Happy Birthday Shenzhen, and Thanks!

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Aug. 26 – Shenzhen celebrates 30 years as a special economic zone today. Here Chris Devonshire-Ellis and Alberto Vettoretti of Dezan Shira & Associates reminiscence about the city during that period.

Chris Devonshire-Ellis
Shenzhen celebrates 30 years of being a special economic zone today, an event that was to instigate momentous change in China. Deng Xiaoping, China’s leader at the time, had just been given a nasty shock; China’s energy reserves were down to just two weeks supplies and it became obvious that a major reform of the nation’s infrastructure and impetus was needed. One of the effects of this (aside from begging and borrowing internationally for oil supplies and completely overhauling the ministries concerned) was to usher in a new type of concept. Shenzhen, deliberately chosen to be far away from anywhere else should the experiment fail, was chosen as the site for “socialism with Chinese characteristics” – a deliberately sly term that actually meant state managed capitalism.

Shenzhen then was effectively sealed off from the rest of China, a wall built around the new zone, and the best and brightest of China’s architects and construction engineers brought in to build a city where a collection of fishing villages stood. Permission to enter the zone was required – there was no just turning up for mainland Chinese, and for years the city maintained its effective border controls designed to firstly isolate the city from the rest of still very communist China, and later to prevent it being swamped by millions as word of its success got out.

I had traveled to Shenzhen several times from Hong Kong in the past, and had worked in Hong Kong and Beijing by the time it came for me to set up my own firm. I was laughed at for choosing Shenzhen as a base over Beijing or Shanghai, but in 1992, when I took that step, it was apparent to me that the tax rate of 15 percent would attract investment – clients I would seek to serve – and that the cities already superior logistics and port facilities were better than those on the mainland. Having Hong Kong so close was also a bonus. I established Dezan Shira & Associates (then called, rather longwindedly, “Dezan Shira Business Management Services (China) Ltd”) in the Crystal Garden Centre in Shekou, just west of Shenzhen city proper. Shekou, which is part of Shenzhen but has a separate administration, was also a beneficiary of Deng’s reforms. Given the shock over China’s energy reserves, he invited the best of international oil drilling companies to conduct tests in the South China Sea for oil. Shekou, being a natural deep water port, was chosen as the onshore base for this, and it rapidly developed into an oil town, with some of China’s earliest joint ventures being in the oil and gas drilling industry. Dezan Shira’s initial client base was very much in this market as a consequence, and the firm got used very quickly to dealing with complicated JV contracts with CNOOC and a variety of Texan, British and Scandinavian oil exploration and service suppliers. It set us on the path to the rest of China.

Based from that, the firm moved on over the years, opening in Shanghai and Beijing two years later in 1994, and has subsequently grown to 10 offices throughout China, and a further seven spread across India and Vietnam. It was Shenzhen that proved to be a great initial base for our firm, and it has been great fun riding the back of the Chinese dragon over those years. We’re very grateful to the city for the opportunity it provided, and also to all our clients and friends who have helped us along the way. But this is a special day for a special city. Happy birthday, Shenzhen!

Alberto Vettoretti
Shenzhen’s achievements in the past 30 years have been nothing less than mind-blowing. The city has been recognized as China’s most competitive city in the past four years by the Chinese Academy of Social Sciences and its GDP per capital is amongst the highest in the country at just under US$15,000. Still little known in the West, Shenzhen today boasts the fourth largest container port in the world and its airport is the fourth busiest in the country. From a small fishing village the city has become one of the largest manufacturing and export bases for electronics, semiconductors, medical equipments, toys and furniture in the world. Shenzhen’s opening to the outside effectively begun in 1980 when it was given the status of special economic zone. It was the first “window” in the country to attract both foreign investors as well as local entrepreneurs which found a local fertile ground where to develop their businesses and ideas. All the China prominent economic champions, the China-born and based multinationals that will lead the world in their respective fields have all their roots here. BYD, Huawei, ZTE, Mindray, Lenovo have all become global brands in their own rights. It is no wonder that Shenzhen’s exports topped China’s cities for the past 17 years.

Local as well as international SMEs and MNCs will continue to play an important role in the city’s industrial landscape. Shenzhen’s blueprint for its future export base will be based on the increased proportion of high tech products, the upgrading and transformation of its export processing trade, and the intensification of its role in supporting services and service outsourcing industries.

This year, I had the honor of being one of the very few foreigners invited to the Fifth People’s Congress of the Shenzhen Municipality as observer where Mr. Wang Rong (at the time acting mayor and now party chief) reported on the achievements of the city and the new challenges ahead. At the plenary session it was announced that by 2015 the city’s GDP will exceed RMB1.5 trillion – close to that of Singapore – and the per capita GDP will surpass US$20,000 thus reaching the level of middle developed countries.

Shenzhen has always been a pioneer city at the forefront of reforms. A unified minimum wage system will soon be implemented in the enterprises inside and outside the SEZ and a social insurance system for all is expected to be built by 2015 before any other places in China.

Living in the city has never been more pleasant and accommodating also to those foreigners used to the ease and comfort of Hong Kong, Shanghai or Beijing. The city has built over 435 new parks in the past five years and the air has remarkably improved (a big factor here has also been the closure of many polluting factories in the aftermath of the financial crisis).

Shenzhen does however face challenges going forward, and especially how to better integrate with Hong Kong to increase the processing time and reduce the hassles for the movement of goods, information, people and money between China and the SAR.

Commuting time between Shenzhen and Hong Kong can be greatly reduced as long queues are still making the trip slow and inefficient for the busy executive. While Hong Kong can issue frequent travel passes to foreigners having legitimate companies in both locations and thus allowing a speedy walk through the HK residents’ channels at immigrations; on the China side, busy foreign investors still have to queue with the mass of people using the single channel day in day out. Foreign managed hospitals and schools are in great demand to both the local and international community and, at the moment, not satisfying current demand lagging behind Beijing, Shanghai, Guangzhou, and of course Hong Kong.

Some positive steps have been taken lately in the efforts to integrate  Shenzhen and Hong Kong even more. The two-in-one smart card to be released towards the end of the year will help all those commuters to feel at home in both locations. In fact, the Octopus card and the Shenzhen Tong card would incorporate the same chip to allow for shopping (still at limited outlets for the time being) and traveling in Hong Kong and Shenzhen with only one card; another step towards the extended use of RMB in Asia.

Chris Devonshire-Ellis is the founding partner and principal of Dezan Shira & Associates, establishing the firm in Shenzhen in 1992, and growing it to 10 offices across the country. He is now responsible for the practices international development, and has recently overseen the firm’s corporate establishment and development with five offices across India. He commutes regularly between China and India and may be reached at chinaindia@dezshira.com.

Alberto Vettoretti is the managing partner for Dezan Shira & Associates in China. He has lived in Shenzhen since 1998. For information and assistance about establishing business in Shenzhen or China, please contact the firm at info@dezshira.com.

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Complimentary download of Dezan Shira & Associates’ first 15 years in China, written by Chris Devonshire-Ellis. Over 15,000 copies distributed.