In 1984 paramount leader Deng Xiaoping visited the then nascent city of Shenzhen – the former fishing village designated a special economic zone. On his return to Beijing he coined the term “Shenzhen speed” telling his colleagues “construction is really fast – when they build houses they can finish a whole floor in a few days time”.
Back then Hong Kong was still the larger economy by a huge margin and enjoyed many advantages over its neighbour, such as a functioning rule of law. But ‘Shenzhen speed’ has closed the gap over the years and 2018 marked the first time that Shenzhen overtook Hong Kong economically.
The official confirmation came last week as the Hong Kong government announced the territory’s GDP grew 3% last year to HK$2.85 trillion. Shenzhen’s GDP, announced earlier in February, rose 7.6% to Rmb2.42 trillion ($360 billion). Based on the official exchange rate, Shenzhen’s GDP stood at HK$2.87 trillion, or a touch higher than Hong Kong’s.
Although the per capita GDP of the former British colony – at HK$381,870 or around Rmb322,000 – is still substantially higher than its neighbour’s Rmb200,000, the alarm bells are sounding over Hong Kong’s competitiveness.
Forty years ago when Shenzhen was named as one of the country’s four special economic zones, its economy was worth less than Rmb200 million, or not even 0.2% of Hong Kong’s and just 4% of Guangzhou’s. But average annual growth of nearly 12% in the last decade has transformed it into one of the most prosperous and dynamic cities in China – just behind Beijing and Shanghai in GDP terms.
Shenzhen’s focus on innovation and technology is widely cited as the motor for its rapid growth. Its gross expenditure on research and development in 2017 represented over 4% of its GDP that year – a ratio almost matching South Korea’s 4.55%, the highest in the world. The result: a six-fold increase in certified invention patents and a surge of 57% in export value from the city’s high-tech sectors between 2007 and 2017.
Behind the numbers are a slew of top-tier tech companies that have chosen to root themselves in Shenzhen. These include electric vehicle manufacturer BYD, drones producer DJI, telecom equipment maker Huawei and internet giant Tencent. Apart from a strong tradition in manufacturing, the city’s more freewheeling spirit has lured entrepreneurs. A case in point is genome-sequencing company BGI Group, which shifted its headquarters from Beijing to Shenzhen in 2007 in the hope of escaping a more politicised environment.
As of the third quarter last year, over 96% of the city’s businesses were privately-owned.
Hong Kong’s economy grew 2.8% annually in the last 10 years. The city has continued to rely on traditional industries such as property, financial services and logistics, and has adopted a more lax attitude towards developing its tech sector. In 2017 the city’s R&D spending accounted for just 0.8% of its GDP. In the fourth quarter of last year its famed port saw a 13% contraction in throughput versus the same quarter in 2017, in part due to competition from rivals like Shenzhen (see WiC437).
Some urge the forging of closer ties with Shenzhen under the Greater Bay Area scheme as the best way forward for Hong Kong (see WiC441). Shenzhen has already made plans to build three railway links to its now smaller neighbour, including one connecting the two cities’ airports, and another linking Shenzhen’s special financial zone Qianhai to Hong Kong’s proposed $65 billion artificial island, or the East Lantau Metropolis (see WiC428).
From the shorter times required to move goods around to the even more rapid speeds of construction, the astonishing development of Shenzhen has kept the idea of ‘Shenzhen speed’ in the headlines, Hong Kong Commercial Daily notes, and Hong Kong needs to do more to keep pace. The GDP data makes plain that the ex-colony is becoming the junior party in the duo.
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