learning from shenzhen?

Long time friend, Josh Kilroy directed me to a recent blog post by William Pesek, who argues that if Japan wants to fix the country’s economy, it should learn from China, or at least Shenzhen and set up a special economic zone. Pesek claims,

In 1980, Deng Xiaoping started China’s first special-economic zone in a coastal village that was nothing to look at. Today, Shenzhen is a teeming collage of huge skyscrapers, thriving industrial parks, 10 million people, one of the world’s busiest ports, and some of the biggest manufacturing and outsourcing industries anywhere…It’s the center of Chinese experimentation. There, officials can test what works and what doesn’t: which corporate tax rates offer the best balance of attracting foreign investment while filling government coffers in Beijing, which labor standards make the most sense, which corporate-governance standards are most advantageous, which immigration procedures are optimal, which regulations stay or go.

Why does this article distress me? In a nutshell, it distresses me because there is nothing in this statement that did not come directly from the propaganda that the SEZ churns out about itself and, even with that caveat, it teems (if I may) with errors:

  1. Shenzhen’s territorial predecessor was Baoan County, not a coastal village. The conflation of Yumin Village with ur-Shenzhen was an artifact of Chinese news reportage circa 1984 and Deng’s first southern tour (to promote liberalizing other areas in the country);
  2. Thriving industrial parks? Leaving aside the fact that the SEZ’s manufacturing growth rate peaked in 1996 (according to government statistics), Shenzhen is currently de-industrializing as manufacturing is being pushed out to make way for creative / cultural industries;
  3. 10 million people? Where did that statistic come from? Estimates between 13-15 million;
  4. Outsourcing? See 2 above with the addendum that Dongmen continues to grow. One of the more recent examples was Foxcomm’s decision to move its manufacturing base out of Shenzhen and turn the Bantian campus into a research and development center.

Leaving aside Pesek’s shaky grasp of fact, his larger point, that Japan needs strong government intervention to grow the economy is based on the idea that tall skyscrapers, industrial parks, corporate tax rates, and immigration laws that work for industry are signs of economic success. Has he completely missed the fact of growing inequality throughout China more generally, but Shenzhen in particular?

The question of growing inequality is particularly relevant because preferential policies have predicated Shenzhen’s competitive advantage. The most famous of the quotations in this regard was Deng Xiaoping’s decision to “allow a few to get rich first”. More to the point, in Shenzhen wages for manual labor remain more or less what they were over 15 years ago, while white collar salaries continue to rise. Meanwhile, the price of housing has gone up even faster than white collar salaries creating a situation in which most young people are trying to figure out if they will be able to purchase a home.

All this to make a simple point. Rather than focusing on glass buildings, Pesek might more usefully ask, “In the absence of preferential policies and an underdeveloped hinterland that remains underdeveloped, can anyone else do what Shenzhen has done? And, if not, what are the lessons to be learned from the SEZ’s experiment with neoliberalism?”

4 thoughts on “learning from shenzhen?

  1. The economic free zone concept isn’t unique to China – you can find them all over the developing world, in places such as the UAE, Egypt, etc.

    The big question is, would the approach work in a developed nation? It’s OK taking a tiny economic model to play with, but I’m not even sure that it’s going to work as well as people think it will when it’s given much more room to flesh out in the latest Chongqing to Chengdu industrial zone development – which will cover 20,000 Square Kilometres…

    • Hi Shardsofchina,

      Thank you for joining the conversation. Yes, there are industrial processing zones and industrial parks and tax free zones all over the world. In fact, China learned from Singapore and Malaysia and Taiwan before establishing Shenzhen and the other four SEZs. And that’s part of my point: Today most of the world has heard of Shenzhen, but not the Zhuhai, Shantou, Xiamen, and Hainan SEZs; even in China, the rate of SEZ success (if we are judging by neoliberal economic indicators) is limited to Shenzhen, even though there are now special zones of various flavor all over the country.

      As you mention, Sichuan’s experiment linking Chongqing and Chengdu – can neoliberalism work in the absence of an underdeveloped hinterland? After all, capitalism turns cheap labor into profits for a relative minority. As a friend once said to me, “It took 1.3 billion Chinese to build Shenzhen. What do we do next?” Thus, for me the question is not simply one of scale (small versus large zones) or even developing versus developed, but rather, “How do these experiments include and/or ignore the pressing issue of economic justice?”

  2. 2 relevant articles from The NY Times:
    The Myth of Japan’s Failure

    Chongqing and Chengdu’s contrasting styles to development–with a mention to income inequality.

    Curious as to your thoughts on the Chengdu v. Chongqing, and any tie-in to Shenzhen.

    Thanks for the English summary of Shenzhen’s top firsts.

  3. Hi Michael, thanks for the links to the nytimes view of Shenzhen. About Chongqing, all I know at the moment is how many Shenzhen based architectural firms are working there. I’m thinking a visit would be enlightening!

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