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China plans to turn Shenzhen into a socialist model city. Photo: Roy Issa
Opinion
Zhang Lin
Zhang Lin

Is China trying to replace Hong Kong with Shenzhen?

  • With support from the former British colony, Shenzhen has grown from a sleepy fishing village to a centre for hi-technology
  • Beijing-based analyst Zhang Lin considers the central government’s plan to make it a socialist model city
Beijing’s plan to make Shenzhen a socialist model city – a blueprint unveiled at a time of turmoil in the neighbouring city of Hong Kong – could be viewed as a plot to diminish the strategic importance of the former British colony.

By that logic, a successful Shenzhen could put pressure on Hong Kong and serve as a reminder to the city that it must align its interests with the motherland if it wants to prosper. But that view neglects the true reasons underlying the rise of Shenzhen over the past four decades, from a fishing village to China’s most dynamic metropolis.

Late paramount leader Deng Xiaoping picked Shenzhen to be one of China’s new special economic zones in the early 1980s because of its proximity to Hong Kong. Its rise started by allowing investors from the opposite side of Sham Chung River – which separates the two cities – to open businesses there. By the following decade, Shenzhen had dispatched hundreds of municipal cadres to Hong Kong to learn how capitalism works.

For example, the first land auction in Shenzhen, in 1987, was a watershed moment that marked a breakthrough in China’s land management system and unleashed the country’s urbanisation in the following decades. That growth was aided by a group of Hong Kong advisers, including Leung Chun-ying. Leung, who served as Hong Kong chief executive between 2012 and 2017.

Shenzhen would not be the city we know today without the help of Hong Kong

Shenzhen would not be the city we know today without the help of Hong Kong.

The economic and political importance of Hong Kong for China’s mainland has decreased over the past 22 years as Beijing’s confidence in its own economic model has grown. China’s economy took off thanks to a surge in trade – aided by its entry into the World Trade Organisation – a low-cost but skilled labour force, and the widespread application of internet technologies. But Hong Kong did not reap any of the dividends.

The global financial crisis in 2008 enhanced Beijing’s confidence in its state-led model. By labelling Shenzhen as a socialist model city, China is, deliberately or not, staging a contest between two systems.

It is not hard to predict that Shenzhen will win on many fronts. Its economy is already bigger than that of Hong Kong, and it is set to attract more capital inflows and visitors. But it would be wrong to conclude that the model Shenzhen represents is now trumpeting the free market and rule-of-law values that Hong Kong upholds.

In fact, Shenzhen’s success in hi-tech and advanced manufacturing was not achieved by sticking to socialist elements such as a state-led economy and centralised control, but by opening up to the world and embracing free market practices. In other words, Shenzhen is successful because it learned from Hong Kong, not because it followed strictly to Beijing’s dogmas.

So, it will be interesting to see if Shenzhen can turn into a “pilot demonstration area of socialism with Chinese characteristics”.

According to the central government’s blueprint, Shenzhen will follow an innovation-driven development strategy. Beijing hopes it can provide an example of how to drive economic growth through technological progress. It if succeeds, it will lift China’s technology to the next level, putting it on a par with the US, or maybe even overtaking it.

Beijing is expected to shower Shenzhen with state funds and other resources. But this top-down approach to some extent runs counter to the true reasons underlying Shenzhen’s success.

On one hand, the state capital allocation system is not compatible with financial freedom, which means it is almost impossible for Shenzhen to become a world financial centre likes Hong Kong. On the other hand, innovations achieved by state investment cannot be converted into real economic power if there is no support from the market.

The idea of dwarfing Hong Kong by pouring resources into Shenzhen is a dangerous one. It won’t be a winner for the mainland’s state-led economic model but could sow mistrust in the relationship between the mainland and Hong Kong.

Zhang Lin is a Beijing-based independent political economy commentator

This article appeared in the South China Morning Post print edition as: Shenzhen is where it is today thanks to HK
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