Gazelle enterprises, named after the agile and fast-leaping antelope, refer to fast-growing, innovation-driven small and medium-sized tech firms that have survived the startup valley of death. Ever since gazelle companies were mentioned by Premier Li Qiang in his Government Work Report in March, this group of tech-savvy players has attracted much attention from both the media and the governments of the Guangdong-Hong Kong-Macao Greater Bay Area.
With their market-validated business models, gazelle companies have the potential to evolve into unicorns. According to the Hurun Gazelles Index 2024, the Greater Bay Area boasts 53 such firms, with Shenzhen leading the pack with 33, spanning semiconductors, new materials, artificial intelligence, and robotics. Hong Kong, however, lags far behind its neighbor with just one on the list, Insilico Medicine, a pioneer in AI-driven drug discovery. This disparity is no fluke. Hong Kong faces structural headwinds that stifle its startups. However, the city has untapped strengths that, if harnessed, could turn the tide.
Hong Kong’s challenges begin with its market size. With a population of just 7.5 million, it pales beside the mainland’s vast consumer base, limiting opportunities for product testing and revenue earning. In 2023, research and development spending in Hong Kong reached only 1.11 percent of GDP, dwarfed by Shenzhen’s 6.46 percent. Incentives lean toward late-stage financing, with venture capital favoring pre-IPO bets over early-stage risk-takers and leaving nascent innovators cash-strapped. The Global Innovation Index 2024 underscores this gap. Hong Kong ranks an impressive 12th in creative outputs but a dismal 58th in knowledge and technology outputs, signaling a low patent-to-market conversion rate — a critical bottleneck for gazelle companies that rely on rapid technology iteration.
Hong Kong, however, is not without its aces. Its market maturity ranks second globally, a testament to its financial hub status. Last year, its IPO fundraising hit $80 billion, nearly double 2023’s haul, reclaiming fourth place worldwide for the city. Private equity assets under management topped $1.7 trillion in 2023, cementing the city’s spot as Asia’s second-largest hub. This capital density offers gazelles a full financing spectrum, from angel rounds to public listings. The Hong Kong Stock Exchange’s Chapter 18C listing rules provide a novel pathway for specialized technology companies without profits or revenue to go public.
In recent years, the Small and Medium Enterprises Financing Guarantee Scheme has unlocked $170 billion in loans with over 90 percent approval, thus providing early-stage gazelle companies with low-interest funding. The Digital Corporate Identity platform, piloted in 2024, further simplifies cross-border financing.
Hong Kong’s intellectual property wealth has great potential but is not fully tapped. Five of its local universities rank among the top 70 in the QS World University Rankings, and the Shenzhen-Hong Kong-Guangzhou technology cluster stands second globally, trailing only Tokyo-Yokohama. To offset the limitation of the local market, Hong Kong could draw inspiration from SenseTime’s success. By licensing its innovations to giants like Microsoft and Qualcomm, SenseTime built the OpenMMLab platform and spun off companies like SmartMore. Expanding this mix of licensing and an open-source ecosystem could turn the unused patents into bridges for resources and fuel for fast-growing companies.
Moreover, patent securitization and regional collaboration are two complementary strategies. The Hong Kong Stock Exchange could take the lead by introducing patent-backed bonds, pooling IP from universities and startups to raise non-dilutive funds, repayable through future licensing revenues.
Meanwhile, the Hetao Shenzhen-Hong Kong Science and Technology Innovation Cooperation Zone can be a “patent transformation accelerator” to leverage Hong Kong’s research and development strengths and Shenzhen’s pilot production bases. With the employment of data encryption and access control technologies, the technical patents can be secured and the conversation timelines shortened. Thus enterprises will have tangible incentives to adapt commercialized cutting-edge technological know-how in a cost-effective and high-efficiency manner.
Cross-border data flow is a linchpin. The Hong Kong Special Administrative Region, in collaboration with relevant national authorities, is promoting data interoperability within the Greater Bay Area. It is advisable for Hong Kong to establish a Data Mutual Recognition Pilot Zone to prioritize and facilitate the creation of bilateral data channels with Singapore, ASEAN’s data hub, and the European Union, a global privacy benchmark. The pilot zone will also preserve local characteristics, such as localized storage of sensitive data. Additionally, drawing inspiration from the UK’s FCA and Singapore’s data sandboxes, the GBA could introduce a compliance innovation sandbox, allowing companies to test cross-border data applications within a controlled environment. Supported by tax incentives and direct subsidies, this would shorten innovation cycles and provide gazelle enterprises with a fast-track environment for experimentation.
Local stars like Animoca Brands (metaverse), TNG (fintech), and Aqumon (AI wealth management) already have gazelle-like traits, as they are tech-savvy and globally minded. By tapping the unused IP, bolstering capital, and seeking closer ties with the Greater Bay Area, Hong Kong can transform its untapped potential into functional growth engines. The SAR can carve out a niche for itself as a high-value, high-efficiency launchpad in the global innovation stakes.
The author is a member of the Chinese Association of Hong Kong & Macao Studies.
The views do not necessarily reflect those of China Daily.
