The International Week of Beijing High & New Tech Industry was visited by a great number of friends. All of them, without exception, said Beijing had a different physiognomy each year as a result of its rapid changes. Furthermore, they had a suggestion, namely, a permanent forum should be set up and institutionalized in Zhongguancun. It would benefit us in three ways: First, to bring up talents for Zhongguancun. Second, to send our people and promote the sales of our products all over the country. Third, to groom talents for high & new tech development zones of other provinces and cities in China.

Investment to the start-up companies is crucial. Most recently, at one forum on start-up investment, held by Guanghua Business School of Beijing University, analysis was made as to the reasons for Japan¡¯s failure to have start-up investments. They came by four reasons. First, Japan attached great importance to having staff well paid without considering stock options. Second, Japan¡¯s macro-economic policy was flawed in that it neglected the hi-tech development and start-up investment despite the fact that it led in traditional industries of the world in the eighties. Third, all managers of Japanese hi-tech parks or zones were appointed by big banks and corporations; they were pretty cautions and dare not to go a step further. Fourth, the Japanese people had little sense of risks. Once a questionnaire was distributed asking those surveyed to choose between two projects: one of them had a 20% profit rate with 20% risk, the other had a 5% profit rate with 0.5% risk involved. The findings were that all the Japanese surveyed chose the second one.

In order to develop start-up investment, we should send people abroad to familiar themselves with setbacks. Start-up investment should basically come form private sources. The securities investment fund is publicly solicited. Currently, the privately solicited fund amounts to at least 300 billion yuan, but it is estimated to reach 50-60 billion. But it has no legal ground. Zhongguancun should take the lead in this endeavor.

Lot of people have paid attention to the impact of China¡¯s WTO entry. However, less attention is given to the impact on China¡¯s agriculture. This is an issue involving the income of the peasants, which in turn determines the possibility of a robust economy in China. If we want to see our peasant enjoy a higher income, we need to restructure the farm produce and upgrade the quality of the produce. Therefore, Zhongguancun should intensify its efforts to draw hi-tech for agriculture; there is huge market potential.

What do I like most about Zhongguancun? The Innovation. The Beijing municipality has pretty good systematic perceptions. The innovation is not alone; it is followed by industry base. Mid-term test plus economy of scale¨Dthis is the right track. Yes, there is overseas returned student business development park as well.

Then what do I fear most about Zhongguancun? First comes the fund-raising issue. Fund-raising and innovation fund must be given priority, since they could resolve the most urgent problem facing those innovative firms. In my opinion, leaders of Zhongguancun should not only make much of the hardware capacity building, but also should pay equal attention to the software capacity building, in other word, help these SMEs and inventors to tackle the essential problems. The biggest problem facing them is the funding.

Second, we have red-tape. A lot of people say Shanghai is totally different from Beijing in terms of customer service. I think we must improve the service. And that is the area meriting Zhongguancun¡¯s efforts.

Third, the issue of Zhongguancun¡¯s positioning. What is the goal Zhongguancun is to pursue? Big companies or more small ones with innovative mind? In other words, the issue involves whether Zhongguancun should become an industry base for big corporations or an innovative base? I believe it should become an innovative base and it should see to it that there are more small companies of innovative type making their debut there, and definitely not the big ones that could rank themselves among the big and the famous.

Fourth, the development of intermediary agencies in Zhongguancun. This is one advantage Beijing enjoys that has yet to be utilized. As the seat of the central government, intermediaries have tremendous potential in Beijing that could contribute more to the hi-tech industry.

There are opportunities and challenges for Zhongguancun. How does it face challenges? What matters most is the market mechanism. How to go global? How to upgrade our products? What do we do for our products to appeal to the international market? All those questions mean a great deal as well. We can not be dependent on the government, rather, on the investors. And the investment must be market-oriented. It cannot be pushed forward by the government. Privatization is the way out.

