How did Shenzhen-Hong Kong-Guangzhou become the world’s number one tech hub? [Eye on Guangdong series]

Most people are aware that China is home to many innovative firms — whether or not this is seen as a threat to the Western world or simply as a consequence of China’s strides in the economy and education in recent decades. But few may know that an innovative cluster in South China is ranked number one in the world.

The Global Innovation Index published by the World Intellectual Property Office (WIPO) provides a highly respected analysis of innovation on a national or regional basis. The 2025 Global Innovation Index Ranking of World’s Top 100 Innovation Clusters puts the Shenzhen-Hong Kong-Guangzhou innovation cluster (SHKGIC) at the top among 100 regional clusters. 

With 2.4% of global publications, 9% share of global patents, and 2.9% share of global venture capital deals, the SHKGIC outperforms the second-placed Tokyo-Yokohama cluster and third-placed San Jose-San Francisco cluster. In other words, the Shenzhen-Hong Kong-Guangzhou cluster is considered more innovative than Silicon Valley.

Not only that, China leads all economies in the number of clusters featured in the top 100 for the third year running, with 24 clusters, followed by the US with 22 clusters, and Germany with seven. Many innovative clusters cover several municipalities, like the Osaka-Kobe-Kyoto cluster, but the Shenzhen-Hong Kong-Guangzhou cluster is the only cross-border innovation cluster.

From economic backwater to innovation cluster

In 2024, the Tokyo-Yokohama cluster was in first place while the SHKGIC came in second. According to WIPO, these two clusters switched positions because WIPO added the indicator for venture capital deals to the index in 2025. This additional indicator also raised the San Jose-San Francisco cluster from the sixth position in 2024 to the third position in 2025.

Like Silicon Valley, which up until the 1960s was better known for its fruit orchards, Shenzhen was a rural area covered with rice paddies until it was declared China’s first special economic zone (SEZ) in 1980. Shenzhen quickly attracted foreign investment and industries, among others, a large influx of manufacturing from Hong Kong. But perhaps an even more important development was the establishment of the Shenzhen National High-Tech Zone in 1996, with extensive policy support for research and development (R&D). In 2019, the Shenzhen municipal government expanded the high-tech zone from 11.52 square kilometres to 159.48 square kilometres. 

This high-tech zone has attracted firms that have become some of China’s leading innovative firms, such as telecommunications giants Huawei and ZTE, social networking platform enterprise Tencent, and electric car pioneer BYD. In addition, new universities such as Shenzhen University and the Southern University of Science and Technology were set up, together with local campuses of Peking University, Tsinghua University and Chinese University of Hong Kong.

At the same time, other cities and districts in Guangdong experienced rapid industrialisation and foreign investment, such as Dongguan, which became a favourite location for Taiwanese firms. Large numbers of small industrial firms also entered into global supply chains as sub-suppliers for multinational firms. The result was that Guangdong province earned its nickname, the “factory of the world”, hosting an extensive range of flexible manufacturing capabilities. This has been an essential aspect of the Shenzhen-Hong Kong-Guangzhou tech hub’s potential to implement innovations in new products or services. 

Another important factor driving the development of new high-tech industries in Shenzhen was that it offered excellent opportunities for innovative and entrepreneurial people, who flocked to the zone for jobs that were rarely available elsewhere. In one sense, Shenzhen became what might be called the “Wild East” — a place where anything was possible, like in the legendary American “Wild West”.

Networking with Hong Kong and Guangzhou

In the beginning, Shenzhen did not have local universities or public research institutes, and new firms like Huawei relied on its own R&D and access to foreign sources of technology in order to develop its own innovations. But there were ample opportunities to link up with leading universities and research centres in Hong Kong and Guangdong. 

In Hong Kong, the government also became keen to provide a stepping stone into China for advanced international technology companies and entrepreneurial talent, setting up the Hong Kong Science and Technology Park to incubate new technology firms and providing special funding for collaborative R&D projects between Hong Kong universities and firms in Guangdong. Furthermore, the Hong Kong government has recently launched the development of the Northern Metropolis — a special high-tech zone on the border with Shenzhen designed to promote innovation and technology industry and attract high-tech firms from Shenzhen and globally.

Guangzhou has also developed new incubators to take advantage of excellent universities and research institutes. The Guangzhou Tianhe Software Park established in 2011 has recently been integrated into the Guangzhou Tianhe High-tech Industrial Development Zone, with support for the development of internet business, big data, geographical information, artificial intelligence (AI) and bio-engineering. The new development of AI industries is strongly promoted in the Guangzhou Artificial Intelligence and Digital Economy Experimental Zone.

What makes the region so special?

The strengths of the SHKGIC cover all the elements that contribute to successful innovations. Between 2020 and 2024, the SHKGIC filed 117,542 patent applications via the WIPO’s Patent Cooperation Treaty. It also recorded more than 6,900 venture capital deals and contributed 193,635 scientific publications from 2019 to 2023.

