Professor Chen Chunxian and the Implementation of Silicon Valley Entrepreneurship at Zhongguancun

  Summer 1978, 26 years ago, a group of nuclear scientists from mainland China, visited the United States. This was one of first exchanges of its kinds arranged by US and PRC governments after about 30 years of isolation when diplomatic relation between the two countries did not exist. Among 12 Chinese delegates, a 44 year old Professor Chunxian.,Chen, the founder of TOKAMAK nuclear fusion R/D projects in China, brought back beyond knowledge and experience of advanced US nuclear fusion and physics Laboratories -- something unusual and new at that time for everyone: stories of Silicon Valley entrepreneurship. This led to the beginning of Zhongguancun Electronics Street, 8 years later to Beijing New-Tech Industry Pilot Zone, to a nationwide "TORCH" Science Park Project in China.

  During the 5 week visit, they had been to about 20 US fusion R/D facilities at different cities, but Chen was most moved and shocked when he stepped into small Hi-Tech companies in Silicon Valley and Route 128 Highway near Boston, and heard stories of HP, Apple, WANG, and others. When he came back from two US visits (1978 and 1979) Chen became an advocate of Silicon Valley entrepreneurship. He told stories of American colleagues many times: how people with money in pocket and ideas in mind came together and set up a "garage workshop" to do something new and became a multimillion dollar giant after several years. "That is why the Bay Area was one of the wealthiest places in US, my friend told me, with a local GDP of approximately 40 billion dollars." That was an astronomical number to us. Although making scientists wealthy personally was not encouraged at that time in China, making the social wealth of 40 billion USD is by all means a great undertaking...

  Highly impressed and convinced by the vitality and prosperity of the "Silicon Valley Mode". Chen did not stop at story telling, but set out to persuade everyone who would listen: colleagues in research labs, friends in universities, the Chinese Academy of Sciences, as well as officers in local and central government agencies. "It is called" technology diffusion" by American colleagues, That means scientists and engineers bring technology and idea of innovation from prestigious universities and national laboratories to commercial companies nearby." Chen explained. "Zhongguancun is where the Chinese Academy of Sciences, Beijing University, and Tsinghua University are located. The concentration of talent pool is of no lesser degree than that in the Silicon Valley. "Why can't we experiment with and adopt the Silicon Valley Mode?" Chen wanted to find out.

  What were people's reactions? First, nobody understood the relevance - how could a place unmarked on the map matter to us, they wondered. Yet, most scientists and researchers responded positively to the idea of making contributions to the society using scientific knowledge. At the time teachers taking a second teaching job, engineers working at small town enterprises on Sundays, and entertainers signing up for performances as free agents had already emerged. Still founding a company and making money with technological inventions were widely regarded as an otherworldly idea. Under the system at the time, the government planning agency solely determined what a factory to produce, in what quantity, and what an institute to do research on, with how much funding. It was out of the question for an individual to set up a factory or a research institute. Some officials thought these talks were "nonsense". After a year's effort, the idea of experimenting with Silicon Valley Mode encountered insurmountable barriers.

  In 1980, a chance appeared, at the newly founded Beijing Plasma Society, which was under the Beijing Association for Science and Technology, a place referred to as the "Home of Scientists", Chen talked to the director, about his idea of Silicon Valley pilot. The officer said, "We support any initiative that benefits the drive to modernization." He agreed in principle to set up a "Service Department" under the Society and try it out. As he put it, "We can solve problems and correct mistakes that may come up."

  That leads to the meeting with extended members of the Beijing Plasma Society in the afternoon of October 23, 1980. Chen made the presentation entitled "Technology Diffusion and New Technology Enterprise", followed by exciting discussions. After the meeting they submitted a written application for establishing the "Service Department", with full name: "Advanced Technology Development and Service Department" was created by the end of the year. Specifically the Beijing Association for Science and Technology issued a document, on the basis of which the Public Security Bureau approved the making of an official seal for the organization. They opened an account at the bank with the 200 RMB lent to them by the Beijing Science Association. Thus they were in business to accept technological development and consulting projects from external parties, and get paid with bank checks.

  The Service Department became a place where more than 10 enthusiastic volunteers gather every day. They came to an old warehouse (later two bungalows were built) after work, and engaged in various research and development projects. Since the Plasma Society had experts on mechanics, electrical machinery, electronics, instruments, laser, and data processing among its members, there were many projects that they could sign up, and everyone was very motivated. The "service fee" for a project typically ranged from a few hundred Yuan to a few thousand Yuan (excluding material cost). By the end of the first year (1981) they had revenue of 20 - 30 thousand Yuan. A small portion of this was paid as stipend to participants, usually seven to eight Yuan per month with the highest pay of fifteen Yuan. (At the time a new college graduate earned a monthly salary of 56 Yuan. The wage system had a seven to eight Yuan difference between the paying scales).

