In the “miracle” city of Shenzhen, fears for China’s economic future

SHENZHEN, China – David Fong moved from a poor village in central China in 1997 to the southern prosperous city of Shenzhen. For the next 25 years, he worked for a number of foreign manufacturers before building his own multimillion-dollar company. $ business – from school bag to toothbrush.

Now 47, he plans to expand internationally by building consumer devices connected to the Internet. But after two years of coronavirus blockades that have pushed up shipping costs and shaken consumer confidence, he worries about whether his business will survive at all.

“I hope we get through the year,” Fong said, surrounded by talking bears, car parts and company catalogs in his top-floor office overlooking the gleaming towers in an area of ​​Shenzhen once filled with large factories. “It is a difficult moment for business.”

“Miracle” city

The story of Fong, the rags-to-riches now threatened by a larger slowdown exacerbated by the coronavirus, reflects the history of his adopted city.

Founded in 1979 in China’s first wave of economic reforms, which allowed private enterprises to play a role in a state-controlled system, Shenzhen has grown from a collection of agricultural villages to the world’s largest port, home to China’s state-of-the-art technology. , finance, real estate և manufacturing companies.

The city has seen at least 20% annual economic growth over the past four decades. In October, forecasting company Oxford Economics predicted that Shenzhen would be the fastest growing city in the world from 2020 to 2022.

But since then, it has lost that crown to San Jose in Silicon Valley, California. In the first quarter of this year, Shenzhen recorded only 2% economic growth, which is the lowest figure for the city ever, except in the first quarter of 2020, when coronavirus infections stopped the country.

Shenzhen remains China’s largest exporter of goods, but its overseas shipments fell by almost 14% in March, hampered by a COVID blockade that caused congestion at its port.

The city has long been considered one of the best “dynamic places” for business in China – the victory of the country’s economic reforms. President Xi Jinping called it a “miracle” city when he visited 2019.

If Shenzhen is in trouble, it is a warning sign for the world’s second largest economy. The city is “the canary of the mine,” said Richard Holt, director of global cities research at Oxford Economics, adding that his team was closely following Shenzhen.

Fong, which mainly sells its products to in-house customers, says sales have fallen by about 40% from 20 million yuan ($ 3 million) in 2020, suffering from a two-month blockade in Shanghai and a general decline in consumer confidence.

Lose attractiveness

Shenzhen, now a city of about 18 million people, has been hit hard by a series of attacks from inside and outside the country.

Shenzhen-based telecommunications equipment maker Huawei Technologies and ZTE Corp. Huawei has pleaded not guilty, while ZTE withdrew from the trial in March, five years after pleading guilty.

Another of the city’s largest real estate companies, China Evergrande, raised fears of a collapse last year over its huge debts, which could wreak havoc on China’s financial system.

Even smaller companies have suffered. Last year, Amazon.com Inc. toughened how retailers do business on the platform, affecting more than 50,000 e-commerce retailers, many of them in the city, according to the Shenzhen Cross-Border E-Commerce Association.

In addition, in March, Shenzhen was blocked for a week to prevent the spread of the coronavirus. That blockade, գտնվող in other Chinese cities, suppressed domestic demand for Shenzhen goods. The city’s 2% growth in the first quarter was less than half of China’s overall 4.8% growth rate.

During that time, business registrations also fell by almost a third. City officials are sticking to their 6% growth target set for April this year, but the slowdown has alarmed Chinese institutions.

The Shenzhen government did not respond to a request for comment. City officials privately admit that it is becoming increasingly difficult to keep the Shenzhen “miracle” alive.

“Many people with shares in Shenzhen remain predictable, unlike before. “You can no longer experiment freely to see what is left,” a city official told Reuters on condition of anonymity.

‘It’s time to go’

The cancellation of most international flights to China, the blockade of the port due to the blockade, and the once-boiling border with Hong Kong, which is now completely closed, have made Shenzhen a difficult place to do business. China’s plans for the Gulf, merging Shenzhen with several mainland cities in Hong Kong, Macao, seem to have stalled.

“It’s losing its appeal, they (the authorities) have to realize that,” said Klaus Zenkel, president of the European Chamber of Commerce in southern China. “We always say they have to balance the constraints – the economic growth.”

In September, the Chinese government announced plans to expand what is known as the Qianhai Economic Zone, a special area within Shenzhen, from 15 square kilometers to 121 square kilometers. British banks Standard Chartered and HSBC have set up offices there, but the closure means borders have made it difficult for foreign businesses to capture the area, said five Zenkel diplomats in the region.

International chambers of commerce have warned the Chinese government of an outflow of foreign talent. A diplomat at the European Consulate General told Reuters they estimated that the number of its citizens in southern China had dropped from 750 to 3,000 before the epidemic.

In the “miracle” city of Shenzhen, fears for China’s economic future

SourceIn the “miracle” city of Shenzhen, fears for China’s economic future

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