Shenzhen pays price of its
success By Catherine Jiang
SHENZHEN - China's first and most
successful special economic zone (SEZ), is
becoming a victim of its own progress. Land
shortages and surging housing costs are driving
enterprises in the boom area, part of Shenzhen
city, to move their factories elsewhere,
reminiscent of how it profited since the 1980s
from a similar exodus from neighboring Hong Kong.
The central government's efforts to curb
house-price gains in the country's leading cities
have failed to prevent increases of more
than
40 per cent in Shenzhen this year alone. The
average price of homes in downtown areas is more
than 22,000 yuan (US$2,840) per square meter, fast
catching up with Hong Kong’s New Territories next
door. This in turn is helping to drive up the cost
of non-residential land.
Among businesses
looking to cut costs by moving out is Huawei, one
of China’s largest telecommunications companies.
It is building a production facility on a 500,000
square meter technology park site in neighboring
Dongguan city. Huawei, which has 4,000 employees
in Shenzhen alone, is investing 4 billion yuan in
the project, scheduled to be finished by the end
of the year.
Jia Xin Da Printing is also
on the move, relocating its seven-year-old factory
to Guanlan Industrial Zone just outside the
Shenzhen SEZ, driven away by rising rentals,
according to general manager and cofounder Guo
Danze.
"When we first rented our place in
2000 the rent was 20 yuan per square meter," Guo
said. "Now it has doubled to 40 yuan. The rent for
our new place in Guanlan will cost us only 15 yuan
per square meter."
Guanlan, though outside
the SEZ, is still only 26 kilometers from
Shenzhen's international airport and is under the
jurisdiction of Shenzhen municipality, a factor
Guo appreciates. The whole area is part of
Guangdong province.
"We don’t want to
leave Shenzhen entirely," Guo said. "We have built
very good relations with the government and we can
easily find all our supplies here."What hurt, he
said, was the prospect of some of the company's
800 workers being unwilling or unable to make the
transfer. "I don’t even want to talk about how
many people we will lose when we move,"he said.
Even tax breaks are failing hold some
businesses in the SEZ. Taiwanese-invested
Guangdong Nai Li Shoes has moved its factory to
Dongguan, about 70 kilometers from Shenzhen.
"We had tax privileges for five years,"s
aid the owner who wanted to be identified only as
Mr Li. "Then we realized that Shenzhen was getting
so expensive, so we have moved our 30,000 square
meter factory with 4,000 workers to Dongguan."
Shenzhen authorities play down the loss.
The city’s Communist Party chief Li Hongzhong told
the Nanfang Daily - the official newspaper of the
Guangdong provincial party committee: "We don’t
have a large-scale exodus of enterprises. There
are some transferring to other places, but those
that have moved out only account for 0.1% of our
total.
"We have more new enterprises
registering than those that have cancelled. Since
2005, there have been more than 110,000 newly
registered enterprises, of which 20,000 were
incorporated in the first half of this year. That
compares with the 40,000 that have moved out.''
Adding to the net gain, the new enterprises "are
mostly high-tech, logistics and financial
businesses'', he said.
Even so, high-tech
outfits such as Di Ma Digital Facilities are among
those responding to the pressure to move. General
manager Liu Ping plans to relocate its factory to
Huidong city, still in Guangdong province but with
more space to spare than Shenzhen.
"We
have a 30,000 square meter factory in Shenzhen now
but we are expanding so we need at least another
100,000 square meter workshop. We’ve bought
equipment from other countries but haven’t been
able to find a suitable place in Shenzhen for it.
We had to rent space," he told the South
Metropolitan News, a sister publication of the
Nanfang Daily.
While the Shenzhen
government plays down the drift out of the SEZ, it
sees benefits in losing labor-intensive,
land-hungry manufacturing plants, freeing up space
for more more value-added businesses in the
high-tech and services sector.
It recently
signed a regional cooperation agreement with
Guangdong's neighboring provinces of Hunan and
Jiangxi and with Chongqing municipality in the
center of the country, to assist manufacturing
enterprises to move out of the Shenzhen SEZ. In
return, the Shenzhen government receives
unspecified fees. The conditions of the removal
aid also depend on "guanxi”, according to a city
official who did not want to be identified. Guanxi
is a term for mutual back-scratching or reciprocal
personal or business connections.
ZhaoYong, the general manager of Mei Sheng
Holding Co, which specializes in natural gas
related products, told Asia Times Online that
there was little Shenzhen could or should do to
retain companies. Instead, it should bring fully
into play its advantage of having a large
concentration of talented professionals and
high-tech operations.
Even so, that is not
enough to keep Mei Sheng in Shenzhen. Zhao is
relocating the company to Henan province in the
north of the country early next year to take
advantage of the area’s lower costs.
Catherine Jiang is a freelance
writer based in Shenzhen, China.
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