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To see the future, look at Shenzhen

Updated: Apr 4, 2019

“I make robots” said the sharply dressed young man.  We had arrived at the same time to an event celebrating forty years of China’s “opening up” in the experimental megacity, Shenzhen.   We exchanged business cards, using both hands as traditionally observed in China, but because my failing eyesight didn’t allow me to make out his business, I asked him what he did.  It turned out he ran one of the word’s leading robot manufacturers. As you do in Shenzhen.

We got talking and it was clear this was a man on a mission.  He said we are ten years away from robots replacing all the day-to-day manual labour that humans currently perform. 

In fifteen years, those who can afford them will have artificial intelligence implants or wearable devices connecting them to unlimited information. Next, he said, robots will be more intelligent than us and able to communicate with each other in languages we can’t understand.

It sounded like a nightmare, I said, and he agreed it could be, or it could introduce humans to a new world of limitless possibility. He wasn’t sure, one way or the other. Welcome to Shenzhen, where the future is being created today.

Some call it the fourth industrial revolution.  Each industrial revolution has ushered in unprecedented social change.  So hold on, because if you thought the world was changing fast, things are about to move a whole lot faster.  And one of the change-makers is likely to be this remarkable South China entrepôt.  Shenzhen is an industry town in a hurry to transform from the world’s electronics hub to the driving force of the technologies of the future.

Once the cheap manufacturing back office to Hong Kong, Shenzhen is coming of age.

It’s no coincidence that this city was the epicentre of Deng Xiaoping’s “opening” of China in the late 1970s.  Shenzhen was China’s first Special Economic Zone, unleashing the animal spirits of business.  It is strategically located in the Pearl River Delta, drawing on the international finance reach of Hong Kong, the trading heritage of Guangzhou (old Canton) and a labour force of over 70 million people in the surrounding cities and towns.

All the world’s major tech brands are manufacturing here, including Apple, Intel and Microsoft. The ones to watch, though, are the local champions.  Amongst the one million private firms in Shenzhen are DJI, the world’s leading drone manufacturer, Tencent, whose Wechat is the social media platform of choice for a billion people, and many globalising brands such as  Huawei, BYD, ZTE and Vivo.  In many of these firms a new meritocracy is forming in which talented, young people are enjoying rapid promotions and flatter structures than they would find elsewhere in China.  Startups are attracted to Shenzhen because of the speed things happen and the open source, collaborative culture.  No longer do these firms need a Special Economic Zone. They are born global players.

This is the site of the world’s most rapid and largest scale urbanisation.  In forty years, Shenzhen has grown from a fishing village of 30,000 to a city of 11 million, to one of the leading cities of China with GDP of an estimated US$331 billion in 2017, clipping Guangzhou and well on the way to surpass Hong Kong in the next few years.  Per capita GDP remains half that of Hong Kong but therein lies part of Shenzhen’s competitive advantage.  Shenzhen has the highest per capita GDP in mainland China, growing at about 9 per cent, well above the national average.

In the space of a generation, Shenzhen has developed a unique entrepreneurial culture.  It’s a migrant city, drawing ambitious young people from all over China looking to make their fortune and hungry to learn and innovate.  It seems everyone is working two jobs, in part time education and learning a language, all to be sure not to fall behind.  There’s a casual egalitarianism about the place, evident from the diverse mix of locals who rub shoulders in the restaurants of Shiuwei and the trendy cafes of the OCT district.

Unlike anywhere else in China, Shenzhen is overwhelmingly a private sector economy. Its businesses rise and fall rapidly and its massive industries generate huge numbers of suppliers and service providers who can nimbly switch from one client to another.  With a passion for innovation, public and private sector firms are committed to research and development, soaking up a whopping four per cent of the city’s GDP.

Over time, the special tax preferences that sparked the initial burst of Shenzhen’s growth have been removed.  In January, China’s State Council approved the removal of the 84 kilometres of wire fences that have, for decades, marked out Shenzhen’s Special Economic Zone from the rest of the city.

As cities go, Shenzhen is still an infant.  Any city takes its real shape, its feel and its character from the sinews of time and the shared memories of successive generations.  Shenzhen is still too young to have much of a distinctive feel.  It’s a little greener than other megacities in China.  A new all-electric public bus fleet is being rolled out, a world first.  And it’s planning the world’s biggest metro.

Shenzhen is about to get a huge identity boost as the hub of China’s vision for the whole Pearl River Delta cluster of cities, badged as the “Greater Bay Area” plan.  This is an economic powerhouse region including Hong Kong, Guangzhou and Foshan.  By combining the strengths of each city stretched across 200 kilometres, and building stronger and faster connectivity between them, the Greater Bay Area is envisaged to be an international powerhouse for finance, logistics, technology and innovation.

So if Shenzhen isn’t world famous yet, then it’s time is about to come.  How the Shenzhen story will evolve from here is impossible to predict, with such fast-paced industries and such an adaptable mindset.  Can it turn Made in China into Created in China?

The story of Shenzhen is the story of modern China, the nation that in one generation has developed faster and on a bigger scale than any other place in history.  Of course, China still has many challenges, contradictions, risks and fears for the future, but Shenzhen demonstrates that tackling the economics is a big part of the solution.  It is an open question whether more “opening up” may be necessary to develop a truly global innovation hub in Shenzhen.  Yet China has surprised in the past and it will again.

Today, 90% of the world’s electronics have at least one component made in Shenzhen.  In the future, will 90% of the AI driving our cars, our augmented reality devices and in products and services we can’t imagine yet all originate in Shenzhen? Watch this space.

Just as the Shenzhen experiment in economic reform has been replicated across China, this city just might be the place to watch for future social and political reform, but don’t hold your breath because, at least for now, everyone seems too busy making money.

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