China is pinning its future economic growth on a high-tech future, with the world's second biggest economy shifting towards innovation and away from manufacturing and construction.

Key points: 'China's answer to Silicon Valley' set up in Beijing

'China's answer to Silicon Valley' set up in Beijing Hundreds of start-ups pulling in billions of dollars

Hundreds of start-ups pulling in billions of dollars Start-ups only have a 10 per cent success rate

The old economy of manufacturing, steelmaking and construction that has lifted 500 million out of poverty is starting to wind down.

Production has plummeted and hundreds of thousands have lost jobs. Migrant workers that have been the backbone of China's industrialisation are starting to return home.

There is a street in Beijing's north-west Zhongguancun district, and from the outside it hardly looks the part, but the buildings are packed with start-up companies. Last year the street housed 600 and pulled in billions in dollars.

Garage Cafe was one of the first incubators in the street and now 40 are operating. An Meng, the founder and president, says the entire focus is innovation.

"We don't set any barriers. It's everyone's right to be innovative, to start up," he said.

When the ABC visits Garage cafe, it is buzzing with energy as teams discuss and develop their latest ideas.

It's a creative melting pot where people get a free workspace and internet and are powered by endless cups of coffee — a world away from China's stagnant state-owned enterprises.

Mr An says they want everyone to be a entrepreneur.

"We allow everyone to try, to make mistakes. One may suddenly reach success and this one could become an engine that drives China's economy growth, even the world's," he said.

New graduate Sheng Jie has been coming to Garage Cafe everyday for the last five months. His start-up team is developing a property management website.

"This start-up company is my baby and I want to see him grow," he said.

"I could get a stable job but it wouldn't be as satisfying. I'm not paid much but at least I'm happy."

It's also a place to meet investors and venture capitalists.

Wei Qingchen has just received $1 million to develop his technology that can read human emotions. He believes it will be applied in home devices, robotics and marketing.

"The Garage Cafe gives us a lot of help. Many technician difficulties are solved by cooperation between different teams," Mr Wei said.

Risks of start-up ventures

This week China posted its lowest growth rates in a quarter of a century.

Professor Yao Yuqun, one of China's top graduate employment specialists, said start-ups only have a success rate of about 10 per cent.

"Chinese high education doesn't provide suitable graduates for these needs, and secondly the economy is declining so there is fewer opportunities. We don't provide the proper education for this," he said.

But there have been success stories from Zhongguancun — innovative phone maker Xiaomi has just been valued at $10 billion.

Mr An acknowledges the harsh reality that most start-up ventures fail and can't provide the jobs needed for graduates coming into the workforce.

"We can't require the innovation and start-up industry to solve the employment problems for over seven million graduates," he said.

"It would be unrealistic...but if China wants to regain higher growth rates it will have to rely on the new economy because the traditional industry is flattering."