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A Tale of Two Engines

China’s central city of Wuhan is taking advantage of its vast population of alumni to attract investment and bolster the local economy

By NewsChina Updated Dec.1

It was 3am when Chen Dongsheng’s plane touched down in Wuhan, the capital of central China’s Hubei Province. He was tired but was caught off guard when he realized the head of the Organization Department of Wuhan was waiting for him.
Chen had been to Wuhan many times as the chairman of the Taikang Insurance Group, but had never received such a high-level reception. It was because of his new role as the city’s talent recruitment adviser. In addition to Chen, Lei Jun, founder and CEO of smartphone maker Xiaomi Tech, also sits on the advisory council for talent recruitment. Both are graduates of Wuhan University.
On April 8, 2017, the Wuhan Talent Recruitment Bureau was launched and 24 famed entrepreneurs who had lived or studied in the city were invited to help mastermind the city’s talent recruitment. Wuhan government announced recently that talent recruitment, alongside favorable conditions for investment, will be the double engines that boost the city’s development. 

Alumni Economy 

On December 20, 2016, the National Development and Reform Commission, China’s top economic planner, officially added Wuhan to the list of China’s national central cities. It stated that Wuhan is the only city in central China that has a population above 10 million and a GDP volume of over one trillion yuan (US$150 billion).
Wuhan was China’s second-largest city in the early 20th century, but after China implemented its major economic reforms at the end of the 1970s, Wuhan was overtaken by coastal cities. Since 2011, it has introduced a package of stimulus measures to bolster the local economy by upgrading its industry, and the city ranked third among China’s 15 sub-provincial cities in terms of GDP growth in 2014. Nevertheless, the services industry accounted for only 51 percent of its GDP growth in 2015, failing to meet expectations.
In 2016, the GDP of Chengdu, capital of southwest China’s Sichuan Province, exceeded that of Wuhan for the first time. To catch up, Wuhan’s government has made luring investment its number one aim.
Wuhan’s government staged a series of high-end business events targeting the city’s alumni resources nationwide. On May 29, 2017, investment projects of 100 billion yuan (US$15b) were signed by alumni of Huazhong University of Science and Technology. On August 27, investment projects worth 158 billion yuan (US$24b) were inked by graduates of Wuhan University and several weeks later, investment deals with a value of nearly the same amount were signed by Zhongnan University of Economics and Law.
“Each of these events attracted over 1,000 alumni as well as an investment volume of over 100 billion yuan (US$15b),” said Wang Feng, a senior official from Wuhan Talent Recruitment Bureau. “It far exceeded our expectations.” Shortly after the Talent Recruitment Bureau was established, the Wuhan government unveiled a two billion yuan (US$300m) fund aimed at luring alumni to invest in the city.
Yi Renchuan, deputy director of Wuhan’s investment attraction bureau, said that it is a pioneering move for the city to invite investment through alumni. “We have made full preparations to gain the basic information of all famous entrepreneurs who graduated from universities in Wuhan, as well as their investment intentions, before presenting them with appropriate investment programs,” he told our reporter.
On June 29, 2017, Xiaomi signed a strategic partnership agreement with the Hubei provincial government to establish its regional headquarters at Wuhan East Lake New Technology Development Zone. In addition, a Yangtze Industry Fund in conjunction with the province’s government guidance fund, known as the Yangzte River Industry Fund, was made public.
Yang Shaodan is one official tasked with drawing investment to the development zone. He told NewsChina that it usually takes at least six months to ink an investment agreement with companies, but it took only 50 days to complete the contract with Xiaomi, partly thanks to the high quality investment environment that has developed there. He told our reporter that the local government has continuously removed bureaucracy and improved procedures to enhance service efficiency in targeting companies.
According to the Statistics Bureau of Wuhan, the city’s paid-in value of investment reached 630 billion yuan (US$95b) from January to September 2017, registering an increase of 43.1 percent year-on-year. It is expected that more than 700 billion yuan (US$105b) of investment will actually enter in 2017. Alumni have played a significant role.
Yan Hongying, management director of Wuhan Talent Recruitment Bureau, told NewsChina that talent recruitment advisers have to meet two basic requirements – having a solid reputation nationwide and even worldwide, and having sufficient resources, including a talent pool, funds, technology and information. 

