Review and Forecast on the Economic Development of Shenzhen

I. Overcame the difficulties and maintained growth in the global economic downturn

The first year of the new century was the most difficult year Shenzhen ever experienced in its economic development over the past many years. The economic growth of the developed countries such as USA, Japan and Europe obviously slowed down and so did the international IT industry. After the September 11th event, the global economic climate became even more turbulent and complicated. Shenzhen has an export-oriented economy and its dependability on exportation ranks the first in the Southeast Asia. And the electronic information industry is the major component of its industrial structure. Therefore, the impact of the global economic downturn and the slowdown of the international IT industry on Shenzhen even exceeded that of the Asian Financial Crisis. To cope with this difficult situation, Shenzhen government decided to speed up the reform of state-owned and large-scale enterprises, to improve the capacity and efficiency of custom clearance and to organize delegations to the developed countries in order to attract foreign investments. This "acceleration" policy ensured the steady and stable growth of the economy. A batch of major projects of strategic significance has been introduced. A number of large-scale orders has been received. More export markets such as the East Europe, the South Africa and the South America were actively explored.

Today Shenzhen has a population of 4.3 million (some reports on the results of 2000 census claim a population exceeding 7 million). It has the fourth largest economy among mainland cities, right after Beijing, Shanghai and Guangzhou. It occupies the first place in terms of per capita GDP and disposable income. An economically prosperous, legally healthy, environmentally beautiful, ecologically friendly, civilized and harmonious metropolis has taken shape. The rise of Shenzhen is a vivid reflection of the remarkable achievements and the historical transformation China has made after its reform and opening up to the outside world. It also illustrates the course on which China follows closely with the trend of world civilization and marches forward with vigorous strides in the new era. Statistics show that from January to November 2001, Shenzhen's GDP was RMB165.2 billion (US$19.95 billion) and export volume US$33.9 billion, up 12.7% and 7.1% respectively over the comparable period in 2000. The output value and the export volume of high-tech products hit RMB116.4 billion (US$14.06 billion) and US$9.6 billion, rising 24% and 27.7% respectively. The output value of its high-tech products took up 44% of the total industrial output value, the highest proportion among all major cities in China. The contractual foreign investment amounted to US$3.68 billion, increasing by 53.2% over the comparable period in 2000. The actually utilized foreign investment recorded an increase by 19.4% to US$3.25 billion. The aggregate retail value of consumer products increased by 13.1%. There were 68 newly approved or capital injection projects with an investment over US$10 million. Among which, Sumitomo Electricity of Japan invested US$29.83 million in setting up Sumitomo Optical Fiber and Cable Manufacturing (Shenzhen) Co. Ltd. in Shenzhen New & High-tech Industrial Park, and Hitachi (Hong Kong) and Hitachi (USA) jointly invested US$29.8 million in establishing Shenzhen Hitachi-Seg Monitor Manufacturing Co. Ltd. in Long Gang Greater Industrial Estate. These key projects had a great significance in upgrading the industrial structure and sustaining continuous economic growth of Shenzhen during the hard times. Shenzhen's economy has achieved a remarkable growth amid the global economic downturn. It has accomplished all its major economic objectives set for the year 2001. The GDP for the whole year is expected to hit RMB191.6 billion (US$23.14 billion), with a growth of 13% over 2000. This growth rate is 5% higher than the national average of 7.3%. It is a miracle for Shenzhen to achieve such a growth rate during the current world economic recession.

II. The development during the next five years will focus on the construction of "centers"

Shenzhen has a spectacular blueprint for the "Tenth Five-Year Plan". In order to implement the plans smoothly, Shenzhen City Planning Committee has discussed and passed the Review and Countermeasure Study on the Overall Planning for Shenzhen Special Economic Zone (Shenzhen SEZ) and the Study on the Developing Strategies of Shenzhen SEZ in 2030. It has set the new ideas for the development of Shenzhen City in the coming five years, i.e. establishing four municipal-level centers and five secondary centers. In 2005, Shenzhen will realize the following economic objectives: GDP at RMB300 billion (US$36.23 billion), achieving an annual growth of 12%, industrial output value at RMB500 billion (US$60.39 billion), growing by 14% in average, investment in fixed assets rising to RMB110 billion (US$13.29 billion), increasing by 12% annually, and an export volume reaching US$48.5 billion, surging by 7% every year.

1. Strengthen the improvement of the four municipal-level centers
   In The Overall Planning for Shenzhen SEZ, apart from continuously strengthening the improvement of the new urban center (originally called "Futian Central Area") and Luohu Commercial Center, Nanshan Science and Education Center and Seafront Logistics Center are also included in the improvement plan. Four municipal-level centers will be gradually formed within the boundary of Shenzhen SEZ so as to help the development of pillar industries. Meanwhile, Shenzhen will also expedite the construction of the secondary centers in order to enhance the service function of each center and to utilize the city space more effectively.
   
