The sky is vast, the wilderness stretches endlessly, and the wind blows the grass low—"to build a factory." This scene today sends a clear message: there is no shortage of land for good projects.

Indeed, in cities where land is at a premium, the willingness to provide “land” is proof of genuine commitment. As long as a project aligns with development goals, it can be successfully established and thrive.

From the perspective of local governments, building a complete industrial chain is indispensable, and their reach has extended into deeper sectors. Looking at the characteristics of enterprises, they occupy key links in the industrial supply chain, driving the entire chain toward specialization, refinement, and distinctiveness.

It must be said that in a landscape where every inch of land is precious, it is essential not only to focus on priority industries but also to broaden the scope of cultivation.

This inevitably involves industrial upgrading.

Industrial upgrading is by no means a case of “replacing old industries with new ones,” nor is it synonymous with the development of high-tech industries. In essence, it involves shifting industries toward higher value-added sectors, with technological upgrading serving as the core driving force behind this transition.

In the Race for Land, Shenzhen Leads the Way

In Shenzhen, as long as a project is viable, there will always be land available for it.

Among China’s first-tier cities, Shenzhen has the smallest land area—roughly one-third the size of Shanghai, one-quarter that of Guangzhou, and one-eighth that of Beijing. Limited land space has long been the biggest bottleneck constraining Shenzhen’s development.

Yet, within this area of less than 2,000 square kilometers, Shenzhen has generated a GDP of 3.07 trillion yuan and local fiscal revenue of 1.1 trillion yuan.

Among these, Nanshan District—a major economic and technological hub—had cultivated 182 listed companies (both domestic and international) by 2021, bringing the total number of listed companies to 186, and hosts approximately 390,000 business entities.

It is worth noting that the 2018 U.S.-China trade friction brought the Yuehai Subdistrict Office in Nanshan District into the national spotlight, earning it the reputation as the “most remarkable subdistrict office” in the country. Simply put, Yuehai is the “backbone” of Nanshan’s economy.

This small subdistrict, with an area of just 14 square kilometers and a permanent population of a mere 200,000, generates a GDP of no less than 250 billion yuan.

A simple calculation shows that every day, commuters from Bao’an, Longhua, Luohu, and other areas flock to Yuehai for work, so the actual employed population is certainly more than 200,000.

In other words, the 250 billion yuan GDP isn’t entirely generated by the permanent residents. But even if it isn’t created by the permanent residents, this total is still staggering on a national scale.

Of course, behind this massive GDP lies a multitude of high-quality enterprises. There are over 100 listed companies here, rivaling the three central provinces.

In addition to listed companies, there are also unicorn companies. Furthermore, the Chinese offices of global giants such as Qualcomm, Apple, and NVIDIA are also located here.

It can be said that China’s high-tech industries and cutting-edge sectors are all concentrated here, truly embodying the image of a Chinese “Silicon Valley”!

Aggressive Relocation: Beijing’s Foresight

Looking ahead, Beijing has been undergoing an urban transformation centered on “relocation, vacating, and upgrading.” It is not hard to imagine that industrial relocation and upgrading are a foregone conclusion.

As early as the Xicheng District “Two Sessions” in early 2013, then-District Party Secretary Wang Ning ran the numbers: the Zoo area housed over 20,000 clothing wholesalers, generating approximately 60 million yuan in economic benefits for Xicheng District annually. However, the government’s expenditures on transportation, environmental management, and other related costs exceeded 100 million yuan.

Subsequently, the central government set forth requirements for Beijing’s future development, calling for the reduction and relocation of “non-capital functions” to surrounding areas.

Data shows that between 2014 and 2020—a span of seven years—Beijing relocated a total of 7,000 enterprises, averaging about 1,000 relocations per year, across sectors including manufacturing, retail, wholesale, transportation, and warehousing.

Take the "Dongcheng-Baidu" market at the time as an example; the relocation notice came very quickly.