Racing For Talent 

China’s four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen have been top destinations for highly-educated graduates and manual workers alike, due to abundant job opportunities and competitive pay. In recent years, however, second-tier cities have squared off to draw talent by issuing preferential policies, including housing subsidies and registration of hukou (permanent residency permits).
Wuhan has come to develop a reputation for scientific and technological innovation and higher education. The city is now home to 89 universities and colleges, 30 national key laboratories and 1.3 million college students. Statistics from Wuhan Municipal Human Resources and Social Security Bureau showed that since 2007, however, the number of college graduates who chose to stay in the city has declined. In 2011, only a quarter of graduates from key universities in Wuhan worked there.
Ant Financial Services Group conducted research on graduates from 2,325 universities nationwide over a period of five years, finding that Wuhan college graduates like to travel afar in pursuit of job opportunities – the cities of Shenzhen, Beijing and Guangzhou are the top destinations.
In June 2017, Wuhan government introduced a package of measures designed to encourage college graduates to land a job in the city. Undergraduates under 40 can get a Wuhan hukou and postgraduates could obtain it anytime as long as they lodged an application. In the upcoming five years, the local government will construct 2.5 million-square-meters worth of affordable housing for graduates working in the city. The sale and rental prices will be 20 percent lower than the market price.
Wuhan government has become the first in China to specify minimum salary standards for college graduates – annual salaries of at least 50,000 yuan (US$7,500) for bachelor degree holders, 60,000 yuan (US$9,000) for masters’ degree holders and 80,000 yuan (US$12,000) for PhD holders. The salary standards ranked comparatively higher among China’s second-tier cities, and the gap with first-tier cities is shrinking.
Yan Hongying told NewsChina that the talent race reflects Chinese cities’ heightened competition. He said it seems like each day a new preferential policy is introduced, at a time when GDP growth is increasingly fueled by innovation rather than by financial investment.
Yan said that Wuhan has attached growing importance to luring talent by providing high quality services and a business-friendly environment, instead of relying only on financial means. “Wuhan government will not simply give money to talent. They are encouraged to create wealth and value by themselves,” he said. 

Technical Innovation 

Chen Yixin, Wuhan’s Party chief, has attached great importance to the development of the private economy since he took office. He likes to take full advantage of recent college graduates, overseas returnees, staff of universities and research institutes and professional managers, who he describes as central players in the new private economy. During a recent interview with Phoenix Television, Chen said Wuhan’s new private economy is mainly driven by college graduates and highly-skilled workers and their capital accumulation is a new means of public fundraising. 
Wan Lianggui, economic director of the Municipal United Front Work Department of Wuhan, said shortly after the founding of the People’s Republic of China in 1949, that the city was made a center of heavy industry. From 1959 to the early 1980s, he said, the total industrial output of Wuhan ranked fourth nationwide after Shanghai, Beijing and Tianjin.
These State-owned enterprises (SOEs) significantly accelerated the economic development of Wuhan, but also monopolized human resources, capital, technology and the market. This weakened the city’s private sector, which fell behind the fully-fledged private economy in coastal areas. In Wuhan, the private sector accounted for 42 percent of the city’s GDP in 2016, 13 percent lower than the provincial level.
Wan said that over the years, SOEs were unwilling to see private companies join the market and compete with them, and on the other hand, some local government officials took precautions against the private sector and were afraid to open market sectors related to people’s livelihood.
“It has been virtually impossible for private enterprises to become central players in Wuhan’s market economy – all they got was a few breadcrumbs,” said a local government official, who asked not to be identified.
“In Wuhan, SOE thinking is pervasive in both social governance and business activities,” Liu Zhenxiu, deputy director of Wuhan Federation of Industry and Commerce, told NewsChina. She argued that the way out lies in changing the thinking of senior officials while strengthening regulation.
In the opinion of Zhao Feng, deputy director of Wuhan Science and Technology Bureau, the city has rich resources in scientific innovation and higher education, but many universities fall under the direct administration of China’s education ministry, which is somewhat disconnected from the local economy. Furthermore, science and technology innovation are not primarily aimed at boosting the local economy. 
Data from the Statistics Bureau of Wuhan show the commercialization rate of technological output in Wuhan is only 35 percent, including 80 percent flowing out of Wuhan. In addition, only 30 percent of institutions focused on technological innovation are companies. In Shenzhen the proportion is 90 percent.
On August 14, 2017, Wuhan established China’s first Bureau for Commercialization of Technological Outputs. One of the agency’s main goals is to raise the commercialization rate of technological outputs in Wuhan to 80 percent within five years.
Party chief Chen Yixin said the Wuhan government would prioritize attracting college graduates, alumni and overseas returnees to work in the city, while encouraging its 200,000 scientific researchers to devote themselves to innovation. He said the new agency would help address the current innovation glut. “This small move is intended to play a big role,” Chen said.