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Shenzhen Zen

By Fu Jing (China Daily)
Updated: 2008-08-04 14:36

Eager to tap Shenzhen's low costs especially for labor and land, foreign companies rushed into the SEZ, led by factory owners from nearby Hong Kong.

But the SEZ's small space - it occupies a mere 396 sq km - later arrested its further development.

In 1992 the 14th National Congress of the Communist Party of China made it clear that the goal of China's economic reform was to build a socialist market economy.

Now that the reform has taken hold the institutional advantages enjoyed by the Shenzhen Special Economic Zone faded a bit. In response, Shenzhen started looking beyond the narrow SEZ and at the city's entire 1,952.8 sq km of land.

The result was a decades-long boom, with Shenzhen's economy expanding at an average rate of 28 percent a year from 1980 to 2004 driven largely by exports. Its exports totaled $168.2 billion last year, leading the country as it has for 15 consecutive years. Today the city is home to some of China's most important electronics manufacturers, such as telecom-equipment firm Huawei Technologies and mobile phone maker ZTE.

The rapid development of Shenzhen has also allowed Guangdong to become the richest province in China. Guangdong still leads its peers in economic output, accounting for about 12 percent of national GDP. The province's population, including migrants, is near 100 million.

Shenzhen can attribute much of its success to migrant workers. Today, it has 2.1 million "official" residents and almost 8 million "unofficial" ones, who are not granted local household registrations or "hukou".

Luckily, since August 1, the city has adopted a "residential permit" system for migrants. Replacing "temprary residential system," the new policy allows the administration to better manage the population by collecting full information on non-permanent residents and provide more employment, social security and educational services for their children.

Qin Hui, a professor with Tsinghua University, points out that while migrant workers have left their rural homes to work in big cities and have spent their "prime" literally building urban growth, they are still not legally entitled to settle permanently in the cities and enjoy the same privileges as those with hukou.

Tens of thousands of people swarm the Shennan Avenue before the huge billboard of Late Chinese leader Deng Xiaoping in Shenzhen on May 8 for the torch relay, cheering their long-awaited taste of the Olympics. Photo courtesy of Xu Wenge

Reinventing Shenzhen

These days, Shenzhen is trying to reinvent itself as a high-tech economic powerhouse with an advanced services sector and more diversified ownership.

This is the progression that Japanese companies went through in the 1950s-70s. It's also progression that Korean companies went through in the '70s and '80s.

Shenzhen began with garments and footwear, and then moved into consumer electronics. Now it's communications equipment, telecoms switches and routers, and automobiles. The municipal government's painstaking efforts to upgrade its industrial structure have also paid off. The service industry now accounts for 49 percent of the economy, following the manufacturing industry at 50.9 percent. Agriculture has narrowed to 0.1 percent.

But Shenzhen has been faced with many barriers such as shortages of land, power and water, population growth and a worsening environment. And it has also been challenged by global factors including the US subprime mortgage crisis and US dollar depreciation, falling global market demand, the rising prices of oil, grain and raw materials, and global inflation.

"Shenzhen is at an important strategic turning point," the city government said recently. "We should waste no time to turn Shenzhen into an innovative city."

Two major factors are helping make it possible for Shenzhen push for a change in the manufacturing landscape. A new highway network to the coast is making it possible to move factories inland, where officials are eager for the investment. Second, most of the low-wage laborers who fill the Pearl River Delta's factories are migrants from rural areas inland. These workers are mobile, quickly moving on if the basic jobs they do disappear.

Now, Shenzhen and the rest of Guangdong province look at Hunan and Sichuan as a much more cooperative hinterland.

If Shenzhen can leap from assembling basic products with low-pay, unskilled labor to nurturing lavishly paid talent, it could blaze a trail for the rest of China.

Confronted with resource and energy constraints, the entire Chinese economy is being faced with the transitional pains Shenzhen must tackle today. Shenzhen is "continuously trying to set an example for the rest of the country," says the expert Li Luoli.

Strategically Li is right: Shenzhen is on the way to realizing its Seoul, Hong Kong or Tokyo dream while China is transforming itself.

 

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