Miracle of Shenzhen

How a fishing village transformed into a cosmopolitan city of 12.5 million people.

In March 1980, the PRC central authorities officially approved the establishment of the Shenzhen Special Economic Zone (SEZ), the first in China. In March 1981, Shenzhen was separated from Hoiyan County and directly subordinated to the authorities of Guangdong Province, becoming a city of sub-provincial significance.

Shenzhen is located in the Pearl River Delta (Zhujiang), in the south it borders on Hong Kong.

Foreign investments

July 1, 2010, the original border control of the SEZ was canceled and the Shenzhen SEZ was expanded to cover the entire city. Thus, the area of Shenzhen SEZ increased from 396 km² up to 1953 km² .

With the creation of the FEZ, Shenzhen became a magnet for both multinational corporations that set up export-oriented production in China and for overseas Chinese entrepreneurs (huaqiao), whose native language was Cantonese. Shenzhen turned out to be especially attractive for businessmen from neighboring Hong Kong, attracted to the city by affordable land prices and cheap labor.

Since the late 90s, priorities have changed somewhat: instead of investing in the production of cheap export goods, corporations began to reorient themselves towards the giant Chinese market.

By the beginning of the new millennium, the share of companies from Hong Kong in Shenzhen's investments was about 70%, and even more in export-oriented industries — up to 95%. Shenzhen ranks third among Chinese cities in attracting foreign capital. Foreign companies from 17 countries of the world are represented here:

• American Capital — supermarket chains Wal-Mart and Sam's Club, restaurant chains KFC, McDonald's, Pizza Hut and Starbucks, IBM research center, DuPont chemical plant, Hewlett-Packard electronics plant, PepsiCo soft drinks plant, Ohio Art Company toy factory, Citibank affiliate.
• Japanese capital — Daikin, Ricoh, Hitachi, Sanyo, Seiko Epson, Fuji Xerox and Uniden electrical plants, Nitto Denko chemical plant, JUSCO supermarket chains and Seibu department stores, The Bank of Tokyo-Mitsubishi UFJ and Mizuho Corporate Bank branches, Tokio Marine, Sompo Insurance Japan representative offices , Mitsui Sumitomo Insurance and Nipponkoa Insurance.
• British Capital — British Petroleum gas terminal, Tesco and B&Q supermarket chains, International Audio Group electronics factory, Standard Chartered Bank branch.
• Korean capital — Samsung electronics factory.
• Russian capital — Vantex electronics factory.

In 2010, foreign direct investment in Shenzhen's economy reached nearly $4.3 billion, including from Hong Kong — about 3.1 billion dollars, from the USA — 890 million dollars. Of the 500 leading corporations in the world, 180 have their offices and branches in Shenzhen.

Now the main locomotives of Shenzhen's economy are high-tech industry, logistics and financial services.

In October 1999, the first China Hi-Tech Fair was held in Shenzhen, which has since become an annual event.

As of 2018, Shenzhen's nominal GDP is 2.42 trillion yuan (2.87 trillion Hong Kong dollars), recently surpassing that of neighboring Hong Kong. If the growth of the economy of Shenzhen and Hong Kong, as well as the integration between them, continues at the same pace, then in terms of GDP they will be able to surpass London and Paris and become the third economic center in the world after New York and Tokyo.

Today, Shenzhen is the 4th largest economic center in mainland China (after Beijing, Shanghai and Guangzhou) and one of the top three financial centers in the country.

In the 2020 Global Financial Centers ranking, Shenzhen ranked 9th among the world's most competitive financial centers (between San Francisco and Zurich in the top ten global rankings) and 6th in Asia and the Pacific (after Shanghai, Tokyo , Hong Kong, Singapore and Beijing).

Shenzhen is also home to a number of large financial institutions such as China Merchants Bank, Ping An Insurance and its subsidiary Ping An Bank. Since the city's inception as a SEZ, a number of foreign banks have established offices in the city, including Citibank, HSBC, Standard Chartered and Bank of East Asia. The city is home to one of the country's largest Shenzhen Stock Exchange, founded in 1990. Overall, the financial industry accounted for 14.5% of the city's nominal GDP in 2015 (254.282 billion yuan).

Production

Shenzhen ranks second among Chinese cities in terms of industrial output. The main industries are the electronic and electrical industry (including the production of telecommunications equipment, mobile phones, computers and components for them, household electrical appliances, medical devices, toys and electronic components for cars), the chemical and biochemical industry (including the production of plastic products and tires, pharmaceuticals and biotechnology), the automotive industry (including the production of components and electric vehicles).

Out of a nominal GDP of 1,750.299 billion yuan in 2015, high-tech industries account for 33.4% of this amount.

Shenzhen is home to a number of well-known technology firms, such as the largest manufacturer of telecommunications equipment and electronics Huawei Corporation, one of the largest investment and venture capital companies Tencent, market leader in drones DJI and telecommunications company ZTE.

China General Nuclear Power Group's Daiwan and Lingao nuclear power plants are located in Shenzhen (most of the electricity produced at both nuclear power plants is exported to Hong Kong).

Foreign Trade

Foreign trade plays a key role in Shenzhen's economy, which is primarily focused on foreign markets. In 2009, its turnover amounted to almost 347 billion dollars, including the export of — more than 204 billion dollars (almost 13% of total Chinese exports), imports — more than 142.5 billion dollars.

In 2013, Shenzhen was the ninth port in China in terms of total cargo turnover, as well as the second port in China and the third in the world (after the ports of Shanghai and Singapore) in container traffic. More than 40 international container companies have included Shenzhen Port in their 150 shipping lines.

There are three free trade zones (customs zones) in Shenzhen — in Yantian, Futian and Shatoujiao, as well as six major logistics parks.

High tech

Shenzhen's first science and industrial park was established in 1985 on the basis of a local university, which itself opened only two years earlier. In 1996, the construction of the Shenzhen High-Tech Industrial Park began; in 1999, the Shenzhen Virtual University Park was founded and the first China Hi-Tech Fair was launched; in 2007, the "Shenzhen-Hong Kong Innovation Circle" was founded to promote technological cooperation between neighboring cities.

The main focus of scientific research is on high-tech industries such as information and computer technology, telecommunications, new materials, robotics, energy, biotechnology, medicine and healthcare. Shenzhen ranks sixth among Chinese cities in terms of high-level basic research. In 2010, the value of high-tech products was 1,017.6 billion yuan (an increase of 19.6% over the previous year), and the number of patent applications filed exceeded 49,400 (in 2009, — 42.3 thousand).

Shenzhen is also home to several major R&D and design centers of Chinese and foreign corporations. In 2009, more than 30,000 local companies participated in the research and development of new technologies and products, of which 1,044 were of Chinese importance (in 2010, there were already more than 1,300 of them). In 2009, Shenzhen employed more than 985,800 technicians, and R&D spending accounted for 3.6% of the city's GDP.

What are the reasons of Shenzhen's "economic miracle"?

1. Favorable, bordering with Hong Kong, geographic location.
2. China's sound economic policy to attract foreign investment.
3. Stable legislation, when laws are not changed every 5 years.
4. Cheap and skilled labor force. In China, a special competition was held for those wishing to live and work in Shenzhen.
5. The right to work in Shenzhen was given not only to foreign and joint ventures, but also to national manufacturers.