  Nobody really paid any attention to the Silicon Valley Mode, but the 15 Yuan stipend stirred up huge controversies. Some said that this meant a raise of two paying scales for one self's salary. The prevalent belief then was that it was shameful capitalist ways to make money using one's scientific knowledge. It was intolerable and unimaginable for researchers and scientists to engage in commercial activities. The superior at the institute where Chen worked put it bluntly, "This is neglecting one's real duties, craziness and nonsense, and corrupting cadres". It was certainly a chilly assessment for members of the "Service Department". Although fifteen Yuan wasn't a negligible amount, the criticism, accusation, and danger were harder to ignore. It was only three to four years after the Culture Revolution, when many intellectuals were persecuted. By the end of 1982, activities at the Department were down to a trickle.

  Right after the New Year holidays of 1983, Chen heard shocking news: the leaders of the Chinese central government made direct evaluations of the Service Department. It took great effort for them to obtain the copy of comments made by the three leaders in the Politburo: Hu Yaobang, Hu Qili, and Fang Yi., who categorically affirmed that "the direction taken by Chen Chunxian is the correct one", and that "accomplished scientists are allowed to get rich first".

  The Chinese economic and scientific system and culture had been modeled after the Soviet Union for a few decades at that time. Companies by private citizens, a commonplace in the West, were an unimaginable and unacceptable concept in the Chinese society. The comments from the senior governmental officials changed the attitude of those in local government, and several intelligent and visionary officials from the Hai-dian District responded positively to the scientists' proposition, and wanted this to drive the economic development of the District. As a result, Chen and his colleagues founded the Huaxia Institute of New Technology Development in cooperation with the Hai-dian Industrial Company within two months. Associated with the Institute, Huaxia Electronics Works., and Electrical Appliance Service Company were also created. In the meanwhile, a number of companies by former scientists were also established. They were Jinghai, Kehai, Stone, Xintong, and so on. Many firms that provided computer sales, software development and application consulting services appeared in Zhongguancun. This is the beginning of the Zhongguancun Electronics Street...

  Debates never subsided surrounding the significant changes that took place in Zhongguancun. Some said that Zhongguancun was about making money, not developing hi-tech. Other said it was a Swindlers' Street. However, these criticisms were overtaken by the phenomenal growth of new companies in the five years from 1983 to 1988. It was like a tidal wave bursting through an opened gate, and it could not be stopped. Many companies, typified by Stone, reached annual sales of hundreds of millions Yuan. They offered technologies developed in-house such as Stone electronic typewriters, the Five Stroke Chinese Input Method, and so on. The Hai-dian District government summed up the policy for these companies: independently managed, responsible for own profit/loss, organization, and funding. No government financial funding and without personnel approvement. Any company meeting these criteria is called "minban" (operated by people) instead of "Private Companies" which is a sensitive concept in China society. This is the main breakthrough from Zhongguancun activity. By 1988, this type of minban new technology enterprises have been at the forefront of economic growth, and drawn attention from the government agencies supervising science and technology. After the in-depth and extensive investigation by the task force from the State Council, the path of Zhongguancun was officially affirmed by the senior leaders. (The facts and conclusions of the investigation were summarized in a book entitled The Light of Hope). The State Council announced 18 favorite policies to Zhongguancun, making it the first New Technology Enterprise Development Pilot Zone. In 1988 the State Science Council launched the nationwide "Torch Project". And tens of new science parks were established in vicinity of other big cities of China.

  Ever since then two creations of Zhongguancun have spread to the entire country: the science and technology parks and minban (privately-managed ) enterprises. By 2003 the privately-managed technology enterprise based on the "Zhongguancun Mode" has become mainstream for hi-tech zones in China in the "Torch Project" review 15 years of its launch by the State Department of Science and Technology. There are 35 hi-tech zones at national level with revenue at 1800 billion Yuan. They make one of the most vibrant sectors of the Chinese economy. This outcome is certainly unexpected when Chen opened his Service Department 20 years ago.

  The past 20 years saw a two-fold increase in China's GDP, and the policy of Reform and Opening to the Outside World has taken root in the Chinese society. Looking back at what has happened in Zhongguancun over the twenty years, Chen believes it is the creativity of the people that drives the progress of history. The creativity of 1.3 billion people was unleashed by Deng's Reform and Open Door policy, and the minban technology parks of Zhongguancun mode and privatization of collective farms at Xiaogangcun are two small streams which were infused in great ocean of Chinese economy

ChenChunxian Works (c)2003-2005