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IBM Cloud Authors: Betty Zakheim, Liz McMillan, Greg O'Connor, Don MacVittie, Kevin Benedict

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China's Top Industrial Park Capitalizes on Tech Innovation

The Tianjin Economic-Technological Development Area (TEDA) claimed the top ranking among the country's scores of industrial parks for the fifteenth year in a row. However, as China's oldest industrial development zone, TEDA did not finish first again by mere chance.

"Championship is more than just being the best right now, it's about investing to be the best tomorrow as well," TEDA Director He Shushan noted, adding that ever since its creation in 1984, the park has never rested on its laurels.

"For example, TEDA has built itself into one of the most technologically advanced pieces of real estate in the world, offering out-of-the-box solutions and blueprints for the next generation of investors," Shushan said.

TEDA beat about 90 rivals to top the rankings, which were published in December. Awarded the top mark in the all important indicator of economic soundness, TEDA was also ranked first for all sub-indicators, including gross productivity, total industrial value, fiscal income and actual use of foreign direct investment. The rankings were based on five pillar categories: economic soundness; mechanism innovation; tech innovation; social development; and eco-environment. TEDA was also ranked first for mechanism innovation and placed among the top 5 in the other three categories.

Since 2000 TEDA has officially made technology investment a priority. Subsidies amounting to five percent of the zone's revenues have been reinvested in tech infrastructure, a move that has produced over 2,500 patents.

Meantime, TEDA has offered grants worth millions of renminbi to incubate a wide range of companies, including startups, growing companies and developed-companies, respectively.

And all that investment will pay off. By 2015 TEDA expects the value of its electronics information industry to reach about 250 billion renminbi.

TEDA's innovations on behalf of its tenants also extend to pioneering funding options. Under a new pilot program TEDA supports and boosts new- and high-technology companies to use their patents, trademarks, authorship rights and other intellectual property as collateral to apply for what might be elusive bank-funding. Occasionally TEDA offers matching grants as well.

One such beneficiary is Bonna-Agela Technologies Inc., a company that serves chemists and biochemists in the fields of drug discovery, food analysis, pharmaceutical testing, environmental analysis and chemical research. The company received a loan of 10 million renminbi from the Dalian Bank in 2010 through a patent-as-collateral lending arrangement.

In the first 11 months of 2012 alone, TEDA's pilot funding program has attracted hundreds of financial institutions as partners and 38 companies have directly benefited from loans amounting to more than 293 million renminbi.

Binhai Cloud Computing Park, with 500,000-server capacity, is another flagship incubator and accelerator behind the zone's tremendous initiatives to develop the cloud computing sector.

"During China's 12th five-year-plan period, Binhai aims to invest five billion renminbi into cloud computing services and infrastructure," said Zou Fang, Deputy Director of the TEDA Investment Promotion Bureau. "These investments include details like the 890,000-square-kilometer park's ample and redundant fiber, reliable power to support the data centers and other mission critical facility."

TEDA has also arranged for its could computing park partners to enjoy negotiated discounted rates from China's telecom suppliers, a benefit that allows even larger efficiencies of scale, she added.

The focus led innovative groups to call TEDA home, including a shining portfolio of corporate, governmental and institutional tenants – such as Tianjin International Joint Academy of Biotechnology and Medicine (TJAB), the National Research Center of Nanotechnology and Engineering, as well as Binhai Software and Service Outsourcing Alliance (BOSA).

Ranked the world's fastest supercomputer in 2010, TEDA's Tianhe-1A Computer has developed a cloud computing platform that supports demands for 3D animation, oil exploration, industrial machinery and pharmaceutical R&D, simulative analytics, system forecasting, data mining and financial risk modeling. Both Tianjin Meteorological Bureau and the National Offshore Oil Corporation have started trials with the Tianhe-1A supercomputer, which, according to a listing maintained by the University of Tennessee, was 40% faster than the world's No.2 supercomputer.

TEDA offers such a robust and high-tech eco-system that IBM partnered with TEDA in 2003 to set up its SaaS and laaS data service joint venture called I@T. Under the partnership TEDA frequently organizes symposiums where its corporate clients, including IBM cloud computing experts, can gather and exchange notes. And as Tianjin evolves into one of northern China's financial service centers, I@T will be perfectly positioned to service the banking industry, which requires above-average data security and greater systems customization.

The partnership is a win-win, said Liu Yang, the joint-venture's head of marketing. "We were able to be actively engaged in planning the blueprint for cloud computing for the zone," he said. "So it's really about two-way communication and service offerings that cater to real-world demand."

I@T is not alone. TEDA is also home to Tencent's first-ever cloud computing center. The group operates the wildly popular instant-messaging platform called Tencent QQ, as well as one of the world's most active web portals, Tencent holds 29 patents directly related to cloud computing, all of which are in use in TEDA.

In addition, Hewlett-Packard has based its global cloud computing hub in TEDA, while Standard Chartered Bank has set up one of its three hubs there, from which it can service its global clients.

"TEDA will continue to engage in innovation to create a better investment environment for its partners — one that will move upward along the value chain and fulfill our promise of excellence," Shushan said.

The stakes could not be higher. Parks like TEDA will only become more important as China continues on its path away from low-cost manufacturing to an economy based on greater levels of automation and innovation.

"Many countries have been suffering from the 'middle-income trap' since World War II," noted Justin Yifu Lin, former chief economist and senior vice president of the World Bank. He was invited to deliver a world economic-outlook report at Peking University in October.

"Industrial upgrading including technological innovation has been the key factor helping emerging economies in Asia such as South Korea get around the middle-income trap and keep sustained economic growth," he further elaborated.

And as the cost of inputs rise and gradually erode China's low-cost competitive advantage in the global economy, the necessity of having innovative industrial parks like TEDA will only grow, said Trish Saywell, a former reporter covering China at Dow Jones' Far Eastern Economic Review and Asian Wall Street Journal. "Tech-innovation and production-networked incubators are primed for growth now in China," she noted. "This will give China an advantage even if foreign capital migrates to lower cost centers."

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