Four decades ago, the then State leader Deng Xiaoping introduced the epoch-making reform and opening up policy, and designated Shenzhen as a special economic zone in China. The fishing village soon became the forefront of China’s miraculous rise, accumulating financial and human capital at a pace that exceeded anyone’s expectation. No one would disagree that the city is now one of the most advanced cities in China. Yet, it now faces new challenges.
Chinese President Xi Jinping’s vision for future national economic development has led to the central government’s decision to designate Shenzhen as the "core engine" of the Guangdong-Hong Kong-Macao Greater Bay Area development plan. As a result, Shenzhen will take on three significant tasks in the GBA: developing an innovation-driven economy, improving financial markets and enhancing regional cooperation.
To accomplish these goals, Shenzhen has to continue upgrading its industries, find ways to link other key southern Chinese megalopolises like Hong Kong, Macao and Zhuhai, as well as attracting foreign investment by creating a conducive environment for innovation. These tasks mean that Shenzhen must adopt the world’s best practices and push forward new reform measures.
First, Shenzhen has gone through several rounds of industrial upgrades in a short time, an achievement that highlights the city's great potential for technological innovation. The city government constructed massive telecommunication and transportation infrastructures that enabled high technology enterprises to adapt to a changing world and catch up with new products. Moreover, the Shenzhen government provided abundant industry-focused subsidies, promulgated strict measures to enforce intellectual property rights protection, and nurtured a mature financial system. These supportive measures have created not only an attractive investment environment but also a “fair play” venue for all, placing private firms on equal footing with state-owned enterprises.
I contend that the key to future success is more competition and further market liberalization. The government needs to focus more on correcting market failures, such as reducing transaction costs and improving information flows.
Secondly, Shenzhen's financial markets also need further reform. Speculation emerged in bubble sectors, especially the real estate market, during the economic liberalization process. That has significantly hurt investors’ confidence and could potentially obstruct its industrial upgrading process.
When monetary policy is loose, capital flows like floods into the real estate and stock markets. Without a more stringent regulatory system and prudent lending standards, Shenzhen will not be able to sustain development or promote growth in the Bay Area.
Moreover, another notable challenge for Shenzhen is the different political and legal systems and banking regulations among GBA cities, because of the existence of the special administrative regions of Hong Kong and Macao. With the existence of system and regulatory discrepancies, Shenzhen would have difficulty in establishing strong regional industrial linkages with other cities. One solution for this issue lies in strengthening the region’s industrial division of labor, which is based on an efficient and low-cost circulation of products. Shenzhen has already created huge supporting advantages for its industries. Thus, a further liberalized market is expected to have a prominent effect on the efficient allocation of market resources.
As China shifts its comparative advantage away from labor-intensive industries, the need for an innovation-based economy and further market liberalization grows. Shenzhen has every advantage to make that happen and can subsequently serve as a model for the rest of the country to study and emulate, as long as they push forward those necessary reforms.
The writer is a secondary student from Shenzhen studying in the United States.
The views don't necessarily reflect those of China Daily.
