HK lags behind mainland cities such as Chengdu when providing support in finance, premises and from academia. But the SAR's financial system and global stature are still a draw for top talents, writes Carrie Qiu.

If you walk into the headquarters of Tap4fun in Chengdu, Sichuan province, you will see that each employee is furnished with a Herman Miller Embody chair. Their desktop computers are either Dell Alienware or iMac. In the dining area, there is a pool table, and next door, a gym.

Tap4fun, one of China's first mobile online game developers which now has over 400 employees, started with a staff of 10 in 2008, and went on to develop global hits like Galaxy Empire. In 2011, Galaxy Empire ranked No 1 among the Apple App Store's top grossing apps, covering 15 countries and regions. The game held on as top dog in the United States into 2012.

A new research and development lab is under construction. It is named Tesla Lab, after Nikola Tesla, the inventor of the alternating current electricity supply system.

Company CEO Stan Xu Zizhan confessed to emulating Silicon Valley, the San Francisco innovation hub known for its overflow of tech startups.

The company's apps target US and European markets, Xu says, but the company will never leave Chengdu. The low cost and high-quality living standards are just too good for them to contemplate moving.

Tap4fun is a graduate of the incubation program at the Chengdu Tianfu Software Park, one of the first science and technology parks in the country. The company's headquarters is still located in the park.

His monthly rent is 30 to 50 yuan (HK$36-59) per square meter and there is a management fee of 6 yuan per square meter. Added up, a 50-square-meter office costs 1,800 to 2,800 yuan a month in the park.

Such support is where Hong Kong lags behind in the global drive for dominance in innovation and technology, believes Zhou Tao, professor and director of the Web Science Center at the University of Electronic Science and Technology of China.

"Government support (for startups) is essential, including startup funds, tax incentives and rent subsidies," Zhou said.

Zhou, 35, now CEO of a group of companies, held forth on what motivated him to come home to Chengdu and how Hong Kong might do better in one area of management that concerns cities of the world over - how to encourage and retain top talents.

Zhou's ideas are based on his own experience. In 2012, the doctoral graduate of the University of Fribourg, Switzerland, opened his company, Union Big Data, in Chengdu. It is a big-data analysis company providing services to businesses, hospitals, recruitment agencies and governments.

Funding support

Throughout the first three to four years, Zhou gradually received 7 to 8 million yuan in government funds, which allowed Union Big Data to expand into a group of companies with different target markets in less than five years. The corporate group now consists of more than 10 companies, with over 2,000 staff nationwide.

"What the Chengdu government did really paid off by attracting several overseas talents to return," Zhou said.

He thinks Hong Kong's program for attracting raw talents doesn't match up.

The Hong Kong Science and Technology Park in Sha Tin has been criticized for its high rents. Many observers ask whether startups can survive once their rent-free period is over owing to the high rent imposed in the park.

According to HKSTP's official website, the monthly rentals are HK$269 per square meter, with an additional management fee of HK$73 per square meter. That's HK$17,115 per month for a 50-square-meter office - five times higher than Chengdu.

Both parks have similar programs, offering rent-free office spaces to startups for up to a year. Both have space for 250 startups.

Startup funding in the two parks is markedly different. HKSTP's investment ceiling is HK$240,000 for biotechnology companies, HK$60,000 for web/mobile application technologies, and HK$180,000 for other technologies. Tianfu offers up to 5 million yuan for any worthy startup.

Some, including Zhou, think Hong Kong could do better, saying the support offered to startups at HKSTP doesn't go far enough.

"One year (rent-free) is barely enough to complete R&D. There is a gap between the time startups start paying rent and the time they start making profit," said Rex Lai Tat-shing, founder and CEO of iMasteRoom, Hong Kong's first online professional learning platform.

Lai, 28, went into business in 2014 and moved into HKSTP a year later, where he took advantage of the free rent and the waiver on the property management fee. After that he had to pay full fare, roughly HK$355 per square meter a month.

Hong Kong has plenty of talents, Lai observed. The city's universities are turning out some landmark scientific achievements, but student prodigies often get stuck commercializing their results.

The Hong Kong market not only is too small, he said, but the climate among investors is rigidly conservative and they shy away from investing in innovative technologies. That's especially evident when Hong Kong is compared to the Chinese mainland, Lai added.

