The Miracle of Hefei: From Small to Smart

MODERNIZING the industrial system anddeveloping new quality productive forcesat a faster pace – this is one of China’smajor tasks for 2024 as laid down in theReport on the Work of the Government.

Hefei， capital of Anhui Province， is a national sciencecenter. Over the past 40 years， the city has beentaking the initiative in developing modern industriesempowered by sci-tech innovation. Starting from thehome appliance industry in the late 1970s， Hefei hasclosely followed the trends of technological revolutionand industrial transformation， and graduallyformed its own strengths in new leading industries，such as chips， display panels， new-energy vehicles，intelligent connected vehicles， smart manufacturing，and artificial intelligence （AI）.

The Hefei Model

Hefei became the capital of Anhui Province onlyafter the founding of the People’s Republic of Chinain 1949. Over years of development， it has blossomedinto a first-tier city with its GDP exceeding RMB 1trillion and a population approaching 10 million.

Hefei’s new development path features invitinga leading company with large investment， and thenbuilding the whole industrial chain in the city. TheHefei model prioritizes cultivating competitive industrieswith skillful use of market capital.

The rise of three Chinese companies illustrates thestory of Hefei’s transformation from an inconspicuousinland city in east China to a hub of high technol-ogy. In 2008， Hefei put one-third of its fiscal revenueinto BOE and helped this struggling company builda production line for sixth-generation LCD displaypanels， the first of its kind in the Chinese mainland.Today， BOE is a giant with an annual revenue of billionsof RMB， and Hefei is known as a global displayindustry base.

Eight years ago， ChangXin Memory Technologies"was founded in Heifei with an investment of RMB150 billion to develop and manufacture memorychips. Today， Hefei has built an industrial cluster formemory chip making.

In 2020， Hefei managed to raise RMB 7 billion inventure capital and tide smart electric vehicle （EV）maker NIO over its difficulties. After the EV makerbuilt its headquarters in Hefei， globally leading EVcompanies， such as BYD and Volkswagen， also setup units， enabling Hefei to share the benefits of abooming EV market.

Operations that are seemingly risky are actuallywell thought out， serving the needs of localindustries. For example， Hefei’s home appliancesindustry was the first in the city to generate aproduction value of RMB 100 billion. Today， Hefeihas become the largest smart home applianceproduction base in China， with the total output ofair conditioners， color TV sets， washing machines，and refrigerators ranking first in the country for 13consecutive years.

The booming home appliance industry generateda massive demand for LCD screens， so enter BOE.Similarly， due to the presence of the local brand JianghuaiAutomobile and an automotive industry cluster，NIO decided to move its headquarters to the city.

The Hefei model highlights institutional innovation.State-owned capital is used to finance strategicallyemerging industries. In this way， both aneffective government and an efficient market areleveraged.

According to Huang Hanquan， president of theAcademy of Macroeconomic Research， both managementand institutional innovation should be givenequal weight in developing new quality productiveforces， as they can speed up scientific and technologicalinnovation. Institutional innovation can be usedto accelerate the transformation of traditional industries，cultivate strategic emerging industries， andmake strategic arrangements for future industries.

New-energy vehicles （NEVs） are another example.Hefei has formed comparative advantages in thetechnologies， brand building， and scale of NEVs. In2023， the city produced 740，000 NEVs， ranking fourthin China.

Hefei is also developing future industries， such asthe low-altitude economy， aerospace information，quantum information， and fusion energy. EHang，which makes unmanned aerial vehicles （UAVs），signed an agreement with the local government toset up its eastern China headquarters in Hefei to promoteUAV production， sales， and operations since thecompany has obtained the world’s first type certificatefor passenger-carrying pilotless electric verticaltake-off and landing aircraft （eVTOL）.

Hefei has a cluster of over 100 aerospace enterprises，such as GEOVIS and PIESAT. Hefei also boastsChina’s first quantum information themed sci-techpark for future industries， with a leading numberof quantum patent authorizations nationwide. Inaddition， collaborative promotion of fusion energytechnology in Hefei has promoted the application ofthe cutting-edge technology.

An Emerging Tech Hub

Hefei’s 2024 Government Work Report pledges tospeed up smart transformation， with the completionof more than 500 major projectscovering all industrial enterprisesabove the designatedsize， so as to improve digital，intelligent， and networked con-nectivity.

In terms of digital intelligence， Hefei has beenapproved as one the first batch of national pilot citiesfor digital transformation of small and medium-sizedenterprises， with 500 companies above the designatedsize to create benchmarks.

Hefei has been implementing an initiative forindustrial Internet innovation. It supports collaborativeapplication of SparkDesk， a homegrown AI largelanguage model， and Antelope Cloud， a cross-domainindustrial Internet platform， in industries， and facilitatesthe Antelope Industrial Cloud in empowering430，000 local companies.

In terms of technological transformation andupgrading， Hefei has revised its subsidy policy.Currently， it provides a one-time subsidy of 15percent of the equipment investment amountwith a maximum reward of RMB 20 million toindividual projects. In 2023， a total of RMB 940million of policy funds was used， benefiting 327enterprises. A total of 81 projects obtained overRMB 380 million in provincial-level governmentfinancial support for digital transformation.

Building a “Silicon Valley”

In June， Wang Qingxian， governor of Anhui，conducted a field investigation in the Universityof Science and Technology of China （USTC） SiliconValley. He called for efforts to turn the USTCSilicon Valley into a test ground for the reform ofscience and technology system and a “high-yieldfarmland” for high-tech industries.

In 2022， the provincial government issued anaction plan for the construction of the USTCSilicon Valley. Today， it is a high-tech hub withhigh-caliber professionals and global alumni ofthe USTC as its think tank. More and more companieshave established their headquarters orregional offices on the campus.

Over the past two years， 1，391 innovative enterpriseshave settled down， and nearly 43 percentof quantum enterprises， 55 percent of aerospaceinformation enterprises， and a half of biomanufacturingenterprises in Hefei have gatheredin the USTC Silicon Valley. It is expected thatas of 2025， this “Silicon Valley” will attract over100，000 outstanding high-caliber professionals，including alumni from both domestic and foreignuniversities and research institutes.

Hefei currently has 12 large-scale scientificfacilities， making it a comprehensive national sciencecenter.

The city’s fine tradition of building a “magnet”for talent can be traced back to the 1970s， whenthe USTC moved out of Beijing into Hefei. In overhalf a century， the once obscure town has turnedinto a globally renowned city for its science andtechnology innovation.