Shenzhen: Industry, Economics, and Policy Trends
Often dubbed China’s “Silicon Valley”, Shenzhen is China’s fastest-growing city. It is ranked by the Chinese Academy of Social Sciences as the mainland’s top city for “overall economic competitiveness” and is China’s premier Special Economic Zone (SEZ) for foreign investment as well as a sub-provincial class city.
Shenzhen was declared China’s first SEZ by then-Communist Party (CCP) chairman Deng Xiaoping in 1979. Aided by capital flowing easily from neighboring Hong Kong, the city has since transformed from small fishing town to bustling megacity.
Every year, millions flock to its city center as part-time or migrant workers, entrepreneurs from around the globe seek to benefit from its investment-friendly practices, and tourists admire its futuristic landscape.
Located in Guangdong province only 100 km (62 miles) southeast of its capital, Guangzhou, Shenzhen is strategically located on the Pearl River Delta that serves as a border with Hong Kong. The city center is under 20 minutes from Kowloon by fast train. Other nearby cities include Huizhou, Dongguan, and Macao.
According to the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), Shenzhen is one of four core cities to serve as the engines for development in the region. Shenzhen is frequently called upon to be the GBA’s technology and R&D hub. As of 2018, four percent of Shenzhen’s GDP was invested into research and over 11,000 high-tech enterprises called the city home.
In 2018, Shenzhen had the world’s fourth largest container port and China’s fourth largest airport for cargo. The same year, Shenzhen’s exports accounted for 38 percent of all of Guangdong’s exports and 10 percent of China’s total exports.
Shenzhen trails only Shanghai and Beijing in China for overall GDP, ranking third at RMB 2,422 billion (US$366.03 billion) per year, its growth having eclipsed Hong Kong in 2018. Shenzhen also has its own stock exchange – the Shenzhen Stock Exchange. It is the eighth largest in the world.
Important industries in Shenzhen include technology, financial services, modern logistics, and the cultural sector. Shenzhen is seen as a global pioneer in several high-tech sectors, including mobile technology, DNA sequencing, metamaterials, and 3D displays.
Leading companies headquartered in Shenzhen are Tencent, Huawei, ZTE, Baidu, and IBM as well as financial institutions HSBC, China Merchants Bank, Standard Chartered, and Citigroup.
Other economic indicators
Investment and consumption (2019):
- Total investment in fixed assets: RMB 514.7 billion (US$73 billion)
- Total retail sales of consumer goods: RMB 601.6 billion (US$85.2 billion)
Import and export (2019):
- Total value of imports and exports: RMB 2,800 billion (US$397 billion)
- Total value of imports: RMB 1,147 billion (US$162.7 billion)
- Total value of exports: RMB 1,553 billion (US$220.3 billion)
Policies and trends
Shenzhen’s SEZ was expanded in 2010 from four districts to the entire city. Businesses within the Shenzhen SEZ enjoy a wide range of tax exemptions, grants/loans, and reduced rates. These notably include:
- Three to five-year tax exemptions for manufacturing and operating sites by high-tech enterprises.
- Five-year business tax exemptions for foreign banks.
- Value-added tax (VAT) and tariff exemptions for imported materials used for finished products.
- Equal living rates for foreigners and local citizens.
- Immunity from state quotas or permits for production.
- VAT exemption for goods made and sold locally.
The Shenzhen Free Trade Zone (Shenzhen FTZ) consists of four state-level development zones – Shenzhen Yantian Port Free Trade Zone (Shenzhen Yantian Port FTZ), Shenzhen Futian Free Trade Zone (Shenzhen Futian FTZ), Shenzhen Shatoujiao Free Trade Zone (Shenzhen Shatoujiao FTZ), and Shenzhen Yantian Port Bonded Logistic Park (Shenzhen Yantian Port BLP).
In April 2015, the Qianhai-Shekou Area of China (Guangdong) Pilot Free Trade Zone – focusing on trade with Hong Kong – officially began operating within the city.
On March 14, 2019, the government announced a one-year trial period tax break for “high-end talent” coming to the Greater Bay Area.
The notice stated that if the amount of individual income tax (IIT) paid by those talents exceeds 15 percent of their taxable income, the excess part shall be subsidized by the governments of the nine cities in the GBA. The subsidy is exempt from personal income tax and is granted once a year. The policy has been made clear to apply for citizens as well as foreigners with residency.
As mainland China’s leading city for foreign investment and a showcase for China’s “socialism with Chinese characteristics”, Shenzhen is frequently at the forefront for new innovations in the CCP’s governing system.
On August 18, 2019, the Party’s leading committee on reform, the Central Comprehensive Deepening Reforms Commission (CCCDR), announced new plans towards expanding the city’s role on the national stage.
Benchmark dates include:
- By 2025: Shenzhen is to become a world-class city renowned for innovation, with special focus on public services and environmentally sustainable development. This will entail R&D investment to be raised and “innovative capacity” to reach the standards of global leaders. Along the way, the city’s cultural “soft power” will be vastly improved.
- By 2035: Shenzhen is to become China’s leading international showcase as the “world capital of innovation, creativity and entrepreneurship,” showing the world what a “modern, powerful, socialist Chinese city” looks like.
- By 2050: Shenzhen is to stand among the world’s top cities, a benchmark of competitiveness, innovation and influence.
- Higher education institutions’ will be granted “self-ruling rights”, to accelerate the building of world-class universities.
- The building of high-quality medical institutions by private enterprises, especially Hong Kong or Macau-funded entities will be highly encouraged;
- The building of medical talent training programs in line with international standards;
- Regulations will be relaxed for overseas doctors to practice in the mainland;
- Increased trialing for global cutting-edge medical technology.
Additionally, the charter states that the city will begin, “Exploring the securitization of intellectual property rights” and “standardizing the orderly construction of property rights trading centers for intellectual property and scientific and technological achievements.”
While the actual steps Shenzhen will take to secure intellectual property (IP) have not been made clear at this time, the language implies a greater shift by the country to comply with IP concerns from foreign enterprises and encourage their continued investment within the city.
China Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Dalian, Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong. Readers may write to email@example.com for more support on doing business in China.