The city of Hangzhou is one of the most historic and beautiful in China.

But this ancient place now has the most modern of reputations, as China’s ‘Silicon Valley’.

A vibrant hub for entrepreneurs and high-tech start-ups, Hangzhou is home to headline-grabbing success stories like Alibaba and breakthrough AI firm, DeepSeek.

In the context of escalating competition with America, the world is increasingly paying attention.

Those who are part of the tech scene here brim with enthusiasm.

Over coffee, in an ultra-modern city complex, they describe how exciting this moment feels, not just for their businesses, but for China too.

‘Passion, pride, purpose in innovation’

“We have the talents, we have the environment, and we have the full supply chain, even though we have a challenging environment,” says Grace Zheng, who has worked at the AI glasses creator Looktech since its inception.

“It’s our time.”

The others laugh and nod. “I agree with it,” says Jia Dou, whose company Wuli Coffee, creates high-tech, automated commercial coffee machines. “And I think it’s our time to show and battle with other foreign countries.”

And is that a battle China could now win, I ask? “Of course,” comes the answer.

Supportive ecosystem fuels success

They tell stories of how estate agents in Hangzhou dedicated hours of their time for free to find the perfect laboratory space, and how the local government showered them in grants and incentives; so hungry is this city for tech success.

“Hangzhou says we’ll provide the sunshine and the water, you go ahead and grow,” explains Zhang Jie.

She is the convenor of this group. An entrepreneur herself and the founder of a thriving ‘incubator’ for start-ups, she has invested in and mentored all the others around the table.

A talent pipeline ready to surge

She is passionate, energetic and has a second-to-none understanding of what makes Hangzhou and China’s tech scene so successful.

“In China, we have more than 10 million university and college students graduating. Then we’re talking about at least five to six million engineers with college education background,” she says.

“So with such a large group of young and intelligent people with a good environment, a favourable environment for entrepreneurship, I’m sure there will be even greater companies coming in the future.”

‘Regulation, education, and youth’

Indeed, a combination of light-touch local regulation, (unusual in China more broadly), coupled with one of the most business-oriented and free-thinking universities in the country, Zhejiang University, is viewed by many as the secret sauce in Hangzhou.

Zhang says she has had more young people approach her with business ideas in the last quarter than at any other time before, and she is full of optimism about the current wave.

“They are already companies [in China that will] probably be greater than Apple, right?” She laughs.

And she may well be right.

DeepSeek: China’s AI breakout moment

But there is one name in particular, born and bred in Hangzhou, that has captured the world’s attention in recent months.

When DeepSeek unveiled its latest open-source AI model earlier this year, it stunned the world, claiming to be as good as western competitors for a fraction of the price.

Many are now talking about the ‘DeepSeek moment’, a moment that turbocharged confidence within China and made the rest of the world sit up and take notice.

Government embrace and global impact

Indeed, successes like this are being lauded by China’s leaders. In February, tech bosses, including DeepSeek’s founder Liang Wenfeng, were invited to a symposium with Xi Jinping and his top team.

Photo ops and handshakes with the president, an abrupt change from the crackdown they faced just a few years ago. In fact, tech is now being positioned as a key pillar in China’s future Economy, repeatedly highlighted in official communications.

Tensions with the U.S. and a trade war reality

But what is seen as inspiring innovation in China is viewed by the United States as a threat.

Donald Trump is moving to ramp up restrictions, including more export controls on chips being sold to China.

Businesses in Hangzhou are of course aware of the trade war unfolding around them, many who export to America will take a significant hit, but most think they can cope.

Resilience and resolve amid global friction

Dr Song Ning is one of them. He proudly shows us his factory, which is integrated with the lab work and R&D side of his business.

His company, Diagens, uses AI to massively speed up medical diagnostics, cutting the time taken to run a chromosomal screening from 30 days to 4. He is also working on a chatbot called WiseDiag which has more advanced medical understanding and can be used by patients.

While they are actively seeking business in over 35 foreign countries, for now, the pursuit of American customers is on pause.

“Competition is a good thing… it makes us all stronger,” he says.

“I do not think by limiting the scientific and technological progress of China or other countries, Trump will be able to achieve his goal, I think it is a false premise.

“Information is so developed now, each country has very smart people, it will only force us to have more tech innovation.”

‘Innovation is rapid and will leave its mark on the world’ 

While individuals remain defiant, the trade war will still leave a big hole in China’s economy. Tech firms, however advanced, can’t yet fill that gap.

But the innovation here is rapid, and there is no doubt, it will leave its mark on the world.