How Beijing innovates: Lessons from China’s market-state hybrid model
If the conventional wisdom about innovation is that it is best left to individuals and private enterprise — and the best thing a government can
If the conventional wisdom about innovation is that it is best left to individuals and private enterprise — and the best thing a government can do is get out of the way — that is certainly not the thinking in Beijing. How innovation happens in Beijing offers a snapshot into China’s model in which research universities, start-ups, the market and the state all have a role to play. The Chinese capital has always had the country’s most important cluster of research universities, with Peking University and Tsinghua leading the list. It is also home to several cutting-edge robotics and AI companies, including Moonshot, which was started by graduates of Tsinghua and made waves over its latest Kimi K3 open-source model. “A closed loop from project discovery to incubation” is how Yang Xiuling, who as the Director General of the Beijing Municipal Commission of Development and Reform leads the city’s top economic planning body, describes the ecosystem. “Our greatest strength,” she says, “is talent and the concentration of top research universities.” The challenge that then follows is how to leverage that talent, or, as she puts it, “how to move results out of the lab”. The gap between translating early research into commercially sustainable ventures is known as the “valley of death” for innovation. To cross that valley in Beijing, the state steps in. Beijing’s Zhongguancun research cluster is at the forefront of tech innovation in China, along with clusters in Shenzhen, Shanghai and Hangzhou. A strong undercurrent of competition underpins the national innovation ecosystem, especially when it comes to attracting and keeping talent.
To deal with the “valley of death”, Beijing set up what it calls “an intelligent platform for results commercialisation” led by a group of tech managers, who, Ms. Yang says, “are a bridge because they understand both the tech and the market”. In 2025, the city’s platform executed 1.04 lakh tech contracts. “Markets and companies are still at the centre,” Ms. Yang says. “But the way we look at it is that the companies pose questions, and the universities can provide answers. The companies still play a key role in R&D and in taking the lead in collaborative research with institutions”. The universities provide the foundation from which the rest follows, says Zhang Jihong, who is a Director at the state-run Zhongguancun Science Park. “It’s the universities that have helped incubate a number of high-tech enterprises,” he says. “We have formed a virtuous cycle where the universities produce talent, the talent provides intellectual support for innovation, and innovation again reinforces the growth of universities.” The state as investor The state’s role here is twofold. It provides the hard infrastructure, as seen in the science park and a number of incubators littered around Zhongguancun. More importantly, it also provides capital, not only linking start-ups to private venture capital (VC) but also stepping in with state-backed capital to help bear some of the risk. The state taking a direct stake in companies is a unique feature of this ecosystem. The upside is it helps bear losses and allows for the longer-term, patient kind of support that VC might not afford.
The BriefWire