Lau Pui-king writes that HK must join hands with its neighbor in regard to innovation and technology - then the SAR can more rapidly achieve structural transformation

I am one of the Hong Kong SAR deputies to the National People's Congress (NPC) who recently visited Shenzhen to find out how the neighboring boomtown became the country's leader in innovation and technology development. We toured six outstanding technology companies based in Shenzhen, including telecom system solutions giant Huawei, Internet services operator Tencent and rising remote-controlled aircraft maker DJI, and met with municipal government officials in charge of innovation and technology - or "inno-tech" - development. Our hosts told us in great detail how they drew up and executed the plan to turn Shenzhen into the most successful city in the nation in terms of science and technology development.

Back in Hong Kong, while I sorted out all the information gathered in Shenzhen and thought about what my home city should do in building its own inno-tech industry, the SAR government's request for initial funding for the Innovation and Technology Bureau was vetoed by opposition members of the Legislative Council. Nevertheless, I believe Hong Kong can learn a lot from Shenzhen in terms of corporate development philosophy and culture, as well as government handling of such endeavors.

Currently, Shenzhen is home to 4,742 national-level tech companies, accounting for more than half of the total based in Guangdong province and ahead of all other cities in the country. The municipal government planned to significantly increase investment in science and technology development with an eye on research and development (R&D) and industrialization during the 12th Five-Year Plan period (2011-15). The plan focused on three main areas: Research, including basic research in such fields as electronics, information technology, biotechnology and life science, natural resources and environmental science, materials and alternative energy, plus advanced manufacturing and "soft science" exploration; support for tech development with startup funding and interest-free trust lending; and coordinating all parties involved in inno-tech development, including cooperation between Shenzhen and Hong Kong and international collaboration.

In the past four years or so, Shenzhen's high-tech industry has achieved average annual growth of 9 percent in total production value, with the increase accounting for 35 percent of the city's annual GDP growth. It is now without question a key sector in the city's economic establishment. At the moment the sci-tech sector is doing particularly well in application and industrialization of research results, led by electronics and inno-tech achievements. The six leading tech companies we visited are all outstanding success stories in their own right. We were very impressed by their commitment to and investment in R&D as the main driving force behind business growth.

These tech firms share a common business characteristic, which is spending a significant portion of their earnings on R&D. Take Huawei for example; the company's R&D spending in 2014 reached 40.8 billion yuan (about $6.58 billion), or 14.3 percent of the annual turnover. Its total R&D spending in the past 10 years exceeded 190 billion yuan (about $30.62 billion). Some 76,000 Huawei employees work on R&D. That is about half of the total workforce. It holds 48,718 domestic patents and 23,197 awarded by foreign countries, and has licensed out 38,825 patents over the years. They cover media and information, power supply, public security, smart city, electronic civil service, communication, education and Internet services. It is also working on such cutting-edge areas as anti-hacking, big data, cloud computing analysis and application, video management platforms and mobile offices.

Shenzhen as a city handled 49,430 patent applications in 2010 alone - of these 23,956 were for inventions. The number of domestic patents licensed out in the same year stood at 34,951, and 9,615 of them were new inventions. It also counted 5,584 applications for foreign patent under the Patent Cooperation Treaty, accounting for about 43 percent of the national total that year. It has been top of the nation in this area for seven years running. And it boasts more "Chinese Brands" and "World Brands" than any other city in the country.

In addition to their emphasis on R&D, Shenzhen-based inno-tech companies also share another common trait: Aiming for the global market and especially the high-end market. And in order to make a name for themselves globally they invariably go all out to hire the best talents they can find around the world as well as in the country. Needless to say their achievements in these respects are not possible without the all-round support of the municipal government, including inno-tech development laws and regulations and a proactive municipal policy that dictates support for tech enterprises in finance and taxes, banking, talent import, land use and intellectual property protection.

Looking at Shenzhen's success one cannot but ask: Can Hong Kong match its neighbor's achievements? Personally I believe Hong Kong will be well served by joining hands with Shenzhen in mutually complementary cooperation, because Hong Kong does not have some of the advantages Shenzhen enjoys. But we also have some things that Shenzhen does not. Close cooperation can generate win-win results and help Hong Kong achieve its structural transformation.

(China Daily 07/31/2015 page10)