Hangzhou is entering a critical period of a new round of industrial adjustment.
On August 19, Unitree Robotics will list on the SSE Sci-Tech Innovation Board, becoming the "first humanoid robot stock" on the A-share market. The first of the "Six Little Dragons" to achieve an IPO is considered another milestone for Hangzhou in moving beyond the "e-commerce era."
Just a few days earlier, Hangzhou further deepened its commitment to its "traditional strength" in the services sector—setting a clear goal at a high-profile city-wide services industry conference: by 2030, the added value of the services industry will exceed 2 trillion yuan, with producer services accounting for over 60%.
On one side is manufacturing, on the other is services, bringing to light the long-discussed issue of Hangzhou's perceived "imbalance" in manufacturing.
In recent years, Hangzhou has continuously ramped up its emphasis on manufacturing, proposing to "rebuild a Hangzhou industry." However, from the data, the proportion of added value from large-scale industries in Hangzhou has been declining, accounting for only 20.1% of GDP last year.
The other side of the coin is the continuous growth of the services sector. In the first half of this year, the added value of Hangzhou's services industry reached 904.5 billion yuan, a year-on-year increase of 5.4%, the highest growth rate in two years; the services sector's share of GDP exceeded 75% for the first time, reaching 75.3%, second only to Beijing, Shanghai, and Guangzhou.
This "rise and fall" has brought an old question back to the surface: as the services sector climbs higher, will the "foundation" of manufacturing become thinner? Under the requirement to maintain a reasonable proportion of manufacturing, what kind of reference can Hangzhou provide for cities hoping to bet on the next "little dragon"?
"25%"
25% was once considered a "red line" for the proportion of manufacturing in a city's economy.
The most representative example is Shanghai, which, in the "Shanghai Three-Year Action Plan for Promoting High-Quality Development of the Manufacturing Industry (2023-2025)" issued in 2023, explicitly drew a red line: by 2025, the proportion of industrial added value in Shanghai's regional GDP should reach over 25%. This was also the first time in seven years that Shanghai re-emphasized this goal.
Authoritative validation comes from a report by a World Bank research team: for megacities like Shanghai, the proportion of manufacturing should be between 25% and 30%. Consistent with this, many cities have also drawn their own "red lines." For example, Shenzhen, a major industrial city, although its manufacturing share is still significantly above 30%, still proactively set a red line for the city, mandating that the proportion of industrial land should not be less than 30%.
Although Hangzhou did not explicitly state such a red line at the time, under the national overall requirement to keep manufacturing's share "basically stable," Hangzhou also made similar arrangements in its 14th Five-Year Plan outline, proposing to deeply implement the "New Manufacturing Plan" and advance the "New Factory Plan."
However, this did not prevent the continuous rise in the services sector share in many cities. Several years later today, the manufacturing "red lines" in more and more cities are showing signs of loosening.
Looking at data from the first half of this year, as most cities have not released specific manufacturing data, if we only refer to the proportion of services sector added value in GDP, among the trillion-yuan GDP cities, there are four where this indicator exceeds 75%. Particularly Shanghai, where this indicator reached 79.4%, an increase of 4.2 percentage points compared to 2023, second only to Beijing.
Hangzhou is one of them.
A set of data repeatedly cited by local media is that in 2023, after Hangzhou's services sector added value share exceeded 70%, it continued to rise, increasing by 5 percentage points in three years, and further broke through 75% in the first half of this year, with the gap with Guangzhou narrowing to 0.3 percentage points.
In fact, Hangzhou has not relaxed its emphasis on manufacturing. In the past few years, under the goal of building a "global advanced manufacturing base," Hangzhou has, on one hand, reshaped its industrial geography, creating the East Hangzhou Intelligent Manufacturing Corridor to synergize with the West Hangzhou Science and Technology Innovation Corridor, forming a "two corridors" linkage. On the other hand, it has restructured its industrial framework, building the "296X" advanced manufacturing clusters, aiming to break the "significant deficiencies" in manufacturing in terms of total volume, growth rate, investment, industrial level, and enterprise attraction capacity.
But at the same time, the services sector remains a key development direction for Hangzhou. Just from a policy perspective, starting in 2022, Hangzhou has held high-level conferences on the high-quality development of the modern services industry for three consecutive years, hoping to further promote the upgrading of the services industry.
At this year's services industry conference, Hangzhou Municipal Party Committee Secretary Liu Fei further pointed out that the services industry is the "driving force industry" for Hangzhou to promote economic and social development, concerning industrial development, economic circulation, and people's livelihood and employment. It is necessary to "take promoting the expansion, quality improvement, and efficiency enhancement of the services industry as a major task, continuously achieve new results, and continue to lead the nation."
"Dual 70%"
Why does Hangzhou continue to push for an increase in the services sector share while under the requirement to stabilize the industrial proportion? One reason is that Hangzhou experienced the debate between manufacturing and services very early on.
One consensus is that the year 2000 was the starting point for Hangzhou's new-era promotion of the "industry revitalizing the city" strategy. Subsequently, Hangzhou's total industrial output value grew at a pace of crossing a 100-billion-yuan threshold almost every year, reaching 800 billion yuan by 2007.
The 2008 financial crisis became a turning point in Hangzhou's development. For many years thereafter, Hangzhou's GDP growth rate once fell to the bottom among sub-provincial cities. Issues such as a lack of land resources and high production factor prices made it difficult for manufacturing to maintain its inherent development model. Also in 2008, Hangzhou officially proposed the "services first" development strategy, achieving a landmark "tertiary-secondary-primary" industrial structure transformation the following year, marking a new starting point for Hangzhou's development of the services industry.
