Shenzhen's success story holds lessons even as US-China tech war bites
When I was first sent to Shenzhen as the Post's correspondent 16 years ago, it was a city in crisis.
Today people may view the rise of China's "Silicon Valley" as a smooth success. The real story is much more complicated. At the turn of the century, Shenzhen - the poster boy of China's economic miracle - was a lost adolescent.
Two decades of breakneck growth had transformed the sleepy village into one of China's most dynamic cities, but increasingly it struggled to find a new direction. Up till then, the city's growth was largely a result of Beijing's preferential policies and its proximity to Hong Kong.
Shenzhen is home to more than 30,000 tech firms today. Photo: Martin Chan alt=Shenzhen is home to more than 30,000 tech firms today. Photo: Martin Chan
Yet, by 2004, these policies had already been extended to the rest of the country. Foreign investors began to venture deep into the country's vast hinterland. Rising costs drove many manufacturers to cheaper places like Dongguan, threatening to hollow out Shenzhen's economy.
Politically, Shenzhen was in an embarrassing position of being sandwiched between the nation's new darling Hong Kong and Guangdong's traditional seat of power, Guangzhou. A proposal to elevate Shenzhen to a municipality was rejected by the central government.
Its most humiliating moment came when Beijing approved an ambitious plan to build a gigantic bridge across the Pearl River Delta. In one of the original plans, there were four cities to be linked by the bridge: Zhuhai, Macau, Hong Kong and Shenzhen. But at Hong Kong's insistence, Shenzhen was left out in the final version.
The city was gripped with anxiety and fear: the wonder boy of China's open-door policy was in danger of losing its shine and becoming "just another mainland city".
Shenzhen was left out of the proposal to build a bridge connecting Hong Kong, Zhuhai and Macau. Photo: Winson Wong alt=Shenzhen was left out of the proposal to build a bridge connecting Hong Kong, Zhuhai and Macau. Photo: Winson Wong
I asked the Shenzhen leadership at the time what would be the future of the city. After an awkward pause, one of its vice-mayors told me that the city would develop its hi-tech industry and aim to become China's technology and innovation hub.
The news was universally ridiculed in Hong Kong. A senior colleague told me that Shenzhen stood zero chance of ever becoming an innovation hub.
The city was mostly known for its cheap knock-offs. Some even dubbed it China's capital of copycats where you could get all sorts of fakes.
Shenzhen was also up against the big boys. Beijing and Shanghai - homes to the country's elite universities and research centres - seemed to be the most obvious candidates in becoming China's Silicon Valley.
Across the border, Hong Kong had just unveiled its brand-new "Cyberport", developed by Richard Li, son of Asia's wealthiest tycoon Li Ka-shing. Hong Kong has free access to global markets, boasts at least five world-class universities and is preferred by top talents around the world.
"Let them throw money down the drain. This is just a desperate pipe dream," my colleague commented on Shenzhen's plan.
The rest is history.
A worker at a factory producing robots in Shenzhen. Photo: AFP alt=A worker at a factory producing robots in Shenzhen. Photo: AFP
Today, Shenzhen is the undisputed "Silicon Valley" of China. It is home to Huawei, Tencent, BYD and DJI, plus at least 10 unicorn start-ups. In 2000, it had about 100 tech companies and, today, more than 30,000.
Shenzhen's GDP surpassed Hong Kong's in 2018. Now the largest economy in the Greater Bay Area, the city ranks only behind Shanghai and Beijing nationwide, and is growing at a faster pace than both cities.
The lessons of its success can fill a book, but one of them stands out.
DJI's flagship store in Shenzhen. Photo: Reuters alt=DJI's flagship store in Shenzhen. Photo: Reuters
More than 90 per cent of Shenzhen's hi-tech companies are private. Unlike Shanghai, Beijing or Guangzhou, state-owned enterprises are small players in the city.
Its success is built on the creativity and ingenuity of a vibrant and resilient private sector. Ironically, almost all major projects initiated and supported by the government failed, such as the disastrous effort to build an automobile industry to compete with Guangzhou.
Its success stories - such as DJI, a world-leading producer of camera drones - were never part of government planning.
To its credit, the Shenzhen government realised this early on and quickly changed its role. Instead of trying to tell companies how to innovate, it refocused on ways to bring innovative talents to the city and create an environment for them to experiment.
Before I left Shenzhen in 2007 to return to Hong Kong, the city government gave me another briefing about its talent scheme. I was shocked by the thoroughness and thoughtfulness of its plan. That night, I couldn't help searching through the Hong Kong government website, hoping to find something similar. Only then did I realise how far behind we had fallen.
Both cities see the private sector as being at the heart of their success. But Hong Kong's laissez-faire policy emphasises a minimalist government approach, resulting in a few magnates monopolising the lion's share of the economy. While Shenzhen also lets its private sector take the lead, it doesn't just fold its arms and watch; its government works hard to create a conducive environment for innovation.
This approach has created a unique culture: a strong and confident private sector and a proactive and understanding government. Most importantly, the two have learned to tango.
Shenzhen's future is highly uncertain amid an unprecedented tech war between the US and China. Huawei, the champion of Shenzhen, may not survive an avalanche of punitive measures from Washington. But I now know better than to write off this former fishing village too quickly.
This article originally appeared on the South China Morning Post (SCMP).
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
