Shenzhen … ‘China’s Silicon Valley’ opens to Edinburgh companies

A state-of-the-art suite of offices in one of China’s fastest growing technology cities is to be offered rent free as an ‘incubator’ for Edinburgh-based creative and tech companies looking to break into the world’s second largest economy.

Shenzhen, which has a population of 12 million and borders Hong Kong, will become a hub for companies based in the capital looking to find new market opportunities in the most populous country on the planet.

Five members of one Edinburgh-based company, Sensewhere, will be among the first to take up space at the 78-desk 101 Creative Exchange building, in the ‘F518 Idea Land’ business district.

They have developed specialist indoor geolocation software, which allows location mapping through wifi or bluetooth where GPS signals are poor.

The company has signed a strategic partnership deal with Chinese internet giant Tencent, which will embed the software in its mapping tools. Sensewhere joins SpotSensor, LiveCode, and Biomorphis, who have already taken space at the incubator.

Companies from Edinburgh who consider migrating all or part of their business to Shenzhen are to be offered a range of incentives. They will be given intensive support on the ground from a local four person team employed by the private investor backed Shenzhen Creative Investment Group, which will help them to get established in their new community.

The fully-furnished, modern offices feature 100mb high speed internet connection, free wifi, a conference room, drawing room, and kitchen.

A one-stop consultancy service including advice on policy, investment and financing, legal affairs, financial management and intellectual property rights will also be at occupants’ disposal, as will business coaching, training and low cost transport services, including free maritime shipping.

The rent-free deal, over two years, is being reciprocated by Edinburgh City Council, and as part of the agreement seven Chinese companies are set to move into the Creative Exchange incubator in Leith on September 15.

The mutual exchange is the culmination of two years worth of work by both Edinburgh City Council and Chinese municipal governments, first in Beijing where the proposal was lodged through the Scottish Affairs office of the British Embassy, and then in Shenzhen.

Wendy Liu, the Senior Economic Development Officer at Edinburgh City Council who has driven the programme, says the initiative was fuelled by an ambition at Scottish Government level to promote trade between Scotland and China.

That objective was backed by a visit by Scottish international development Minister Humza Yousaf in June 2o13, who oversaw a memorandum of understanding signed between Edinburgh’s Lord Provost and his Chinese counterparts.

The facility includes 78 desk spaces, offered to both local companies and those from Edinburgh

The facility includes 78 desk spaces, offered to both local companies and those from Edinburgh

Edinburgh was already twinned with Xi’an in the North of China but that did not provide the right ‘fit’ in terms of the creative and technology sectors, as Wendy explains: “I visited a number of the cities and cross referenced sector strengths of all the cities with Edinburgh, and I thought Shenzhen was probably the ideal city for Edinburgh to link up with and do something.

“Shenzhen has been a Special Economic Zone since the 1980s, so it has a lot of preferential treatment and there a lot of private businesses in Shenzhen, more than in any other city in China.

“It is also a very tech focused city; it started with electronics manufacturing and telecommunications and China’s two largest tech companies are now headquartered in Shenzhen, and all the internet companies like Tencent are based there.

“Here in Edinburgh we sometimes see the creative sector include some sort of tech as well, so I think there is a really good match between Edinburgh and Shenzhen.”

Shenzhen is a remarkable story of economic growth and urbanisation: its surrounding hills have been levelled to make way for a continually expanding urban sprawl; it is also one of the largest ports in the world, and its ability to manufacture high quality, high-tech products and ship them to global destinations within hours, has driven phenomenal growth rates.

Just 45 years ago Shenzhen was a sleepy fishing village with 30,000 inhabitants but it has grown to a city of over 325 times that now. Its GDP in 2013 surpassed $230 billion and the city – where Apple locates its iPad and iPhone manufacturing arm – was ranked second on the list of China’s best cities for business by Forbes magazine.

