Xu Weihong: Creating More "Innovative Urban Economic Ecosystems"

In 2026, the government work report first proposed “creating a new form of intelligent economy,” integrating elements such as artificial intelligence, computing power, and data systematically. It emphasizes new concepts like intelligent agents, native intelligent business models, open-source ecosystems, collaborative computing and electricity, and public cloud, making the approach more specific compared to the 2025 “AI+” proposal. Notably, in terms of the innovation system, the 2026 government work report places greater emphasis on original innovation and tackling key core technologies, rather than simply strengthening one aspect. The report also suggests building international science and technology innovation centers in Beijing, Shanghai, Guangzhou, and Shenzhen to develop world-class sources of technological innovation.

These top-level designs strongly resonate with the industry boom in China’s artificial intelligence sector since the Year of the Horse. After the Lunar New Year, when the YuShu robot flooded domestic and international media, Shenzhen’s “AI Eight Horses” became a hot topic again, with tech products in Huaqiangbei seeing over 30% higher sales during the Spring Festival holiday compared to usual days. Public opinion has thus focused on China’s “innovation city economic ecosystem,” with increased attention on who will become China’s next “City of Innovation.”

Building a clearly divided regional economic ecosystem has been a continuous national strategy since China’s reform and opening up, and a development blueprint that has been repeatedly mapped, updated, and refined in government work reports over the years. Whether it’s the ongoing effort to create a unified national market or establishing a multi-level capital market with a clear “righteousness and profit” outlook, the country leverages the invisible hand of market economy—optimizing resource allocation and harnessing regional advantages—to cultivate modern urban clusters and economic groups with clear specialization and balanced competition and cooperation. Based on this, the state encourages advantageous cities, especially front-line open cities along the southeastern coast, to actively venture into cutting-edge scientific fields through industry-university-research integration and participate in global competition. At the same time, it promotes state-owned assets to skillfully use capital markets to participate in product and model innovation by private enterprises, providing local governments with greater policy support and space to build “cities of innovation.”

Ultimately, the core of an “Innovation City” is innovation, rooted in the foundational research capabilities in frontier fields. The research infrastructure of universities and colleges in each city constitutes hard power. This is why Beijing and Shanghai, the earliest cities to develop an innovation industry ecosystem in China, are the leading examples: since the planned economy era, they have been the national economic centers with the most universities and research institutes. Notably, Hangzhou, which has developed rapidly over the past 20 years, and Shenzhen, which has continuously deepened its innovation efforts, have each seized world-class innovation opportunities in humanoid robots, AI, and other fields from the competition among Yangtze River Delta and Pearl River Delta cities. The key lies in their long-term investment in basic research.

Taking national laboratories as an example, Shenzhen has consistently invested heavily in attracting multiple national and provincial-level research laboratories. In November 2024, the Shenzhen Science and Technology Innovation Bureau issued the “Shenzhen Key Laboratory Management Measures,” which aims to optimize and improve the key laboratory system, promote the transformation of scientific and technological achievements, and continuously enhance the “hardcore” strength of technological innovation and industrial competitiveness. The Pearl River Delta region hosts several world-class manufacturing cities; not only Guangzhou but also Foshan, Dongguan, and others are trillion-yuan GDP hubs with significant global influence. Shenzhen’s sustained innovation in the real economy and AI application scenarios heavily relies on its research advantages in frontier basic sciences.

Beyond research capabilities, the efficiency of transforming inventions into products is fundamental to an “Innovation City.” How to convert research results from laboratories into competitive products on factory production lines is a critical area of economic competition and a key goal of industry-university-research integration. Whether in the founding and development of Silicon Valley or China’s practice over more than 40 years of reform and opening up, the best route for transforming inventions is under the national science and technology industrial development strategy: encouraging state-owned capital at all levels to actively participate, motivating private entrepreneurs, and creating highly liquid stock markets to form a healthy, active, multi-tiered capital market. This approach enables angel funds and venture capital to proactively participate in the transformation of inventions, continuously contributing leading tech enterprises to society.

Many characteristic cases of this risk investment ecosystem exist in China. State-owned capital enterprises in Hangzhou, Shenzhen, Suzhou, and Hefei are experts in this field, driving the transformation and upgrading of local state assets. For example, Hangzhou’s state-owned capital has a clear principle: “Intervene when markets fail or guidance is needed, and respect market entities at other times.” Especially after 2008, during the impact of the global financial crisis, Hangzhou, known as the “Venture Capital City,” faced financing difficulties for many tech companies. To address this, Hangzhou increased efforts to establish government-guided funds and Hangzhou Bank’s science and technology branches, providing financial services such as equity investment and bank loans to help tech startups overcome difficulties. With solid funding support and market-oriented mechanisms, Hangzhou has seen the emergence of more “post-90s” and “post-00s” entrepreneurs, leading to a cluster of innovative companies like “Little Dragon,” “Little Tiger,” and “Little Antelope” in recent years.

Looking ahead, Chinese companies are fully integrating into the global market, and the Belt and Road Initiative calls for more “Cities of Innovation.” The Chinese model of “state-led science and technology innovation ecosystems, creating fertile ground for tech startups, leveraging capital markets, and forming advantageous industrial clusters”—exemplified by Shenzhen, Hangzhou, and others—has matured over decades and is worth actively promoting.

At the national level, reforms will continue to deepen in areas such as issuance and listing, mergers and acquisitions, and equity incentives, guiding resources to accelerate toward innovation fields, and forming a Chinese tech innovation board with reasonable valuations and active liquidity. This will strengthen the role of patient capital, represented by local state-owned assets, in empowering technological innovation, and attract more private capital and private equity funds to participate in the incubation, acceleration, and promotion of invention results. Consequently, this will promote coordinated development between local state-owned assets and listed companies, led by leading enterprises or hidden champions, fostering a vibrant scene of collaborative innovation among upstream and downstream enterprises, research institutes, and other stakeholders. (Author: Chief Economist of the China Invention Achievement Transformation Research Institute)