Skyscrapers from Scratch

Hou Weili

Thanks to constant innovation amid four decades of reform and opening up， Shenzhen has quickly emerged as a major international metropolis from a barren， sparsely populated county

Lin Xiaojing， 55， conjures up an image of a dilapidated village swarming with buzzing flies， covered with muddy roads and short of drinking water and power supplies to describe Shekou four decades ago.

“It only took half an hour to cross the entire water-surrounded village on foot，” she recalled.

She moved to Shekou， Shenzhen in southeastern Chinas Guangdong Province in the late 1970s with her family to work a desk job at the construction command center of Shekou Industrial Zone. Consequently， she was able to witness the city rise from nothing.

With a rundown village as the frontline， Shenzhen embarked on a journey of reform and opening-up. Today， the cityscape has radically changed. The 2.14-square-kilometer area has evolved into an industrial hub packed with high-rises， convenient transportation， established public facilities and top talents from all walks of life.

This is the theme of Shenzhens development since the adoption of the reform and opening-up policy. In about four decades， the GDP of the city rocketed to 2.24 trillion yuan （US$326.15 billion） in 2017 from 197 million yuan （US$28.68million） in 1979， an increase of over 11，000-fold. During the same period， Chinas economy multiplied more than 200 times.

Following Beijing and Shanghai， Shenzhens economy rivals that of Hong Kong. Internationally， Shenzhen has grown into a moderately advanced city economically comparable to cities in Spain and South Korea， with a per capita GDP of US$27，100.

Overshadowing the original three-story mansions that were once the most luxurious buildings， Shenzhens urban skyline is now shaped by some 1，000 skyscrapers over 100 meters in height. Before 1979 when Shenzhen was still a town in former Baoan County， only two cement-paved roads ran through it with an aggregate length of barely 2 kilometers. Now， the 25.6-km landmark Shennan Road hosts the headquarters of key Chinese businesses in sectors of technology， finance， banking and insurance， some of which are global giants.

“Innovation is the fundamental driving force，” asserted Tian Fu， member of the Shenzhen Municipal Committee of the Communist Party of China （CPC） and director of the Administrative Committee of Qianhai-Shekou Free Trade Zone. “Shenzhens exponential and leapfrogging growth was fueled by innovation.” He added that innovation includes supporting investment and trade facilitation， opening the financial sector， loosening government control and reforming systems of talent management. “Institutional innovation effectively lowered research and development expenses and comprehensive social costs for businesses， thereby boosting their performances.”

Pilot Field

Shenzhens innovation story dates back to December 1978 when China held the Third Plenary Session of the 11th CPC Central Committee in Beijing. One of key issues the session intended to solve was how to revive the economy and accelerate Chinas industrialization process.

Shenzhen was chosen as a pilot area for achieving the mission due to its geographical adjacency to Hong Kong and preliminary attempts to launch manufacturing enterprises. “Many locals in Guangdong Province are related to residents of Hong Kong，” noted Hu Biliang， dean of the Emerging Markets Institute at Beijing Normal University. “Eyeing cost-effective custom manufacturing with materials， designs and samples supplied as well as compensation trade， Hong Kong businesspeople extensively invested in Guangdong and successfully transformed some poor villages into manufacturing bases for global markets.”

With intentions to jumpstart the national economy， Shenzhen Special Economic Zone was established in 1980. Before that， attempts to introduce a newly-proposed socialist market-oriented economy had been made in Shekou. The core of the new practice was to eliminate governmental intervention in business and promote autonomy in accordance with market rules and laws of economics. The new economic development path originating in Shekou created a favorable business environment and incubated a raft of businesses with global competitiveness.

Specifically， Shenzhen was the first city in China to introduce systems of contract employment， social security， open tender practice and joint-stock system. The openness， inclusiveness and sound business environment combined to attract investors from Hong Kong， Taiwan and foreign markets， including tech conglomerate Foxconn.

“In early days of reform and opening-up， Shenzhen was short on capital and technology， but the supportive attitude of the government and favorable policies encouraged me to stay，” recalled Terry Gou， president of Foxconn. “Businesses were encouraged to try new things and correct mistakes in practice. Shenzhen was like an experimental field. I was persuaded and committed to investing top technologies and talent to boost local industry and the economy.”