How do we attract the entry of transnational corporations (TNCs)? Honey needs bees and butterflies to pass on. In this case, the enterprises are the bees and butterflies. How do they pass on the honey? Mr. Chang Chong Mou had made it to the vice CEO of a Texas Instrument Company. He was later recruited by Taiwan and appointed as president of a polytechnic institute before he was given support to start up enterprise. The government lent him money as investment since he had certain appeal. And the Philips joined and as a result achieved the success of Taiwan electric appliance and becomes one of the leaders in this field. If we wish to see Zhongguancun go along this path, we have to begin with finding those bees and butterflies. What could we offer to attract them? We have to impress them with our reasoning and China¡¯s reality. Most of the Chinese living overseas wish to come back to their home country once they get old. Many miss China no matter how long they reside abroad. But should the first generation fail to come back, we stand to lose the second and the third one. Hence, the government must go an extra mile to bring back the first generation of the Chinese students studying overseas. This way, big TNCs could possibly follow them.

SMEs are the movers and shakers of the majority of economies. The same is true of the US. China is no exception. 99% growth can be attributed to the SMEs. We much bear in mind that this is crucial to the entire economy in China. There are a number of issues that are of first importance to the development of Zhongguancun. They could affect the growth of SMES, which fuel the development of economy.

We must get the start-ups a vehicle to grow. The science park is exactly such a vehicle. In so doing, we can draw more attention and more investments from TNCs and investors across the world. We must have a clear-cut economic and human resource policy before we can bring people together to help science park develop. The capital market needs to play a vital role, since it is supposed to provide capital for the innovative development of enterprises. The legal framework must be strengthened so that it could facilitate the coordination and harmonious cooperation between the Chinese market and the global market. Besides, we have environment protection, protection of various categories of investors¨Dthose problems are all extremely important.

Once China accedes to the WTO, the Chinese market becomes increasingly transparent and there is no longer any boundary of the market. In a free market economy, the government can do little, because the principle is the survival of the fittest. The strong can survive whereas the weak will be eliminated. Therefore, the challenge is how an enterprise can grow up in the shortest possible period and take advantage of the global resources.

The development of the global market is apparently manifested in the restructure of value link. No one would be willing to work on technological development, manufacture and sales altogether, because that would be too costly. The Dell has revenue of US$30bn. It does not make chips, nor computers itself. Rather, it asks some manufacturers in Chinese mainland or Taiwan to do the job. Then what else does Dell do? It designs, distributes, sells. Those are its core businesses. A company does not need to be big and all-inclusive. Whoever fits this commercial pattern will come out stronger. In Hsinchu, Taiwan, some companies merely offers manufacturing service, a portion of the value link of transistors. It has no computer product of its own. It has been thinking of developing of brand name but so far has not made it. Therefore, it becomes the company turning out computers for Compaq and Dell. The potential in Hsinchu lies only in manufacture, with its low cost, short lead-time and high quality.

China is big and its domestic market huge. It boasts a great number of well-educated scientists and engineers. One of my suggestions is that upon China¡¯s entry to the WTO, each Chinese company must find its own place in the value link of the global market.

One forte Chinese mainland has vis-¨¤-vis Taiwan is the technology development of the former. This is true of any field including biogenetic engineering. Now the problem is commercialization. The market knowledge must precede the technology commercialization. Once we know what the market demands, we can identify the suitable product to be commercialized before we can move on to the manufacture and sales. Hence, we must muster enough strength to make companies aware of the global market and forge alliances or partnerships with companies overseas. Say, I have the technology; I need money and partners to tap that technology and I need other partners to sell the products. So in my view, companies need not aim at being big and all-inclusive, and it does not have to be a comprehensive on. What we need is to locate our positions in the value link, and then we can be a success story in the world.

It is the first time for me to attend this session. Just now I listened to vice mayor Liu¡¯s presentation. I feel, among other things, that you have had a very successful development. In terms of international science park building we have to stick to two principles deemed by each science park as essential.

First, it must be based on the economy and the science and technology of the city in question. In other words, in case there are no research institutes par excellence in that city, there is no raison d¡¯etre for such a park since the development of science and technology must synchronize with the commercialization.

