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Shenzhen, Economic Zones and migrant worker pressure

The Chinese authorities have just given the go ahead for Shenzhen to build a National innovation Zone. What it means is that the City receives support in terms of taxation and research and development financing and the model is proven to work in Shanghai, Beijing and Wuhan.
Shenzhen is another one of China’s success stories and in 1979, was the first of China’s Special Economic Zones (SEZs). Its proximity to Hong Kong was clearly part of a longterm strategic plan.

Close connections with Guangzhou, and the migrant workers the factories in this region attract from across China, have helped to create an economic powerhouse of predominatly low cost manufacturing over the past 30 years in the wider region. However, things are changing. The migration patterns in China are shifting inexorably to the West and specifically to the Sichuan region with its 100m population and central cities of Chongqing and Chengdu (of Panda fame). This is putting pressure on costs in the South Eastern and Southern cities which relied on low cost migrants to keep the price of goods down. As the pattern of infrastructure developments in the West increases then the number of low cost workers will decrease. Repositioning Shenzhen as an innovation centre and attracting a very different pattern and type of industry will allow wage price inflation to be absorbed with new higher end jobs and services. It will also help rebalance the inevitable loss – or price increases – in the manufacturing base.
Unlike Shanghai and Beijing, less is known of the city of Shenzhen and its enormous potential.
With a population of around 10.5 million (depending on the source) it dwarfs London and New York. It has seen huge growth in terms of GDP and enjoys UNESCO creative status. The National Innovation Zone will position Shenzhen as a city that other global cities, and more importantly, companies in other global cities, will want to connect with.
In my trips around China, I have always been impressed by the spirit and can do attitude of the business people of Shenzhen. Our office in the city is well placed to help Chinese firms wanting do business internationally and international firms wanting to access Shenzhen and its wider manufacturing and economic region.
Good luck to Shenzhen on this great opportunity.