Shenzhen's population has multiplied 325 times since the early 1980s and is now one of the wealthiest cities in China

Shenzhen’s population has multiplied 325 times since the early 1980s and is now one of the wealthiest cities in China

That focus has also led Edinburgh product designers 1PartCarbon to visit last month as it seeks a manufacturing partner for one of its designs, after receiving a major order from a client.

“Shenzhen is perfect for that kind of thing: you can get all your electronics components within an hour’s distance of Shenzhen and you can get the manufacturers to put everything together,”adds Wendy. “But you do need somebody on the ground to oversee quality control, to check and manage the quality.”

Having boots on the ground is a thought echoed by Adam Foster, whose Edinburgh-based company Digiology is also dipping its toe in the water of the Chinese market. The digital marketing agency was asked by Newcastle United in January 2014 to film its players saying Happy New Year in Chinese to celebrate the Chinese New Year, the Year of the Horse. It was part of a marketing campaign which saw the club and its Chinese sponsor reaching out to Asia; the video featured players and coaching staff and was distributed both in mainland China and in the UK.

The campaign attracted 45,000 views and generated over 12,500 unique visitors in a four-week period on the popular YouKu and Tudou sites, Chinese equivalents to YouTube which have more than 500million registered users.

The video also featured on Digiology’s WeChat (an instant messenger service similar to What’s App but which offers much more, including the ability to pay for services, buy movie tickets and order taxis) and Weibo accounts (Weibo is China’s version of Twitter, and has more than 500million monthly users). As a result of the campaign – and having made new contacts and connections in China – Digiology is in the process of launching its own Chinese digital marketing agency for Scotland.

Adam says: “There’s three barriers you need to overcome if you’re going to make it work: you need a good, solid partner on the ground; you’ve got to deal with the digital and technology aspects of business out there, in terms of how they like to see stuff displayed, e-commerce wise, and finally the cultural aspects of doing business in China.

“And you need to have feet on the ground over there; certainly there is stuff you can deal with remotely from here. But we have partnered with a company over there and if you’re selling anything you still have to go through the motions of being officially approved. It’s not easy and entry into the market is complicated.”

Edinburgh companies seeking support can contact Wendy or check out @InvestEdinburgh on Twitter. There are other support mechanisms as well; the China Britain Business Council (CBBC) has long been established as a membership organisation which delivers government trade services in China, and operates across the UK to support companies doing business in China. It has 85 member companies in Scotland and 13 offices throughout China, with a largely bi-lingual staff that can help firms get a foothold in the Chinese marketplace, which can be complex to navigate.

James Brodie, who manages the Edinburgh office for the CBBC, is a Mandarin speaker and has worked extensively in China. He says companies serious about doing business in China can benefit from a range of advice, consultancy and marketing services.

“If they have got a strong business proposition and want to get to market, and have got the budget to develop, then we look at commissioning market research,” he explains.

“That market research can be anything from visiting supermarkets to look at what retailers are doing, running a focus group, trialling products, to phoning up industry experts, to looking at potential obstacles for market entry.

“We take all of that research and try and build a brief that will meet expectations.

“At the end what comes out is a report, which will collect together all that information, including market stats and information, as well as some indication of what are the chances of success.”

The CBBC also assists with regulatory research to see whether a particular product or service is viable. If all of that is positive the next level is to look for a distributor or partner in China, as well as to help with the appropriate translation of materials. Brodie says companies should be under no illusions, however, and that the market is “really tough”, especially the tech market which does not have the branding advantages of distinctly ‘Made in Scotland’ products like Scottish Salmon.

Adam insists, though, that the CBBC has been a great help to his business, enabling him to get a feel for the Chinese market.

“It’s a bit unfortunate in that it sounds like Cbeebies but it’s been fantastic for us. It was hard because we’re the only digital marketing firm to my knowledge doing this in Scotland, but they’ve been a great help. They help set you up for a trade mission and things like that. But for us the big thing will be a digital marketing conference in Beijing later this year.”