He cited the example of mobile payment services that have become the mode on the mainland. People don't even have to carry wallets anymore. In Hong Kong, market penetration for that kind of mobile payment option hasn't come close to that of the mainland.

"There are two problems about Hong Kong's scientific achievements at universities. First, although they excel, by the American and British standards, they do not consider the needs of the Hong Kong and mainland markets. Second, commercializing these achievements requires a lot of effort by the universities and the government, including support techniques, funding, policies and recruitment," said Thomas Chan Man-hung, director of the One Belt One Road Research Institute at Chu Hai College of Higher Education in Hong Kong.

Addressing the issues

Chief Executive Carrie Lam Cheng Yuet-ngor published her maiden Policy Address on Oct 11 last year. Policies regarding innovation and technology include a HK$10-billion fund for university research and HK$3 billion in scholarships for college students doing research.

The $10-billion university research funding will be disbursed upon the completion of a review by a task force led by Tsui Lap-chee, president of the Academy of Sciences of Hong Kong.

Chan looks forward to Tsui's review, adding that the government's ambitious target in the latest Policy Address to increase R&D expenditure is surely a move in the right direction.

Hong Kong's current R&D expense is 0.73 percent of the city's GDP, far behind Shenzhen's 4 percent and the mainland's 2 percent. Lam's program aims to increase funding to 1.5 percent of the city's GDP, or HK$45 billion, by 2022.

Chan voiced concerns, however, that the government's goal to increase R&D will not be efficient enough to boost the innovation and technology sector, despite a tax deduction of 300 percent for the first HK$2 million spent on R&D and 200 percent above the HK$2 million mark.

He echoed Lai's words that Hong Kong investors are too conservative to invest in innovation and technology. The tax deduction, he predicted, will benefit other small and medium-sized enterprises in general, but not the innovation and technology sector.

From Chan's point of view, and for many others, cooperation with the mainland is the key to Hong Kong's survival in the global innovation competition. The mainland not only has a large market, but also has clearer ideas and ability in how to commercialize products.

As Zhou puts it, Israel has the world's leading medical technology but also a small population, hence little profit was made when they sold domestically. "But once they sold the technology to China, the company scales became 10 to 100 times larger," he said.

Collaborating with the mainland isn't a new idea. First initiated in 2007, a planned Hong Kong-Shenzhen innovation and technology park, right next to the Hong Kong-Shenzhen Lok Ma Chau border, was conceived to better connect the R&D and commercialization sectors of innovation and technology industries across the border.

But the park was set aside until early last year, when Lam, then chief secretary for administration, signed a memorandum about the development of the park with the Shenzhen government.

The SAR government won't finish construction and hand over the land to the developer until 2021, according to a government paper handed to the Legislative Council in March 2017.

Although Lai encourages the young people of Hong Kong to take advantages of the mainland market, he cautioned that there are plenty of pitfalls to acclimatizing to the mainland environment.

"Policies, like patent regulation, are quite different between the mainland and Hong Kong, which discourages Hong Kong people from entering the mainland market," Lai said.

He went on to say that existing measures to help Hong Kong people do business on the mainland still don't go far enough. He cites the Hengqin Free Trade Zone in Zhuhai and Qianhai Free Trade Zone in Shenzhen, which offer tax incentives and reduced red tape for customs clearance as good starting points for Hong Kong entrepreneurs.

Since last year, the central government has aimed to expand access and create a more relaxed environment for foreign enterprises to invest on the mainland. Such free-trade zones are pilot projects.

Still, Zhou, who has worked with several scholars in Hong Kong universities on publishing academic papers on big data, contends that the city has great advantages but needs to commit fully to promoting high-tech innovation.

"Its highly developed financial system and global stature have turned Hong Kong into a world center for information, capital and talent," said Zhou. "And the education resources are much more advanced," he added.

Zhou placed special emphasis on youthful innovation. "Only in the recent one to two decades have emerging industries allowed people to reach their career capstone in their 20s and 30s. This was rare in previous generations.

"Young people are willing to stay in a place where they see other young people succeeding. Hong Kong should take careful note of this reality," he added.

Tap4fun CEO Stan Xu Zizhan takes a photo at the company. Carrie Qiu / China Daily The Chengdu Tianfu Software Park, which houses Tap4fun’s headquarters, is home to over 400 tech companies. Provided to China Daily

Sta in the Tap4fun o ce space (left) and its dining area (right).

(HK Edition 07/13/2018 page7)