In early 2015, the relocation timeline for the Dongcheng-Baoding Market was announced: by 2017, 300,000 square meters of market space would be relocated, along with 30,000 employees, reducing the floating population by 50,000 to 100,000.

Businesses are like a stream, always flowing toward where conditions are most favorable. And this mobility of businesses directly reflects the optimization of a region’s industrial structure.

After a period of upheaval, while industries were relocated, sufficient space was freed up to accommodate the influx of more “high-tech, high-end, and cutting-edge” industries.

As the Dongbei Market community scattered to various locations and financial professionals took center stage, Beijing’s Dongbei Market transformed into the “Jinke New District.”

As Xicheng District’s demonstration zone for fintech enterprises, the Jinke New District had seven companies listed on Beijing’s “Specialized, Refined, Unique, and Innovative” enterprise roster by the end of 2021, including Yunli Wisdom, Guozheng Tong, Qingge Technology, and Interstellar Glory.

Thus, from the relocation of “Dongbai” to the departure of “central state-owned enterprises” from Beijing, while everyone has been fixated on the city’s “downsizing,” few have noticed that the prime real estate has been filled with “Specialized, Refined, Unique, and Innovative” enterprises.

The shift from “Made in Beijing” to “Created in Beijing” is a testament to the capital’s strength. As Beijing transitions from “aggregating resources for growth” to “relocating functions for development,” its industries are poised to upgrade and seize new opportunities.

Breaking Through Bottlenecks: The Endogenous Nature of Industrial Upgrading

Have you heard of the “ballpoint pen conundrum”?

A ballpoint pen tip consists of the ball at the tip and the ball holder. While China produces and exports the balls, the ball holders—which are only 2.3 millimeters in diameter—have long been dominated by countries like Switzerland and Japan, both in terms of production equipment and raw materials.

Who would have thought that such a tiny ball holder could become a bottleneck?

To transition from a “manufacturing giant” to a “manufacturing powerhouse,” we must extend our reach into deeper sectors. However, to effectively implement land-intensive utilization, industrial upgrading is the most effective path.

Nevertheless, most localities have a vague understanding of industrial upgrading. Some even believe that “replacing old industries with new ones” constitutes industrial upgrading, or that simply replacing existing industries with high-tech ones is sufficient.

From the perspective of economic policy, two main viewpoints currently dominate the discourse on industrial upgrading.

The first is macroeconomic policy. It posits that industrial upgrading will occur automatically once “market clearance” takes place—that is, once excess capacity is resolved and “zombie enterprises” are eliminated.

The second is traditional industrial policy. This approach is defined directly as technological breakthroughs, involving massive investment in R&D, with results determined by expert reviews and acceptance—essentially equating high-tech development with industrial upgrading.

In reality, this is not the case. Industrial upgrading possesses “endogenous” characteristics, with its primary driving force arising from the industrial development process itself—that is, from the innovative activities of enterprises.

01 Moving Beyond the "Empty the Cage, Replace the Birds" Mindset

Using administrative measures to drive industrial upgrading and structural adjustment is not a sustainable approach.

For example, using administrative measures to screen projects, pushing out low-end industries, and then introducing high-end ones. This is also reflected in the rush across the country to build industrial parks for big data, cloud computing, robotics, and the like.

This “one-size-fits-all” approach is simply not feasible.

02 Moving Beyond the Fantasy of a “One-Size-Fits-All” Solution

Industrial upgrading is an evolutionary process. Local governments should introduce relevant policies that promote, guide, and incentivize development, while avoiding “shock therapy” approaches.

Manufacturing expertise and technology are constantly evolving, and these advancements must be built upon existing foundations. Therefore, the policy mindset toward industrial upgrading must never rely on a “one-size-fits-all” approach; otherwise, it will disrupt the entire industrial structure and ultimately hinder industrial upgrading.

It is clear that industrial upgrading must be “broad-based,” encompassing both the development of high-tech industries and the transition of existing industries toward higher technological levels, greater productivity, and higher-value-added activities—the latter being particularly crucial for cities where land is at a premium.