Dreaming of the next big thing

Beijing has the largest number of elite universities and scientific research institutes in the country. About 230,000 college students graduate from universities in the capital each year. Many stay on to roll out startup companies or join similar ventures.

"The large number of graduates from top-tier universities have also raised the innovation bar," Zhao said.

But while Beijing has the financial and technological muscle, Shenzhen in Guangdong province has the manufacturing brawn. The city has been transformed in the past 35 years after China started opening up in the late 1970s.

Once a sleepy fishing village next to the Hong Kong Special Administrative Region, Shenzhen quickly became an electronics manufacturing center for global tech giants looking to cut their production costs.

Three decades later, the city is now home to domestic behemoths such as Huawei Technology Co Ltd and ZTE Corp. Both companies specialize in major technology infrastructure projects as well as manufacturing consumer goods such as smartphones and tablets.

Another major group there is DJ-Innovations Technology Co Ltd, or DJI, which is the largest manufacturer of commercial drones, and smartphone maker OnePlus.

The Shenzhen miracle is not short of success stories. "The city has come a long way," Kitty Fok, head of IDC China, the market research, analysis and advisory firm, said.

"It has become a crucial hub for electronics globally, and that is why Intel Corp started to host its China technology event in Shenzhen two years ago," she added.

A glance at the numbers shows that investment in research and development topped 30.5 billion yuan ($4.8 billion) in the first half of this year, or 4.04 percent of the city's GDP. That percentage figure surpassed most developed economies, including the United States and Japan, the Shenzhen Statistics Bureau reported.

Naturally, that has fueled the entrepreneurial spirit in the city. Pete Lau, a former executive mobile phone manufacturer at OPPO Electronics, left the company to start OnePlus in 2013.

His plan was to produce a high-performance and affordable smartphone. Tapping into the city's manufacturing prowess, OnePlus smartphones are now rolling off assemble lines in Shenzhen before being shipped to Europe and the US. Being a privately owned company, OnePlus has yet to released detailed financial figures.

"But this demand from local startups for mobile chips has already caught the attention of global component suppliers," Fok said.

While Shenzhen has a distinct edge over Beijing when it comes to manufacturing, Shanghai is like the new kid on the block.

Even though the city is a global financial center, it is short on angel investors and lacks Shenzhen's manufacturing clout.

Still, the Shanghai authorities hope to turn the city into a major innovation hub after unveiling a raft of measures to entice foreign talent, including easier visa access. The city is also working on investment options for domestic startups.

In addition, the local government is providing a more "startup-friendly environment" for young companies. Office rents are also cheaper compared to Beijing.

"Entrepreneurs can easily lease offices in high-tech parks that host startups. They are usually half the price compared to Beijing," Yu Jianjun, CEO of online music-sharing site ximalaya.com, which is based in Shanghai and has about 160 million users, said.

Qiu Quanlin in Shenzhen and Yu Ran in Shanghai contributed to this story.