Pearl River Delta leads the country in innovation

Shenzhen-based companies lead the pack in "innovative power", ahead of Shanghai and Beijing, according to an HSBC survey.

Companies based in the Pearl River Delta are the most competitive in innovation, according to a HSBC report.

The Chinese Corporate Innovation Report 2017, presented by HSBC China in partnership with Yicai Media Group and Zhejiang University, finds that companies based in the delta are the most competitive in terms of their “innovative power”, with those in Shenzhen topping the list nation-wide.

Overall, the best areas are along the eastern coast, such as Guangdong, Beijing, Shanghai, and Zhejiang.

“Innovative power” measures many things, such as the amount a company spends on research and development, its “innovative efficiency” and the number of patents filed.

“Innovative efficiency” is calculated on such factors as how well the company’s research and development investment translates into sales and how novel its business models are.

The Pearl River Delta is becoming China’s “Silicon Delta” as companies there transform from traditional manufacturing to the new economy and a new generation of start-ups mushroom, the report said.

With their better resources and infrastructure, Beijing, Shanghai, and Zhejiang are among the top destinations for innovative companies.

But the report says some inland provinces are catching up in their shift from traditional industries to the new economy.

The report points to central Shanxi Province and northeastern Liaoning Province, which saw their innovative power scores soar 34 percent and 29 percent respectively in 2016, compared with a 13 percent gain for Beijing.

 “It isn’t just hi-tech companies in China that invest in innovation, but also those in traditional industries such as beverages and textiles, and in particular privately owned companies and small and medium enterprises,” said Frank Fang, HSBC’s Head of Commercial Banking for China.

The report studied 1,264 domestically-listed Chinese companies in industries ranging from manufacturing to software and information technology services.

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