By the end of 1985， foreign investment in Shenzhen Special Economic Zone totaled US$3.35 billion， more than one sixth of Chinas total foreign direct investment.

Moving up the Value Chain

After opening to the global market， manufacturing sectors sustained the rapid industrialization of the city. Until the mid-1990s， trade and primary manufacturing had been the two pillars of the local economy. With accelerated reform and opening-up， China further opened 14 coastal cities for foreign investment in 1984， followed by Hainan Special Economic Zone at the southern tip of China and Pudong New Area in Shanghai， which were officially founded in 1988 and 1993， respectively. “Shenzhen was no longer special in supporting policies for businesses，” explained business analyst Gao Xuesi. “If it stuck to the convention of asking for privileges from the Central Government， the city would risk falling behind in fierce competition.”

Instead of resting on laurels accumulated from primary labor-intensive manufacturing and compensation trade， Shenzhen chose a tougher path forward by moving up the value chain. In late 1993， the city decided to stop approving businesses engaging in labor-intensive custom manufacturing with materials， designs and samples supplied by foreign firms. Those already in the city were asked to move out if they were polluting heavily.

“Inevitably， we were going to attract some sunset industries in the beginning， but as we accumulated wealth and technology-driven growth became a global trend， we had to restructure our economy to keep abreast of changes，” explained Li Youwei， Party chief of Shenzhen in 1993. “Upgrading was imperative.”

Soon， the city officially embarked on a path of restructuring the economy to make it one driven by high technology. In July 1995， Shenzhen placed hi-tech industry atop its agenda and set information technology， new materials and biotechnology as pillars of the future economy. For the first time， the government acknowledged the value of intellectual property and approved researchers contributing their intellectual properties like patents and inventions to become business shareholders. Ren Zhengfei， founder of Huawei， said such policy was a strong incentive for his startup.

“Such a forward-looking incentive planned nearly 10 years ahead of other regions enabled Shenzhen to build an industrial base for high-tech and value-added sectors，” noted Gao Xuesi.

Business-dominated R&D

In fact， Shenzhen was never the center of technology and enjoyed no edge in developing tech-related industries， but still excelled in commercializing technologies. Wang Weizhong attributes the phenomenon to the active role of businesses. “A distinctive feature， 90 percent of Shenzhens research personnel， institutions， investments and patent generators work for businesses， making research and commercialization extremely dynamic and effective，” explained Wang， incumbent Party chief of Shenzhen.

In 2017， the citys research and development （R&D） investment totaled 90 billion yuan （US$13.3 billion）， accounting for 4.13 percent of its GDP， similar to South Koreas input which ranks high globally.

Zhou Luming echoes Wang regarding the role of businesses in R&D. “Instead of paper-oriented research， the planning of scientific research programs has been inclined to follow market rules and aim for making real products that meet market needs and satisfy consumers，” said Zhou， president of the Southern Academy of Shenzhen Space Technology， a private research institute specializing in industrialization of space technologies.

As a result， hi-tech industries became the main contributor to the local economy. In 2017， the added value of the sector commanded 32.8 percent of the citys GDP.

The supporting system for technological innovation attracted Chen Ning to start a business in Shenzhen. In 2014， the Doctor of Artificial Intelligence left the United States where he had studied and worked for years to launch a company in Shenzhen to apply facial recognition technology in the public security sector. “With most of its population immigrants， the city is truly inclusive and suitable for startups，” noted Chen. “I cannot imagine where I would be if I hadnt chosen Shenzhen.” He added that the commercial prospect of artificial intelligence was not initially considered promising， but Shenzhen offered him the chance to venture.

According to statistics released by the city， Shenzhen has attracted over 100，000 overseas talents like Chen as of 2018. And it is home to 5.1 million highly-trained personnel from all sectors， over 40 percent of its total population.

All of these people are now driving Shenzhen to transform from a manufacturing hub into an intelligent manufacturing center and continue its role as the frontier of reform and opening-up. The place where Lin Xiaojing worked also continues to march forward. In 2015， Shekou was included in the China （Guangdong） Pilot Free Trade Zone and received a new mission of experimenting with a more open economic system and spearheading in-depth cooperation among Shenzhen， Hong Kong and Macao.