Start-ups rise fast where traditional manufacturing once ruled – powering Beijing’s innovation and self-reliance push
In Suzhou, eastern China’s Jiangsu province, the start-up Magic Lab specialises in full-sized humanoid robots designed to interact with people and work in factories – just one example of the
Yangtze River Delta
region’s transformation into a national innovation hub.
“More than 90 per cent of the components, including critical parts like torque motor joints, actuators, control units and dexterous robotic hands, are developed in-house and locally manufactured,” said Wu Changzheng, the company’s president and a graduate of Shanghai Jiao Tong University. “The other 10 per cent is in central processing units (CPUs).”
Magic Lab is one of thousands of cutting-edge ventures reshaping Jiangsu and neighbouring Zhejiang province. Once known for producing textiles, chemicals and machinery, the Yangtze River Delta is now home to a new generation of firms developing technologies critical to China’s future.
Do you have questions about the biggest topics and trends from around the world? Get the answers with
SCMP Knowledge
, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
The start-up has developed a general-purpose AI model that integrates sensing, navigation and movement control, enabling its humanoid robots to quickly adapt to tasks and cooperate in real-world environments.
According to Wu, the local government has fostered a supportive environment through tax incentives, industrial estates and other measures, providing the company with a solid foundation. Most of its funding comes from private sources, with the firm largely driving its own research and development.
One of the main factors attracting MagicLab to Jiangsu is its mature manufacturing base – particularly in next-generation information technology, high-end equipment, new materials and other advanced sectors. This offers quick access to upstream and downstream support and helps reduce supply chain costs, according to the company.
Based in the same city as appliance unicorn Dreame Technology – one of Magic Lab’s investors – Wu’s team has deployed its humanoid robots on the partner’s factory floor to gather real-world data and explore multi-robot coordination, a field still in its infancy in China.
The transformation underway in the Yangtze River Delta builds on a decades-long industrial base. After China launched reform and opening-up, entrepreneurs in the lower reaches of the eastern coastal region quickly set up private factories, turning it into one of the country’s first manufacturing hubs.
For years,
cities like Yiwu
, known for small commodities, and Kunshan, a major hub for electronic components, symbolised Zhejiang and Jiangsu’s traditional industrial strengths.
But that image is rapidly changing. The Yangtze River Delta now stands at the forefront of China’s drive for ”
high-quality growth
“. Building on its strengths, the region has emerged as a hub of innovation amid a national push for technological self-sufficiency.
Long powered by industrial output, vibrant private economies and close proximity to China’s financial hub Shanghai, both Jiangsu and Zhejiang consistently rank among the country’s top five provincial economies in terms of GDP.
Jiangsu, in particular, has held the number two spot for decades, behind only Guangdong province – with the gap narrowing each year.
In 2024, the combined GDP of the two provinces in the Yangtze River Delta reached 22.7 trillion yuan (US$3.15 trillion), rivalling that of the United Kingdom.
While Chinese policymakers have talked about technological independence and innovation since the early 2000s, terms like “chokepoint technologies” and “self-reliance” gained wider traction during US President Donald Trump’s first term – when
Sino-US tech tensions
intensified.
In 2018, President Xi Jinping elevated the Yangtze River Delta’s regional development to a national strategy. A year later, China’s State Council released a blueprint to turn the area into an innovation hub by 2025, targeting mid-to-high-end industrial upgrades in IT, biotech, green energy, intelligent transport and other advanced sectors.
The push has accelerated since late 2023, when Xi urged the country to embrace ”
new quality productive forces
” – a growth model centred on technological breakthroughs and industrial upgrades. Economic powerhouses like Jiangsu and Zhejiang have been tasked with spearheading the transition, shining a spotlight on the Yangtze River Delta’s reputation as a “land of plenty”.
Hangzhou, Zhejiang’s capital, has emerged as China’s newest “Silicon Valley” thanks to the rise of its “six little dragons” – home-grown innovators including AI start-up DeepSeek, humanoid robotics makers Unitree and Deep Robotics, video game studio Game Science, brain-machine interface innovator BrainCo and 3D interior design software developer Manycore.
Meanwhile, Jiangsu leads the country with 2,163 national-level
“little giant” firms
– specialised small and medium-sized enterprises (SMEs) known for their technological innovation and influence in strategic supply chains. That number surpassed Guangdong’s 1,984 and Zhejiang’s 1,805, according to the most recent official data from 2024.
Guo Shan, a Shanghai-based partner at the advisory firm Hutong Research, said one major advantage setting the two provinces apart is the talent pipeline from leading universities that excel in engineering and applied sciences – such as Zhejiang University, Nanjing University and Shanghai Jiao Tong University.