WIPO chief economist Carsten Fink said that Shenzhen-Hong Kong-Guangzhou formed a diverse cluster where each part has contributed its strengths to the area’s overall innovation development. He noted that Hong Kong is an important source of financing for innovative activity, with many scientific ideas emerging from the special administrative region leading to startup companies across the border.

Guangzhou and Shenzhen lead in application and deployment, while Dongguan and Huizhou have compelling strengths in advanced manufacturing. Together, these cities offer immense production capacity, commercialisation opportunities and access to a vast consumer market. For example, the two high-tech startups, drone maker DJI (Da-Jiang Innovation) and AI and facial recognition firm Sensetime, originated from research at Hong Kong universities, but moved to Shenzhen when the knowledge needed to be commercialised due to the local availability of manufacturing inputs.

The cluster also covers a range of different societies and cultural vibes. Hong Kong is a highly globalised city with advanced educational institutions and financial services; Guangzhou is a historic Lingnan trading hub rooted in deep Cantonese traditions; Shenzhen is a futuristic, fast-paced migrant metropolis driven by technology, innovation, and a multi-provincial blend of Mandarin-speaking newcomers.

Contrast with Beijing and Shanghai

There is a traditional stereotype belief in China that northern Chinese (Beijing and further north) are known for leadership, charisma, impulsiveness, over-promising and under-delivering, lack of attention to detail, and loyalty to their inner circle. In contrast, southern Chinese (Shanghai and further south) are known for deliberating, being detail-oriented, execution-based, more commercially savvy and believing they are more civilised and sophisticated than northerners.

Whether or not these stereotypical views are true, it is clear that the SHKGIC has been successful in providing support for the whole pipeline of innovation. Beijing, in fourth place on the Global Innovation Index ranking of clusters, is stronger than Shenzhen-Hong Kong-Guangzhou in scientific publications, but weaker in patents, while having a similar number of venture capital deals. Shanghai-Suzhou, in sixth place, ranks similarly in scientific publications and venture capital deals, but is weaker than Shenzhen-Hong Kong-Guangzhou in terms of patents.

As the capital, Beijing is close to power for better or worse, home to a large number of researchers and institutions like the Chinese Academy of Sciences and leading universities. The emergence of innovative startups in Zhongguancun in the 1980s was often constrained by social and political suspicion, and although current municipal policies are strongly supportive nowadays, innovative firms have often moved south to commercialise and manufacture technologies. 

Shanghai has a long history of manufacturing and scientific research, but a large number of highly innovative firms have settled in neighbouring regions like Suzhou and Jiangsu province. Moreover, the new attraction of Hangzhou as an innovation centre has challenged Shanghai for innovative potential in the digital economy.  

Policies also make a difference

Politicians in Guangzhou have been known for a more lenient attitude toward the policies brewed up in Beijing. Xi Jinping’s father Xi Zhongxun served as the Communist Party chief of Guangdong province, based in Guangzhou from 1978 to 1981, leading the progressive policies that created the special economic zones. Shenzhen municipal government often went further in the “anything goes” approach, and was instrumental in promoting science and technology — ultimately turning the place into an innovative high-tech hub.

It is noteworthy that when Deng Xiaoping was challenged by traditional hardliners in the Party after the Tiananmen incident, he decided to go on a Southern Tour in 1992, observing developments in Shenzhen, Guangzhou and Shanghai and talking about the importance of opening up and reform, allegedly saying “Development is the hard truth!” and “Those who do not promote reform should be brought down from their leadership positions!”  

Today, Governments in Shenzhen and Guangzhou also want the region to lead China’s innovation-oriented development efforts. Shenzhen focuses on hardware integration, public data sharing, and local-level AI legislation. Guangzhou emphasises downstream software uses, manufacturing upgrades, and small-to-medium enterprise transformation. Grounded in the development plan adopted in 2019 for the Guangdong-Hong Kong-Macau Greater Bay Area, the coordinated development of infrastructure and innovative capabilities is the highest priority.

For Hong Kong, support for innovation produced more rhetorical statements and marginalised institutions than genuine innovative firms in the past. For example, Hong Kong’s government R&D funding agency The Innovation and Technology Fund in 2025 spent HK$ 5.2 billion (US$662 million) in support of R&D projects, R&D centres and a host of other programmes. By contrast, a single Shenzhen firm, Huawei Technologies, in 2025 spent 192.3 billion RMB (equivalent to HK$ 222.8 billion) exclusively on R&D. Nevertheless, the city has recently become a centre for startup entrepreneurship, and the integration into the Shenzhen-Hong Kong-Guangzhou innovation cluster presents a new opportunity to intensify linkages with the mainland and global markets.

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