Life begins at forty | President Xi tours Shenzhen to celebrate city’s major milestone

Article courtesy of Week In China

You start out with a remote fishing village and then you add free markets, hardworking people and buccaneering entrepreneurs. What do you get? Surging growth and the emergence of an economic powerhouse that becomes the envy of its peers.

If the storyline sounds familiar, it’s because it has been told repeatedly about the post-war rise of Hong Kong. But in more recent times the ‘economic miracle’ has moved a few miles to Hong Kong’s north, chronicling the extraordinary emergence of Shenzhen. The city is a now a totem of China’s modern era and a place of pilgrimage for its political leaders when they need to communicate new plans for the Chinese economy.

In 2012 Xi Jinping visited Shenzhen for his first public trip after becoming the country’s leader. And last week he travelled there again to commemorate the fortieth anniversary of Shenzhen’s debut as a special economic zone (SEZ). But what messages was Xi trying to send in what is being termed as another of his ‘Southern Tours’?

Shenzhen’s growth under Xi

Shenzhen’s economy had just surpassed the $200 billion mark when Xi was appointed boss of the Communist Party of China (CPC) in late 2012. Hong Kong’s GDP was about $262 billion at the same time. But by 2018 the economic data confirmed that Shenzhen had overtaken its neighbour (see WiC443). The achievement looks all the more astonishing when you consider that Shenzhen started from scratch in 1978 when Deng Xiaoping ushered in his economic reforms, and when Hong Kong was already a major Asian trading hub.

Driven by what is often termed “Shenzhen speed”, the southern Chinese city’s GDP has grown at dizzying rates over the last 40 years. Its more recent transformation is from manufacturing heartland to technology and innovation hub. When Xi visited in 2012 the city’s ChiNext stock exchange was barely two years old, with 355 firms with a total market value of Rmb873 billion ($128.53 billion). It has since grown into Asia’s largest tech bourse with a market capitalisation of nearly Rmb10 trillion.

The bulk of Shenzhen’s growth has been powered by the private sector. When Xi visited Tencent’s headquarters in Shenzhen eight years ago, the internet firm was worth less than $70 billion. It has since jumped nearly 10 times in value. By contrast, China Merchants Port, one of the top state-controlled firms from Shenzhen in the past, saw its share price dwindle 65% over the same period.

In 2012 many tech commentators sniggered at suggestions from Huawei executives at a consumer electronics show that the Chinese telecoms manufacturer would eventually outgrow Apple and Samsung as the world’s biggest smartphone maker. But the forecast came to fruition last year (although Huawei’s growth trajectory has been disrupted by the Trump administration’s sanctions against the company, which Washington views as a major threat to American national security).

First stop: Shantou and Chaozhou

Xi made another trip to the south two years ago to Zhuhai and Shenzhen, in that case to celebrate the fortieth anniversary of Deng Xiaoping’s 1978 reforms (Shenzhen was awarded administrative status as a city in 1979 and the SEZ was established a year later). Xi also attended the opening of the Hong Kong-Zhuhai-Macau Bridge, a key project in the plan to develop the Greater Bay Area.

Before setting foot in Shenzhen again this month, Xi made stops in Shantou and the nearby town of Chaozhou. These visits were symbolic as the Chinese president has now visited all four of the SEZs founded in the 1980s – that is to say: Shenzhen, Zhuhai, Shantou and Xiamen (Xi hosted the BRICS summit in 2017 in Xiamen).

Shantou and Chaozhou are known as the “home of overseas Chinese”. Residents there speak a dialect different to Cantonese and have a long tradition of venturing overseas. Xi acknowledged this, telling a crowd that it explained why there are so many of the “Chaozhou gang” in cities around the world. He also called for “overseas Chinese” from Shantou and Chaozhou to uphold their patriotic tradition and “contribute to China’s renaissance”.

Videos of Xi giving his speech on a busy street in Chaozhou spread quickly across the Chinese internet, in part because it looked more like a piece of grassroots campaigning in a Western election than the sort of presidential address more common in China. Dressed casually and with understated security, Xi spoke to a small crowd in an unusually relaxed fashion.

