Yin Yang Lu examines the development of incubation in China and gives us a look at its entrepreneurial support landscape

Dong Hu Business Pioneers Center was China’s first technology business incubator, established in Wu Han city in 1987. From that first incubator, the Chinese incubation industry has developed quite rapidly. By the end of 2010, the national statistics system showed that there were 896 science and technology business incubators, which including 346 at the national level. The numbers stated that the incubation sector comprised an area of more than 30 million square meters, with a service and management staff of more than 15,000 people. Of the 56,382 incubated enterprises featured, 7,677 were students. Certainly the numbers and figures on record show a massive interest in this sector and now it would appear that the Chinese business incubation system has entered a new stage in its development.

MOST (Ministry of Science and Technology) has some ambitious plans for 2015 - the aim is to take the total number up to 1500 incubators, with national incubators reaching at least 500 in number. Plans are in place for the implementation of a national incubator dynamic management system, as well as exit mechanisms. More than 30 percent of national incubators are looking to build venture nurseries and business accelerators, and more than 50 percent have angel investment and shareholding as part of the incubation function. More than 60 percent of the employees and service providers in this space receive professional incubator training, and 80 percent built the public technical service platform, 90 percent provide mentoring options for their clients. The numbers are impressive and it is clear that China’s Ministry of Science and Technology has played a vital role in creating and developing the entrepreneurial ecosystem.

The history

The development of Chinese technology business incubators originated from 'Torch Plan'. The Torch Program is the guidance programme aimed at developing China's high-tech industry, and was approved by the State Council in August 1988, and was organized and implemented by the Torch Center. The Torch Plan aims are as follows: implementation of strategy to invigorate China through science and education, implementation of the general policy of reform, and exploitation of the advantages and potential of China's scientific and technological strength. Part of the mandate is also market orientation commercialization promotion of high-tech achievements, industrialization and internationalization based on market orientation.

The Torch Plan focuses on creating an environment for high-tech industrial development, the development of a complete package of high-tech industry development policies and regulations, creating a good support environment, establishing the management system and operational mechanism, opening up funding channels to establish venture capital mechanisms, opening information channels at home and abroad, establishing information networks and developing the long-term planning in line with the objective reality. It is this Torch Plan that has resulted in China's booming high-tech parks and technology business incubators. Establishment of business incubators is an important part of Torch Plan. Special consideration has been given to the fact that financial support is an important means for the government to help the industry and this would include assistance with the construction of incubator infrastructure and special funds support.

MOST decisive

Certainly, MOST has played a decisive role of guidance, organization, promotion and development of the technology business incubators in China over the past 17 years with the help of the specialized Torch Center that was developed. At every stage of the development of Chinese science and technology business incubators, the coordination and guidance of Torch Center are both essential and strategic - in policy guidance and financial support.

In order to standardize technology business incubator development, in November 1994, Torch Center delivered a ‘comments on principle of China Hi-tech Innovation Service Center’. This ‘comments on principle’ provided the specific provisions on the status of the technology business incubator, the task, the conditions of the founder, preferential policies, management practices, etc. In January 1996, MOST issued the 'Measures for the determination on National Hi-tech Innovation Service Center', which stipulated that the management levers of business incubators were to be divided into national and local levels. Specific provisions were made on the conditions of the National Business Incubator. In November 1996, MOST launched the Business Incubator Ninth Five Year Plan and the 2010 development plan, which clearly outlined incubation as a key state industry, under the guidance and planning of MOST.

The 11th Five-Year Plan

In the period of The 11th Five-Year Plan (2006-2010), the State has formulated a series of policies and measures to support the technology innovation and the development of incubators. Many local policy documents established the need for the strategic development of incubators, with increased support for the technology business incubators. The scale of incubator development over the previous 20 years was further underlined by the supporting industries such as by the construction, education, human resources, social security, finance, tax departments... as well as widely recognized social organizations and foundations which helped further the cause of entrepreneurship support in the country. The launch of the Torch entrepreneurship action aided the establishment of ownership incubation methods, the birth of incubator investment funds and special funds, the establishment of science and technology innovation practice bases for students - all of which led to a significant improvement in service innovation performance. Incubator radiation from the city centres and the National High-tech Zone to the conditional counties, incubator investment diversification, professional operations, network services and internationalization development pattern has now all come together to make for a well-developed incubation model.

