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Hong Kong's rival Shenzhen is vulnerable at the rear
Hong Kong's rival sister city, Shenzhen, is vulnerable in the rear. This week, Xi Jinping said he will give the tech hub more autonomy. But his housing bubble is putting his innovation lead at risk, allowing other cities across the country to steal talent and investment.
The site of the country's first special economic zone in 1980, Shenzhen, located across the economic border from Hong Kong, helped lead the way in opening up China to foreign investment and trade. Since then, it has grown from a facilitator of manufacturing exports to a tech hub with a $4.9 trillion stock market, home to global giants such as Huawei and Tencent. Shenzhen plays a key role in Beijing's goal of independence from US hardware and software.
During a speech marking the 40th anniversary of the special zone, Xi repeated government promises to give the city more freedom to innovate in key areas such as stock market liberalization, cross-border capital flows and property protection. intellectual. Foreign direct investment growth in Shenzhen fell to 0.2% in 2019 in dollar terms, down from 11% in 2018 (official data).
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But real estate speculators are scaring away young entrepreneurs and startups. At $10,000 per square foot, the average home eats up 46 years of annual income, according to Numbeo. That makes Shenzhen less affordable than Hong Kong in salary terms. As a result, some companies are moving to cheaper coastal cities like Suzhou, which have their own tech hubs. A quarter of the Shenzhen offices were empty in June, according to Cushman & Wakefield.
The government seems aware. Part of the new policy package includes a clause allowing Shenzhen to convert more nearby farmland into housing. But the point is that the more special privileges it has, the more attractive it is for real estate.
The authors are columnists for Reuters Breakingviews. The opinions are yours. The translation, by Carlos Gómez Abajo, is the responsibility of CincoDías
