With half the offices in its skyscrapers empty and half the spaces in its malls empty and its highways almost empty, its special economic zone China in Shenzhen’s Qianhai district is a palpable repudiation of the Chinese dream of economic power and prosperity. It started operating more than 10 years ago and was a bold investment worth $45 billion.
Beijing earmarked her for what the state media called her, “home Hong Kong”, as they anticipated that it was going to develop into an international center of technology and financial services. Having spoken to business executives, investors, brokers and general real estate market players, economists and some workers in the region over the past two months, Reuters paints a sad picture of the region that remains almost deserted and seems to have lost all reform ambition.
To achieve its ambitious plan and attract big business from the Western world, Beijing generously offered incentives, such as a 15% tax rate, when almost all of the rest of China has a corporate tax rate of 25%. It also offered $4.1 million in subsidies for the purchase of buildings or offices, state-of-the-art offices, and even rent coverage for 5 years for certain categories of companies. To all this was added the advantage of proximity to Hong Kong.
Initially the venture appeared to be succeeding, as over 100,000 companies opened branches, including large multinationals and banking giants, such as HSBC, UBS and Standard Chartered. Chinese authorities insist that the special zone has succeeded in attracting family businesses and investors. But according to investors, business executives and real estate brokers, most of these companies have merely been registered in the relevant records of Shenzhen’s Qianhai District, but never set up there.
Beijing intended the region to develop into an international center for technology and financial services.
Speaking to Reuters, Brian Miller, owner of a warehouse business in another area of Shenzhen, stressed that his company “doesn’t employ a single person here.” He even explains that he has registered his company in the special economic zone in Qianhai on the advice of his accountant, but he himself has never even appeared at the address he has given. The absence of businesses is confirmed by the empty offices in the area, with their percentage in the special zone reaching 28.9%, while in the greater Shenzhen area it does not exceed 23.2%, while in Beijing it is only 15. 1% and at Shanghai 17.1%.
Over the past 40 years, Shenzhen has grown from a small cluster of villages to a megacity with a population of 18 million people and home to some of China’s largest companies. It was a kind of success award for China’s historic leader, Deng Xiaoping, and the reform campaign of, as it adopted business-friendly policies, as, after all, other regions of China and other special economic zones had done. And since 2010, Beijing began to treat the special economic zone of the Qianhai district in Shenzhen as a kind of policy laboratory that would usher in China’s new era with its gradual opening to the international market, with the internationalization of the yuan and full freedom in Internet.
In 2019, however, when it was 40 years since his reform Deng Xiaoping, nothing seemed to be going in that direction. State interventions have been tougher, controls on capital movements stricter since the massive outflows of 2015, while censorship has intensified and with it the monitoring of the movements of the Chinese people. And in Shenzhen’s special economic zone, rents are many times higher than in other parts of China. Even those who work in the special economic zone leave it as soon as they finish their work.