The 12th Five-Year Plan

In the 12th Five-Year Plan (2011-2015), the overall development goal is very clear. It is to build and further improve the science and technology innovation service system, promote regional enterprise incubating abilities for science and technology, foster emerging industries of strategic importance, train high-level and high-quality entrepreneurial teams, create suitable and sustainable environments for businesses to flourish, and form scientific and technological innovations. The overriding purpose is to drive economic growth for society as a whole, transforming the model of economic development in China and to lay a solid foundation that enables the creation of a welldeveloped innovation-oriented country.

Still needed...

Despite all the ongoing efforts, everything is not yet perfect and there is much work to be done. Support for the incubator and venture enterprise policy environment needs to be improved. The rapidly growing demands of technology entrepreneurship are hard to meet and entrepreneurial ability and overall service level need to be further improved. There has to be further support given to the management systems and the operational mechanisms require further innovation, linking and integrating social resources match the needs of the industry with those of the country. In conclusion, it would appear that during the period of 2011- 2015, China will continue to develop and expand its innovation mechanisms in order to realize diversified development. There is the determination to expand incubators' function and improve its serviceability, to build a culture that recognises the needs of the entrepreneurial environment, to strengthen organization and leadership and perfect the policies and regulations to enable all of the above.

Fired up

An interview with Adam Chen, the manager of The Service Center of Shenzhen High-Tech Industrial Park, gives us an overview of operations in a Chinese business incubator

What are the experiences and your future vision of your incubator?

Before introducing the incubator, I would like to introduce our ISTB (Shenzhen International and Technology Business Platform). There are 44 organizations from 31 countries or regions settled in ISTB, for which it is now known as a 'Folk (non-governmental) Embassy'. These organizations are actively engaged as bridges between China and the rest of the world in science and technology, commerce and trade or official reciprocal visits. With the purpose of further developing the potential capacity of these organizations and carrying out the work of 'bringing in' and 'going out', we have built the incubator to attract high-quality projects from these regions. We provide favourable offices and government services, help project companies to open up markets and maximize their influence on their targeted markets. This has won us praise, especially in the environmental and electronic sectors. There are several projects that have been applied in Shenzhen and other domestic areas. Our future plan is to introduce more highstandard overseas organizations, to improve our screening standards of incubator projects and to enhance the specializations and skills of our service team members.

What is the focus of your incubator? Do you have any special programme to support your incubator? How do you select your incubatees?

Our incubator is funded by the government, therefore projects related to public service would be given first priority. Before introducing relevant projects or companies, we will study each industry and put an emphasis on the relatively weak links in China's industry chain. At present, our help to incubatees mainly lie in introducing more business partners to improve their market access.

What is your funding model? Do you have unique sale points?

There are financial investment organizations in the science and technology sectors that specifically work with us. In order to help companies gain access to financial support and to enable face-to-face communications with investment organizations we organise a targeted road show every month. At present, the uniqueness of our incubator is 'international' because all incubatees are involved in overseas projects. In addition, we encourage all types of local enterprises to visit ISTB, which helps to broaden their horizons internationally, and also helps foreign project investors to better understand domestic conditions in China.

What are your opinions on governmental policy regarding incubation in China?

Currently, Shenzhen municipality vigorously encourages the development of our incubator and actively creates an atmosphere of entrepreneurship. There is a subsidy of RMB30 million for each incubator annually. Besides this, the municipality also has varied support policies for specific venture programmes.

Do you closely cooperate with university?

We have really close relationship and interactions with Shenzhen Virtual University Park and work with them to spread the word and commercialise research. You can get more information from its website www.szvup.com