Staid Shanghai seeks to reinvent itself as innovation capital

The coastal city built its wealth on banking, finance and heavy industry. Now it’s trying to hitch itself to the hi-tech train driving the new economy

PUBLISHED : Friday, 05 August, 2016, 2:02am
UPDATED : Friday, 05 August, 2016, 2:17am

For all its fame and sheer size, Shanghai – once known as the Paris of the East – is a surprisingly conservative city that made its wealth the old fashioned way: through heavy industry, banking and finance.

It long ago passed the baton of innovation and new technology to southern upstart Shenzhen and even Beijing. So it may seem strange that this somewhat staid city is officially pinning its hopes becoming a centre of entrepreneurship and creativity.

Not so for Echo Lu, who recognised an opportunity in the strong spending power of local residents.

People here want to chase the easy life ... This culture provides opportunities for people like me
Echo Lu, app developer

“People here want to chase the easy life,” she said. “They enjoy their beer and skittles. But this culture provides opportunities for people like me.”

Lu developed a mobile app to take the pain out of getting a haircut in a city where there are long queues at salons and appointments are out of the question.

Her app, named Pumpkin Coach “so every woman can be Cinderella”, links customers to a network of more than a dozen salons in Shanghai and nearby Hangzhou to make appointments with their favourites stylists. Lu insists that her stylists offer fair prices and shun VIP memberships and other scams.

Is China’s innovation boom producing too many useless inventions?

The fact that Shanghai has fewer academies and universities than Beijing, or as many innovative firms as Shenzhen, has not stopped it embarking on an ambitious plan – approved by the State Council earlier this year– to become a “globally influential centre for technological innovation”.

One of its ways to achieve this is to move the booming “life service sector” – services that cover day-to-day living needs such as education and food and haircuts – to the online realm.

Lu’s company was among dozens listed in Changning district in a new pilot scheme called “Internet+ Life Service”.

Shanghai’s great advantage is its demand for life services
Echo Lu, app developer

“Shanghai does not have many preferential policies for entrepreneurs, but its great advantage is its demand for life services,” Lu said.

On average, 60 per cent of Shanghai residents’ total spending goes on life services, similar to Europe and North America, according to the city government.

But because Shanghai lacks such big names in technology such as Shenzhen-based Huawei and Beijing’s Xiaomi, it is often criticised for missing opportunities in emerging industries.

An innovation index of mainland cities compiled by the Guangdong Academy of Social Sciences in March ranked Shenzhen first ahead of Beijing, but both placed well ahead of third-placed Shanghai.

“Shanghai people tend to abide by rules … the atmosphere here is not as free,” Professor Dai Xingyi, deputy director of Fudan University’s Urban Development Institute, said. But these same qualities also made the city a good place for technological and scientific research, he said.

Chinese province Guangdong raises R&D target, turns to innovation to revive economy

In 2014, President Xi Jinping ordered Shanghai to make itself a globally influential centre for technical innovation. As a result, under the internet and life service plan, 3.8 per cent of the city’s gross domestic product was earmarked for R&D by 2020, by which time “strategic new industries” would contribute 20 per cent to GDP. Last year, the percentage nationwide was 2.1 per cent of GDP.

The city declared the Zhang­jiang area in Pudong district a national science centre, with major scientific projects in energy, biotechnology an advanced manufacturing its priority.

But the city is also facing major challenges that are shared with other cities in the Yangtze and Pearl River deltas.

Smaller enter­prises, which typically started from low-end sectors and had been the pillars of both deltas’ economies, were not upgrading of their businesses amid the innovation drive, said Gao Xudong, a Tsinghua University professor specialising in innovation and entrepreneurship.

“You see more and more SMEs leaving China to find the way out, instead of [staying and] moving upward by improving their brands or technology,” he said.