The president also visited Chaozhou Three-Circle Group, a little-known electronic components and communication devices maker, and reiterated the importance of tech innovation. But giving a somewhat harder edge to his trip he inspected the Navy Marine Corps in Chaozhou, which is believed to be one of the units that would be first into action if there was a conflict in the Taiwan Strait. “The Marine Corps should focus on war preparedness and combat capabilities, and maintain a high level of readiness,” he urged.

What did Xi do in Shenzhen?

The key event of his trip was a grand gathering in the city. After giving a more conventional keynote speech, Xi concluded his tour by paying obligatory homage to a statue of Deng Xiaoping and checked on the progress of a tree that he had planted in the same park eight years ago.

Previous visits of Chinese leaders to Shenzhen elicit memories of Deng’s famed “Southern Tour” in 1992, when the paramount leader battled against political resistance from Communist hardliners to his market reforms.

Xi’s first trip to Shenzhen as leader in 2012 saw analysts predict that China’s new president was sending a strong signal that he favoured further economic reforms too. But eight years on, critics at home and abroad say that reforms have stuttered and that market forces have often been smothered by a state-dominated growth model.

What were his main messages about Shenzhen’s success?

Xi conveyed a different message on his third trip to the SEZ as the nation’s leader, saying that the tour was aimed at “telling the world that China will not stop its reform and opening-up”. During a 52-minute speech to 800 senior officials and business bosses, he noted that the zone’s more free market approach had been pivotal to the city’s success, triggering the rise of an economy worth less than $40 million to one of $400 billion as of last year.

“Shenzhen has used 40 years to go through a journey that took a hundred years for other international megalopolises. This is a miracle in the world’s development history that the Chinese people have created together,” Xi marvelled. The idea of the SEZs was to set up laboratories for new policies to be tested out, before applying the experience to other cities across the country. Over the years Shenzhen has carried out a number of experiments – from the early days of allowing the market to set prices in goods and services through to the first sales of state-owned land through public auctions.

Many of the initiatives related to globalising the Chinese currency also started onshore in the city, with a bold new programme to launch a digital renminbi being tested there this month (see this week’s “Rise of the RMB”).

Xi lauded the city’s legacy as a pioneer and during his trip that role was on display again.

In a new initiative Shenzhen will be granted leeway by the central government to steer its own path, with the announcement of another five-year action plan allowing greater “autonomy” to its special zone to test new reforms such as framing and enacting its own local legislation.

In a raft of further advantages bestowed on the city Shenzhen will also establish a new system to protect intellectual property rights, launch a stock futures index and develop new immigration rules to attract talent from abroad.

Other policy incentives will support another of Xi’s key goals for the country at large – achieving self-sufficiency in technology components that removes the threat of US sanctions to the supply chain.

Critics have cited how these freedoms can be contrasted with a notable centralisation of power at the top of the CPC around Xi himself. His political doctrine is set to be written into the Five-Year Plan that will be presented at the Party Plenum later this month and there’s speculation that Xi’s political and economic ideology could even be elevated to the status of ‘thought’, a level previously attained only by Mao Zedong.

During his trip to Shenzhen China’s president also mapped out 10 lessons that other cities should copy in trying to emulate its success. And perhaps unsurprisingly, the first of his golden rules was “adhering to the CPC’s leadership” and “upholding and improving the system of socialism with Chinese characteristics”. That’s a reminder that – for all the optimism about Shenzhen as a crucible for change – Xi sees the Party as a constant and guiding presence in the process.

Here the interpretation of Shenzhen’s future is markedly different to those that might see a freer economy and open market as necessitating a reduced role for government – or more specifically for the CPC itself. Xi and the Party leadership don’t draw quite the same conclusion, seeing political control and economic development as complementary forces.

In this view China needs strong leadership from the Party if its economy is to flourish, with a buoyant economy further strengthening the Party. But the new experiments in Shenzhen reveal that policymaking is not totally monolithic.

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