The lever for the shift towards services was precisely what later became Hangzhou's pride: the electronic information industry. As Liu Ting, former Deputy Director of the Zhejiang Provincial Development and Reform Commission, pointed out, from the "industry revitalizing the city" strategy to the information economy as the "No. 1 Project," Hangzhou's economy underwent a strategic leap from industrial-led to information-led, from industrial economy-dominated to information economy-dominated. This became the major background for Hangzhou's leading development in the new economy.
And now, more than a decade of accumulation in the services sector has, in turn, become the key to Hangzhou's advancement in manufacturing.
Last year, the emergence of Hangzhou's "Six Little Dragons" was seen as a milestone marking Hangzhou's transition from the "e-commerce era" to the "AI era." But if we look closely at the "Six Little Dragons," peeling back the shell of "hardcore manufacturing," it is precisely the core of Hangzhou's services industry, represented by the digital economy, that provides support.
Among them, Game Science and DeepSeek, which gained attention earlier, are backed by Hangzhou's advantage in software and information services—in 2025, the revenue of just large-scale information services exceeded 1.3 trillion yuan. Even Unitree Robotics, which focuses more on hardware development, has in the past year "conquered" many cities across the country, integrating into the industrial chains of major manufacturing cities like Chongqing. However, as a research and development center, Hangzhou's focus remains on its advantages in the digital economy, technological innovation, and the integration of the digital and real economies.
As pointed out in an article published on the official WeChat account of the Hangzhou Investment Promotion Bureau, this essentially injects Hangzhou's innovation genes into the national industrial and innovation chains. Such a city "truly deserves the term 'national strategic force.'" To achieve this goal, Hangzhou's services must not be just the "human touch" of consumer services; more importantly, they must be producer services that act as an "accelerator" for manufacturing.
Looking closely at the composition of "Hangzhou Services," the keyword also falls on "producer services"—a set of data repeatedly cited by local media in Hangzhou is that as early as 2024, the share of producer services in Hangzhou's services sector added value reached 63.2%, surpassing Shanghai and second only to Beijing.
In Hangzhou's 5.3% services sector growth last year, revenue from information transmission, software, and information technology services maintained double-digit growth for 11 consecutive months, with a full-year growth of 13.4%.
Comparing with the internationally commonly used "dual 70%" indicator for observing urban economic development levels, Hangzhou's services sector share has already "crossed the line." The next step is to fill the gap in producer services.
"Imbalance"?
In this sense, for Hangzhou, a more fundamental question is whether it actually needs to maintain an unchanged proportion of manufacturing.
Last year, at a Hangzhou conference on producer services, Huang Qifan, former Mayor of Chongqing, raised an "Apple question":
Apple doesn't build factories, has no production lines, and doesn't engage in manufacturing, so why does it take the vast majority of the product's profit? The reason is that it firmly controls every link of producer services, including research and development, logistics and distribution, market access, inspection and testing, digital empowerment, financial clearing, sales, and after-sales service. These are the foundation of the industrial chain and the bestowers of its core value.
In other words, to increase added value, manufacturing must extend into links such as R&D design, industrial software, supply chain management, brand services, and financial services. It is precisely these producer services that ultimately determine the profit and industrial added value of manufacturing, determining the gold content of modern manufacturing.
Going further, industry insiders have summarized the development path of Hangzhou's "Six Little Dragons" as a "soft driving hard" development model with Hangzhou characteristics. Compared to the longboards of Beijing, Shanghai, and Shenzhen in computing infrastructure and talent density, Hangzhou's artificial intelligence industry, based on the advantages of the digital economy and the services sector, has the potential to carve out a distinctive path of promoting innovation through application and gathering resources through ecology.
It is difficult to fully reflect the quality of a region's manufacturing development simply by looking at the increase or decrease in numbers.
Liu Ting once recalled in an interview that a few years ago, Hangzhou's economic growth rate was once at the bottom within the province. The local government became anxious, wondering whether to invite back heavy and chemical industries to boost the manufacturing proportion. After debate, a sober judgment emerged: the root of Hangzhou's problem was not insufficient industry, but insufficiently strong producer services. Sacrificing invisible competitiveness for visible numbers was not worthwhile.
One reason is that, unlike the "visible" manufacturing, the manufacturing growth driven by producer services is relatively "invisible." Many places have already realized this issue. According to media reports, in order to make this part of manufacturing data visible, Jiangsu changed its assessment method for manufacturing, no longer isolating and assessing the secondary industry share, but instead looking at the combined proportion of manufacturing and producer services in GDP. "The former is the 'skeleton,' the latter is the 'muscle'; looking at either one alone will be distorted."
From a national perspective, policies are also changing.
In the outline of the 15th Five-Year Plan, the phrasing of keeping manufacturing's share "basically stable" was replaced with a "reasonable proportion." Xiao Rongmei, Deputy Director of the Policy and Economics Research Institute of the China Academy of Information and Communications Technology, and others once wrote in an article that this means "after fully considering various internal and external risk impacts and balancing development stages and industrial structure issues, allowing the proportion of manufacturing to fluctuate within a certain reasonable range," "not only pursuing the scale expansion of manufacturing, but more importantly striving to achieve a systematic improvement in quality."
Under the new round of adjustment, how should we re-examine the judgment of Hangzhou's services sector "imbalance"? Where exactly is the "reasonable proportion" for Hangzhou's manufacturing? Hangzhou has already made its judgment. According to the "Hangzhou Three-Year Action Plan for Accelerating Manufacturing Development (2025-2027)," by 2027, the total added value of large-scale industries will reach 530 billion yuan, with an average annual growth of over 6%, and the proportion of industrial added value in GDP will be over 22%.
This article is from the WeChat public account "City Evolution Theory," author: Yang Qifei