The provinces also benefit from the presence of major tech firms like Alibaba, vibrant private sectors and supportive, business-friendly local governments, she added. Alibaba is the owner of the South China Morning Post.
“They enjoy less central policy support and less foreign interest than Beijing, Shanghai or Shenzhen, but this also leaves more room for local governments to pilot new ideas and for local small and medium-sized enterprises to grow.”
“The lower living expenses in these provinces have also made them more affordable for start-ups like the six little dragons or small giants.”
Take Suzhou as an example. Just 20 minutes from Shanghai by high-speed rail – a journey that used to take about two hours by conventional train – the city previously benefited from the “Sunday engineer” effect, with experts travelling from Shanghai on weekends to help upgrade local factories.
“Suzhou now is becoming an all-rounder,” said Zhang Bin, deputy director of the Service Division at Suzhou Science and Technology Bureau, noting the city’s business environment, industrial foundations and quality of life.
Compared to metropolises such as Beijing, Shanghai and Shenzhen, Suzhou has lower living costs and a
greener environment
. With a strong manufacturing base, a thriving private economy and a strategic location in the Yangtze River Delta, it also offers abundant job opportunities and fertile ground for talent to thrive. Promising careers and quality of life go hand in hand, Zhang said.
In Zhejiang, both officials and businesses credit the province’s thriving innovation culture to its early embrace of market reforms – and, more importantly, to an effective government-business relationship.
“Dating back to the planned economy era, Zhejiang received limited state investment due to its lack of natural resources. As a result, the province had little choice but to pursue development through innovation,” said Xu Wenguang, executive vice governor of the province, in a press conference on June 12.
“When it comes to fostering technological progress, I’ve always believed Zhejiang’s greatest strength lies in its overall ecosystem – the government focuses on creating a favourable environment, while companies focus on creating value,” Xu said.
“Zhejiang has cultivated a particularly effective relationship between the government and the market, which has laid fertile ground for innovation and entrepreneurship.”
Wang Hengli, communications director at Tianneng, a new energy company based in Huzhou, Zhejiang, said local authorities generally refrain from unnecessary intervention, allow companies room to operate and respect entrepreneurship.
“Every year, on the first working day after the Lunar New Year, local officials visit companies in the region. It may seem symbolic, but I think it reflects their recognition of our contributions and their pro-business attitude,” Wang said.
Founded in the late 20th century as a lead-acid battery maker for scooters,
Tianneng
has turned its focus to lithium batteries and energy storage systems in recent years. With a fully automated production line and a research team of over 100 PhDs, the firm has developed models capable of operating at minus 70 degrees Celsius (minus 94 degrees Fahrenheit).
According to its 2024 annual report, Tianneng plans to invest over one billion yuan in R&D for advanced energy storage and hydrogen fuel cell systems.
Despite the national push for new energy, Wang said the company retains full autonomy over innovation and strategy.
“In Zhejiang, the boundary between government and enterprise is clearly defined.”
But even with a thriving tech ecosystem and emerging companies, the region still faces persistent challenges.
Wu Gang, deputy director of the Nanjing Municipal Bureau of Industry and Information Technology, said funding had been one of the biggest obstacles in recent years.
“The fundraising environment is not particularly favourable at the moment,” Wu said. “But local governments are increasingly recognising the importance of guiding funds, while private capital is actively seeking promising sectors.”
“Rather than offering direct subsidies, local governments are co-investing to signal policy support and bolster confidence in strategic industries.”
With limited fiscal budgets, which also need to fund public services, local authorities act more as facilitators – building platforms and linking enterprises with capital to spur innovation, Zhang said.
Guo also pointed to the lack of predictable exit channels for private equity and venture capital, as well as an underdeveloped capital market for pricing technologies and managing risks – top concerns for foreign investors looking to benefit from China’s innovation-led growth.
Commercialising domestic technologies also poses a challenge, requiring cooperation with globally competitive firms and the export of original,
high-end Chinese tech
– both still in their infancy, she said.
“To close these gaps, local governments and enterprises may consider taking a global perspective in developing these technologies. Both could more actively seek collaboration with foreign institutes for research and commercialisation opportunities.”
While central policies largely shape exit channels, she urged local governments to adopt a more flexible approach towards investors, offering greater leeway “in defining the terms of investment, returns and exit options – and even facilitating mergers and acquisitions”.
More Articles from SCMP
End-of-life support for disabled to ease stress in Hong Kong
How Hong Kong’s IPO reforms are aiming to boost market stability and attract global investors
In a first, Xi will miss Brics summit in Rio as Li Qiang leads China delegation: sources
Hong Kong’s new openings, from a Japanese bar to a pastry pop-up
This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.
Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.
