounted for 51 per cent of China's economy in the first three quarters of 2015, while secondary industries such as manufacturing and construction only accounted for about 43 per cent, the HSBC report found.

That presents growing opportunities for Australia's services sectors, given its on-going strong economic ties to China, it said.

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