Is Shenzhen the new Silicon Valley?

ZTE boss Shi Lirong tells Linda Yueh about China's future in innovation

Three of the five largest mobile handset companies in the world are from one country and it's not the US.

Shenzhen-based Huawei, Lenovo and ZTE are Chinese companies that rank alongside Ericsson and Samsung.

And it's not just volume of sales. ZTE has been the most innovative company in the world based on international patent filings over the past three years, totalling some 50,000 patents last year.

So, could Shenzhen in China surpass Silicon Valley?

Shenzhen is a short distance from Hong Kong. Once a fishing village, now a massive tech hub rivalling the original in California.

It's not just the big players; there are 6,000 handset manufacturers in Shenzhen.

Spending more

This area produces the majority of the mobile phones in China, and China produces more than half of the 2.5 billion phones sold around the world annually.

That's equivalent to half of all of the adults on the planet who buy a new handset each year.

Research and development (R&D) spending in China has certainly increased rapidly, rising by over 20% a year in the past couple of years.

As a result, China now spends around $300bn (£182bn) a year, compared with a US spend of $450bn, and it is estimated to surpass Europe by 2018 and the US by 2022.

Of course, it's not just what is spent or patents filed that determines innovation. It's how useful these inventions are. And that's where there isn't the data yet.

In an exclusive interview, ZTE president Shi Lirong tells me that irrespective, his firm spends 10% of revenues on R&D.

Data risks

He says that they need unique technology to maintain market share and require innovation to keep their customers.

Plus, Chinese firms may be large, but they are not global household names.

Part of the reason is that they are restricted in the world's biggest market - the US.

On a daily basis, we all use our mobile phones to talk, text and send emails.

All of that equates to gigabytes of data being sent everyday - data that could end up in the wrong hands.

That perceived risk has led the US government to largely ban tech companies from China from taking contracts in areas like government procurement due to national security concerns.

Nevertheless Chinese firms now jostle with American and European ones in terms of being the largest global companies.

But it takes time to see if a nation is truly innovative - whether Shenzhen can rival Silicon Valley.

If China succeeds, then it will mark a key chapter in the shift of economic might from West to East.

Linda Yueh Article written by Linda Yueh Linda Yueh Chief business correspondent

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