Thereโs the old Chinese idiom โDonโt enter Sichuan when you are still young.โ The saying reflects the concern that the free and easy local lifestyle will effortlessly undo a youthโs energy and spirit. Today, however, in the age of fierce competition and the notion that time is money, Chengdu, the capital city of Sichuan, stands out as a cozy hub for some tech companies, especially game developers, which donโt care for the stress of Beijing or Shanghai.
At noon, staff at Startupbootcampโs (SBC) Chengdu office were taking naps in unoccupied conference rooms. They are taking real napsโlying across chairs with thin blankets covering them. Erik Ackner, Program Director at SBC, said he enjoyed the relaxing city life and the mindset locals haveโpeople choose to work on what makes them happy.
โPeople here are proud of the local food and the culture,โ Ackner said.
Charlie Moseley, an expat in the local gaming industry said that if it werenโt for the laid-back atmosphere, he wouldnโt have stayed in the city for 10 years. Moseley is the founder and chief editor of a lifestyle blog called Chengdu Living, where he shares his experience and appreciation of the city.
Living is cheap and the traffic is easy. The tradition of playing Chinese chess and Mahjong helps to set up a positive vibe for the creative industry such as gaming, Moseley told TechNode. One of the best-known cases is Tencentโs top-grossing mobile game, Honor of Kings. This multiplayer online battle arena was developed by Tencentโs Timi Studio Group in southern Chengdu.
According to local media reports, 70 percent of the team were locals, and the others were drawn to the city because of local food and cheaper housing compared with Beijing, Shanghai, and Guangzhou. For instance, Moseley rents an apartment with three bedrooms for a little above RMB 2,000, while in Beijing, the same amount of money can afford less than a single room.
Government funding is a great help
Chengdu is home to several top Chinese universities, such as Sichuan University, Southwestern University of Finance and Economics and the University of Electronic Science and Technology of China. In the southern part of the city, tech companiesโincluding offices of some multinational tycoons such as IBM and Ubisoftโare gathered in Chengdu Hi-Tech Industrial Development Zone, one of the hundreds of administrative districts in China solely set up for developing high tech industries.
Ackner said the Chengdu government is eagerly anticipating the first unicorn startup in the region and is very generous with funding and other forms of support that can help startups grow.
In April 2017, the local government invested RMB 600 million in smartphone manufacturer Smartisan Technology. Smartisan has moved half of its employees into their new 8,000-square meter (86,111 square feet) office in Chengdu from Beijing and held its product launch event in the city last November. Luo Yonghao, Chief executive officer at Smartisan, said the government was a great help.
Chengdu has been promoting tech innovation and entrepreneurship since 2015. It released a 10-year plan to turn the city in Chinaโs less developed southeastern regions into โthe city of entrepreneurshipโ. Early-stage startups can apply for RMB 100,000 to RMB 500,000 financial assistance, depending on the scale and stability of their businesses. The government also provides startups an extra 10% of the angel investment theyโve received. The Science and Technology Innovation Service Platform, a website supported by Chengdu Science and Technology Bureau, shows new tech companies that have been granted tens of thousand RMB loans under special terms that favor tech startups.
Tap4fun, a Chengdu-based mobile game company, was incubated in the government-backed Tianfu Software Park. The company grew from a team of ten to a few hundred in the recent decade and released a few top charted games in the international markets such as Galaxy Empire and Kingโs Empire. It filed for an initial public offering on the Shanghai Stock Exchange in 2016 but was rejected. There were concerns over Tap4funโs long-term profitability and the fact that most of its profit came from overseas. Apart from those, tax incentives made up 27% of the companyโs net revenue in 2016 and if the policy changed, it would hurt the earnings.
The influx of government money not only suggests the local authorities want to take the lead in the future tech industry but also that there arenโt many mature investors around. After companies finish the acceleration program, SBC will take them to Beijing or Shanghai to seek funding. For Ackner, Hangzhou is a better city for startups because itโs closer to Shanghai, which has abundant investors and capital. Hangzhou is also where the e-commerce giant Alibaba is located with plenty of local tech firms trying to fulfill Alibabaโs needs.
Itโs understandable that the government wants to make up for the capital that is not available in the market, said Sophie Yao. She is the China general manager at Fenox Venture Capital, a Silicon Valley-based firm that opened a new office in Chengdu last year.
Programs led by local government mostly follow Beijingโs instructions, which means policies that encourage technology and innovation do not always fit different cities that have varied resources, Yao explained. The generous support from the government can give birth to innovative and first-rate startups, but it wonโt be very efficient. Yao estimates two or three may come in a hundred.
Lacking variety is also obvious within industries. Nearly 90% of gaming in China is mobile and since PlayerUnknownโs Battlegrounds is such a hit now, most of the top charted mobile games are of the similar kind, Moseley said. Tencent and Netease dominate 80% of Chinaโs gaming market, which is unthinkable in the US, where even a huge company usually takes 20% of the market share at most, he added.
996 in the lazy city
Multinational game publisher Ubisoft opened its Chengdu Studio in 2008. Studio Manager Jean-Francois Vallee has not expected the city to grow to its present scale. His experience of the city was different from the newly grown local startups.
People here work hard too, he said. The notorious 996 lifestyleโworking from 9 am to 9 pm and 6 days a week which is ubiquitous across Chinaโs startupsโis not uncommon among Chengdu tech companies, although not at Ubisoft, he explained. As for rents, Vallee said cheap rent and labor were an advantage in Chengdu in the past, but not anymore.
โRents are more expensive than some places in my hometown of Montreal,โ he explained.
The Chengdu studio focuses on providing technical support for game production, especially on the Assassinโs Creed brand. It is also cooperating with different studios and supporting Ubisoft general gaming development.
Vallee said Ubisoft came to Chengdu to explore more cultural diversity and โestablish a presence in less known cities where there are good universities and a good talent pool.โ Also, in early 2000, the central government started the still ongoing โChina Western Developmentโ campaign that encouraged companies to start businesses in the less developed western parts of the country.
Since China is such a mobile-focused gaming market, the Chinese market only a fraction of Ubisoftโs overall revenues. In 2017, Ubisoft achieved sales of โฌ687 million in the US, compared with โฌ162 million in the Asia Pacific. The Chengdu studio is part of the overall strategy of the company, targeting global audience rather than focusing on the Chinese market. However, Vallee said that the Chinese market is still promising as Chinese gamersโ tastes change and evolve and, hopefully, more will move into console games.
In March, Chinaโs tech giant Tencent acquired 5% of Ubisoft in March for โฌ369 million. In a recent video, Chief Executive Officer of Ubisoft Yves Guillemot said the deal will help Ubisoft to present its games in the Chinese market and grow its market share there.
Itโs not just Ubisoft: many international companies have been viewing China as their crucial source of income andโjoined by domestic tech giantsโare shaping Chinaโs economic landscape. Chengdu is known for a slow-paced lifestyle, which locals are really proud of. However, the city is becoming faster and faster. With more people and companies moving in, Chengdu will become more integral to Chinaโs tech scenes and maybe, it will become just another tech hub of China.
