For most of the time in the past four decades of reform and opening up, Hangzhou, capital of Zhejiang Province in east China, pursued prosperity by following the traditional economic development method that focused on lower value-added industries requiring higher consumption of resources. But with the development of the Internet industry and application of artificial intelligence technology, the city's top priority today is promoting emerging industries with the digital economy at the core.

To transform Hangzhou into a digital economy leader, the local government has come up with policies and measures to improve information infrastructure, attract talented people, support research as well as business incubation and financing platforms, and simplify business registration procedures.

Hangzhou possesses a distinct advantage in the IT industry, courtesy of Zhejiang University, one of the top universities in China, along with the presence of Internet giants such as Alibaba and NetEase. Besides policy support and education, Hangzhou, with its livable environment, relatively moderate cost of living and concentration of science and technology resources, has been attracting a large number of talented IT professionals from other cities, mostly Beijing and Shanghai. The number of people employed in the Internet industry in Hangzhou has increased year by year, accounting for about 7 percent of the whole country's Internet professionals in 2018, according to a report by Lagou.com and NetEase's joint Innovation Center.

Hangzhou had 21 unicorn companies—startups whose valuation exceeds $1 billion—as of the end of October. Though fewer than Beijing's 83 and Shanghai's 34, it is more than Shenzhen's 18, according to ITjuzi, a business information service provider focusing on the Internet industry.

In 2017, the value added of Hangzhou's information industry accounted for more than one quarter of the city's GDP, growing at 21.8 percent and contributing more than 50 percent to the economic growth of the city, according to the municipal government's work report this year.

Hangzhou's economic transformation represents the trend of China's economic development during the past four decades. After entering the new era of digital economy, the city is overcoming the development bottleneck caused by limited space and resources. It is following the principle of "limited space, unlimited growth" by encouraging Internet industry innovations and startups. The booming digital economy has, in turn, improved livelihoods in the city and created more conveniences for urban life, driving urbanization.