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But the “Hefei model” will not be easy to emulate
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stroll down “Quantum Boulevard” reveals one of the world’s tightest concentrations of bleeding-edge technology firms. Dozens of companies feed a quantum-computing supply chain that did not exist a few years ago. Their wares include some of the most advanced commercialised technology on the planet. The district is hardly a decade old; not long ago the most modern tech in the area was farming equipment. And it is in an unlikely spot: Hefei, the capital of Anhui, one of China’s less fancied provinces.China’s growth is flagging, but its economic miracle appears alive and well in Hefei. Home to about 9.6m people, the inland city saw its GDP grow by more than 8% a year on average from 2012 to 2022. Once considered backward and poor, Hefei’s residents now enjoy a disposable income that comfortably exceeds China’s urban average (see chart).
The city’s success owes much to what some call the “Hefei model”. A unique combination of local-government investment and private enterprise, the model has been described as state capitalism at its best. It has fostered industries like high-end manufacturing, electric vehicles (EVs), biotech and semiconductors. These so-called strategic, emerging industries now account for over 56% of Hefei’s industrial output, compared with less than 27% in 2013. Whatever local officials have been doing, it appears to be “the right mix of industrial policy and private-sector mojo,” says Robin Xing, an economist at Morgan Stanley and a Hefei local.
This style of growth is precisely how Xi Jinping, China’s leader, envisions the country’s future. Hefei’s technological progress chimes with Mr Xi’s call for an “Industrial Revolution 4.0”, in which China shakes off “low-quality” growth—cheap manufacturing and debt-financed homebuilding—by capturing entirely new industries and their supply chains. This vision reserves special attention for the inland backwaters that have missed out on much of the internet boom in coastal provinces. If Mr Xi has his way, the next decade of development will look more like Hefei than today’s tech hubs of Shenzhen and Hangzhou.
BOE Technology, the world leader in LCD displays, has some of its main factories in Hefei. So does NIO, one of the world’s fastest-growing ev companies. China’s leader in voice-recognition artificial intelligence, iFlyTek, was...