A beacon for the private sector

Shenzhen's economic reform policies have set it apart from other cities

Shenzhen bears a superficial resemblance to Shanghai. There are dozens of multinationals and gleaming skyscrapers casting their shadows over narrow lanes. Their respective economic performances last year were also similar: Shenzhen's GDP hit 1.3 trillion yuan ($210 billion; 160 billion euros), gaining by 10 percent from 2012. Shanghai GDP reached 2 trillion yuan, increasing by 7.5 percent from 2011.

Both are testing grounds for China's economic reform policies. Still, for Peter Fuhrman, 54, Shenzhen is a private sector city, a city that has its face pointed toward the future.

In 2009, Fuhrman moved to Shenzhen from California. The chairman and CEO of China First Capital, an international investment bank and advisory firm focused on China, he is always struck by how similar Shenzhen and California are.

"Both are places where new technologies, and valuable new technology companies, are born and nurtured. I treasure the role Shenzhen has played over these last 30 years in helping architect a new China of renewed purpose and importance in the world," Fuhrman says. "It is impossible to imagine a US without California. It is so much the source of what makes America great. Shenzhen, too, is a major source of what makes China great, what makes this country such a joy for me to live in.

"Although Shanghai also boasts of its openness and innovation, its private sector is not as developed as Shenzhen's. People have come here from everywhere in China to build a new future for themselves, their family and their country. Shenzhen is a city that welcomes and embraces innovation, new thinking."

Shenzhen, located in the Pearl River Delta, is China's first special economic zone, giving businesses in the city the benefit of more free-market oriented policies and flexible government measures. Major multinationals include HP and IBM, while major Chinese companies include Huawei Technologies Co Ltd, a networking and telecom equipment firm; Tencent, which operates one of China's largest web portals QQ.com; and Vanke, the nation's largest real estate company.

Guo Wanda, executive vice-president of the think tank China Development Institute, says both cities have rapidly grown in the past 30 years because of the economic openness, but the biggest difference is that Shanghai is developed mainly through the growth of its state-owned enterprises and its financial sector, whereas Shenzhen has developed through the private sector.

"Shanghai plays an important role in the central government's strategic planning of the national economy," Guo says. "Many big SOEs have set up their headquarters there, such as Baosteel Group, the biggest domestic steel producer. Shenzhen cannot be compared with Shanghai in this regard, yet it has a very developed private sector."

Wen Guang, managing partner of Shenzhen Rongchuang Venture Capital, says there have been tremendous changes and achievements, especially in the private sector since he came to the city in 1998.

"Driven by the vibrant private business here, I left the group and set up this venture capital group with some of my friends in 2007," says Wen, who has been in the investment sector for more than 10 years and previously worked at Shenzhen Capital Group, one of the biggest domestic investment groups.

In the financial sector, Shanghai, located in the Yangtze River Delta, is the nation's largest hub for foreign financial institutions, with 21 foreign banks and 19 foreign insurance firms headquartered in the city. As the biggest financial center in China, Shanghai is aiming to become a global financial center for innovation, transactions, pricing and the clearing of yuan-denominated financial products by 2015. And though Shenzhen has just four foreign banks and two foreign insurance firms based there, Gao says Shenzhen is catching up because of its proximity to Hong Kong.

Another big challenge for Shenzhen is to provide enough land to support the city's development.

"Shanghai has vast land areas, yet here in Shenzhen, because of its small scale, coupled with the challenges of rising costs of labor and raw materials, many large manufacturing companies, such as Foxconn, have moved their manufacturing bases inland," says Qian Jin, director of technology for the Shenzhen Guangming New Zone Economic Service Bureau, which provides services to the development of the Guangming new district, set up in 2007 by the Shenzhen government.

Qian says transforming former labor-intensive industries into being more energy-efficient is essential for Shenzhen to move forward. He says one reason why Shenzhen can develop quickly is not only favorable government policies, but also because its residents are open-minded and aware of the global economic environment.

"You can see that some other regions of China also offer many favorable government policies, yet they have failed to stand out in their reforms. Based on its successful experiences in the past, Shenzhen has every potential to maintain its leading role in reforming and opening-up as it has over the past 30 years," Qian says.

Contact the writers at huhaiyan@chinadaily.com.cn and chenhong@chinadaily.com.cn

(China Daily 04/12/2013 page12)