Second, a network should be in place so that the people and companies inside the park could have close contacts with those outside the park and the commercial community and the government, in particular. We need such a platform where we can communicate and interact daily and in an informed manner. Once they come to know each other, they can proceed on to cooperation. If those with science & technology backgrounds have some understanding of the science park, they would like to work in it. Hence the need for such a network whereby people can interact. That could be conducive to innovation.

Venture capital is not only confined to money. In the US, there was plenty of it, especially last year. But little attention and concern was shown to the enterprises. So now the venture capital is paying for it.

While we are investing, we have to take into consideration four factors. First, a good market. Second, a good team. Third, a sustainable technology. Fourth, good return on investment.

Market wise, China has a big home market, and in addition, it has a force of scientists and technicians with outstanding talent. That sort of combination will yield good results; it is an invincible combination.

Management wise, the start-ups in Silicon Valley are easy to look for management people. We could tackle this issue one way or the other. One way is to provide the start-ups with a lot of seminars, trainings. For instance, we could run evening school in Tsinghua and Beijing University or even in science parks. The alternative is to recruit those who were born in China but now are working in the States.

As regards technology, we have to make sure that IPR is protected and not lost, enabling the company to enjoy a certain period of growth.

The last point I would like to make is the financial return on investment. There exist two ways of having return on venture capital. One is to have the company listed; another is to have the company bought up. It is critical to set up a stock market for hi-tech firms in Shanghai. It is easier to talk about the listing in the NASDAQ and in Hong Kong than to actually put it into action. So it is imperative to have a stock market in your own localities. I believe a lot of American companies are willing to enter the Chinese market. If they can acquire one tailor-made hi-tech company on the Chinese market, so much the better. A lot of people talk about IPO, but as a matter of fact, the number of companies bought up by others double that of listed ones. Therefore, we must stress the development of the merger market.

In the coming 20 years, the software industry will become the driving force and powerhouse behind the hi-tech industry.

The software development heads for three directions: network, service and globalization. This industry will experience such a process on China¡¯s WTO entry, namely, globalization of technique and human resources, diversification of products, localization of market and localization of service.

With regard to technology globalization, the net era is characterized by an open, communicable, interactive system. ISO is growing in importance and China must take care of the international standards in every field, including multi-media, Internet, communication interface etc. The ISO has made a lot of technical progress. Once China is in the WTO, the core technology no longer makes a clear distinction between international, national or culture identity because of the globalization of technology and human resources.

What is most important for Zhongguancun is to draw the talents. They cut across national borders, cultures, languages and religions. In order to have excellent talents, we need to provide the best environment, space for development. Distinctions among companies, countries, and regions are getting blurred. In future, no one will speak of US Microsoft, China¡¯s Legion, what we talk most is Legion in the US and Microsoft in China, meaning they are supposed to abide by and follow the laws and tax policy of the country they are based in, including the policy of using the talents of that country.

In order to upgrade China¡¯s software industry, the most important thing is to create an ecological environment for development. First, IPR should be respected and piracy minimized. The R&D of product must be market-oriented, and the market is profit-oriented. For venture capital, there must be a withdrawal mechanism. That value link or industry link must be close-ended. But in China, it is different in that it is open-ended due to lack of IPR protection and its consequent unprofitableness. The other question is how the venture capital can withdraw. These two links have to be close-ended gradually. The government should offer a decent policy framework. The regulations regarding Zhongguancun are a good case in point.

Another point I would make is how to optimize the human resources structure, and knowledge structure in particular and how to speed up the update of the knowledge. What China needs is not CEO, but CTO, i.e. some management personnel with certain technology background.

The infrastructure construction in Zhongguancun has made rapid progress. There are a number of good ideas in the master plan. But in developing surface works projects, attention should be paid to the underground space. At present, land in Beijing costs a lot. Therefore, we should develop the underground space, and the shallow layer of the underground space in particular. At the moment, there are two typical work