Silicon Valley used to be seen as the tech mecca of the world. However, nowadays, the innovation hub is shifting to China.

From online retail giant and mobile payment pioneer Alibaba to the world's most valuable artificial intelligence company SenseTime, which dominates global research in autonomous driving, a handful of Chinese companies are now leading tech innovation in key industries.

According to the Global Innovation Index 2019 released by the World Intellectual Property Organization, China ranked No. 14 in innovation capacity, 15 places up compared with 2007. In 2007, China filed around 161,000 patent applications. A decade later, that number has jumped to 13 million.

"Emphasizing education is emphasizing innovation," said Wang Huiyao, president of the Center for China and Globalization (CCG), a leading Chinese non-government think tank. Every year about 8.5 million Chinese students graduate from college, and the country now produces the largest number of PhD students in the world.

Emphasis on tertiary education has created a new generation of talent in emerging tech industries. Tang Jianshi, a tenure-track assistant professor at Tsinghua University, is one of them. He works among 200 scientists and engineers at the Beijing Innovation Center for Future Chips at the university.

After graduating from Tsinghua University with a bachelor degree, Tang received his PhD degree in electrical engineering from University of California, Los Angeles. He later worked at the IBM Thomas J. Watson Research Center, the innovation engine of IBM, for four years before joining the faculty of Tsinghua University in January this year.

The innovation center he works at is developing new computing technology to put chips that recognize speech and handwriting into smartphones. The center has spun off five startup companies in the past four years and has set developing five to 10 chips as its ultimate goal.

When asked what holds the key to innovation at the center, Tang said, "Besides long-term development, the key is actually people, especially skilled talents to support the continuous innovation."

Tang is among the tens of thousands of Chinese who returned to China after obtaining degrees abroad. According to the Ministry of Education, in 2018, more than 662,100 overseas Chinese students returned to the country, bringing the total number of returnees to over 5.85 million.

To attract more people like Tang, China introduced tax incentives and policy support to overseas returnees. As early as 1998, China launched the Changjiang Scholars Program which offers returning students a 30,000 to 200,000 yuan yearly subsidy and a generous research grant.

By 2018, China had established 367 overseas student entrepreneurship parks nationwide to let returned overseas students start their own businesses. The success story of China's innovation hub Zhongguancun, home to most of the earliest Nasdaq-listed Chinese tech companies, can be attributed to the tax break and funding from the local government.

Still, one thing China needs to improve on is its global talent composition, said Wang Huiyao from CCG. In 2016, China issued 1,576 permanent residencies to foreigners, compared with 1 million in the same year in the U.S.

"There needs to be changes in the procedures as well as incentives for bringing more foreign talents to China," said Laurence Brahm, nonresident senior fellow of CCG. "If China is more open in this respect, I think there will be more foreign talents that will be committed to be here for a long term."

Antony Chang, who is originally from the UK, is one of the foreign talents who decide to stay in China for a longer term. Now the senior global digital communications manager at China's leading thin-film solar company Hanergy, he said the visible progress China has achieved over the years, especially when it comes to major industries like tech, led him to stay in the country. 

The company he works for, Hanergy, recently collaborated with NASA to send the company's thin-film technology to the International Space Station. And, according to him, cross-national collaboration contributes to further innovation.

China's Ministry of Public Security recently relaxed immigration rules to make it easier for top foreign talents to apply for long-term visas to China and start businesses here. Since 2015, 133,000 visas and resident's permits have been issued to foreign entrepreneurs, investors and technical specialists.

China is now looking to transform itself from the world's factory to a global tech powerhouse. And to achieve that goal, it must continue to do what it has been doing in the past three decades: cultivating and attracting talents that span national boundaries.