The Daily Planet #65: Compute Sovereignty, Part 2

Everyone knows the importance of Silicon Valley in the annals of computation. If you have been listening more closely, you might have also heard of London or Tel-Aviv or Bangalore or Shanghai. But how did Hangzhou - home of Deepseek as well as Alibaba - become a tech hub? There's a story behind its rise, and gives other cities that want to rise up the computational ladder a (long and winding) road to the top.

Hangzhou's rise as a major tech hub in China is a unique story of contingent coordination, where success emerges not from grand design but from improvisation and the alignment of diverse forces. Unlike Beijing's political dominance, Shenzhen's manufacturing prowess, or Shanghai's financial clout, Hangzhou lacked traditional structural advantages. Instead, its transformation began with individual entrepreneurial sparks in the late 1980s and early 1990s, including figures like Jack Ma and Lu Guanqiu, whose ventures thrived in a permissive policy environment. Alibaba's survival and growth from a small startup in Hangzhou became a pivotal moment, anchoring the city's tech ecosystem and attracting talent, capital, and innovation.

The city's ecosystem is characterized by overlapping networks--such as the Zhejiang University alumni and private investor circles--that foster trust and rapid capital deployment but also create insularity and barriers for outsiders. Hangzhou's government plays a nuanced "facilitator" role, providing timely support and funding through specialized funds while avoiding heavy-handed intervention, though this balance requires constant recalibration and depends heavily on individual officials' judgment.

Alibaba's massive $53 billion AI infrastructure investment and DeepSeek's experimental adoption of the TileLang programming language exemplify the city's dual approach: large-scale capital-intensive bets alongside nimble, technically sophisticated startups setting industry standards. This layered coordination happens without a central coordinator, reflecting a broader pattern of Chinese tech ecosystems evolving through negotiated relationships rather than top-down planning.

However, Hangzhou's success is fragile, contingent on continued alignment among Alibaba's capital, government restraint, talent networks, and patient investors. The ecosystem's resilience faces tests from potential capital scarcity, shifting government priorities, and Alibaba's strategic outcomes. While Hangzhou may never rival Beijing or Shenzhen structurally, it remains a vital node in China's tech landscape, offering a living experiment in whether improvised coordination can institutionalize itself and sustain innovation amid uncertainty.

Hangzhou’s Contingent Coordination: When Improvisation Becomes Strategy

How a City Without Advantages Built China’s Most Instructive Tech Experiment.