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Why Are China’s Tech Companies Leaving First-tier Cities?

High land and human resources costs in China's megacities are driving tech giants to move their production and R&D facilities elsewhere

By Xu Mouquan Updated Jul.11

Telecom equipment maker Huawei moved its R&D teams out of its Shenzhen (among China’s biggest four cities) headquarters to Dongguan, in south China’s Guangdong Province on June 1 and 2, reported Shanghai-based news portal The Paper. In response to online rumors that the company will also move its headquarters there, Huawei said that its headquarters will stay in Shenzhen. 

Huawei’s choice is rational, said financial commentator Chu Tian. As a mega-business with a rapidly growing business and number of employees, Huawei requires a huge amount of land for R&D and production – a resource that is prohibitively expensive and scarce in Shenzhen. 

This is the main reason why Chinese tech companies have been on the move – many other tech companies like drone maker DJI and smartphone maker Xiaomi have also moved their production and R&D departments to second- and third-tier cities. Average property prices in Shenzhen are 10 times that of Dongguan, and production and R&D facilities usually require more land.

The cost of hiring skilled staff in first-tier cities is high and still rising, exerting pressure on the tech companies, reported The Paper. Pony Ma of Chinese internet giant Tencent once said of moving R&D centers to second-tier cities, “We must follow where the talented researchers are concentrated. Where there is a large supply, we will have a research center.”