   The new urban center lies in Futian District where Shenzhen municipal government is located. It is also the political, economic, cultural, commercial and dwelling center. It is densely populated and swarmed with shops. There is also a forest of office buildings and residential quarters divided by bustling streets. The dozens of high-rise buildings and urban squares under construction such as the new City Hall, the citizen squares, and the exhibition centers will constitute the central area of the city in the future. Luohu District was the earliest commercial center developed. This district will still be the commercial, trade, economic, cultural and dwelling center of Shenzhen in the future. Dongmen Old Street, Renmin Nan Road, the railway station, Luohu Commercial Plaza and their peripheries will not only be the focus of the city reconstruction, but also the irreplaceable key commercial area of Shenzhen.
   
   Shenzhen Nanshan Science and Education Center and Seafront Logistics Center are the hottest areas under construction that have aroused a lot of attention. Nanshan Science and Education Center will focus on developing a high-tech industrial park, building Xili University City, upgrading Shenzhen University to a new level and constructing large-scale athletic facilities. In addition, Shenzhen will also invest about RMB100 billion (US$12 billion) to build a high-tech industrial zone. It is estimated that industrial output value within the zone will amount to RMB200 billion (US$24 billion) in 2005 and RMB400 billion (US$48 billion) in 2010, enough to rebuild a Shenzhen City. Seafront Logistics Center is located in the west of Shekou. Based on the ports of Shekou, it will concentrate on expanding import and export trade and cargo transportation, especially harbor transportation. Its container throughput will become so big in the coming five years that it will be developed into an important export base in South China.
   
   
2. Focus on building five secondary centers
   
   While strengthening the improvement of the municipal-level centers, Shenzhen will quicken its paces in developing five secondary centers: Nanshan Central Area, Bao'an Central City, Longgang Central City, Longhua New City and Shatoujiao-Yantian Central Area. Shajing Town Center and Pingshan Town Center will be regarded as two potential secondary centers in the long term development. Among the five secondary centers, Bao'an Central City, Longgang Central City and Longhua New City are outside the boundary of Shenzhen SEZ. After over 20 years' development, they have greatly evolved. Bao'an Central City and Longgang Central City are not only where the district governments are located, but also the political, economic, trade, cultural and dwelling centers of these districts. The industry and construction are uprising in Longhua New City in the recent years. It has a good chance to be incorporated into the Shenzhen SEZ and become a superstar among the administrative towns of Shenzhen.
   
   Nanshan Central Area and Yantian-Shatoujiao Central Area are both within the boundary of Shenzhen SEZ. The former is the earliest industrial economy development area based on the original Shekou Industrial Zone and Nantou Old City. As part of Luohu District, Shatoujiao used to be the only town within the boundary of Shenzhen SEZ among the 18 towns under Shenzhen's jurisdiction. When Shenzhen reorganized its administrative districts in 1996, Yanhu-Shatoujiao was carved out of Luohu District and became a new district administratively parallel with Luohuo District and directly under the jurisdiction of Shenzhen Municipal Government. With hills behind and the sea in front, Yantian District has cross-border links to Hong Kong by both land and sea. It is a key district for further development in the east of Shenzhen as well as a harbor and tourist area.
   

III. Adjust the industrial structure and radiate through developing belts

The first one was in the early 1980s, when agriculturally based Bao'an County carved out a 375 square kilometers area to create a special economic zone - Shenzhen. As a window of China's reform and opening up to the outside world, Shenzhen formed an export-oriented economic pattern pillared by industry, trade, retail, light industry and processing industry. This pattern sent Shenzhen on the route of a soaring economy. The International Trade Building, the highest building in China and Asia and the fourth highest in the world at that time, was built at the speed of "completing one floor in every three days". Luohu Commercial Area started to take shape. A new city sprang up from a small county.

The second adjustment took place in the late 1980s and early 1990s. As the economy of Shenzhen developed at a high speed, the look of the city changed with each passing day. Bao'an County was replaced by Bao'an District and Longgang District. In order to keep abreast with the new changes, Shenzhen set a new goal of establishing a well-rounded economic frame giving priority to five pillar industries including industry, trade, finance, real estate and tourism while vigorously developing tertiary industries in order to develop Shenzhen into an international metropolis. After this adjustment, a modern coastal city appeared. Shenzhen became one of the biggest cities in China.

The third adjustment was made at the intersection of the two centuries. Shenzhen's government timely brought up with the concept of developing "two zones and one axis". After that, Shenzhen's economy drove onto a fast lane and entered into a new realm in which it was afraid of no difficulty and moved forward regardless of any kind of danger. With the development of high-tech technologies and the rise and prevalence of electronics, telecommunication, video technology and Internet, Shenzhen determined an industrial structure development policy "pillared by high-tech industry and modern finance industry and based upon advanced industries".

Shenzhen planned to reasonably organize and guide the development of the three pillar industries and form an industrial structure backed up by the High-tech industrial Zone, the Modern Logistics Zone and the Axis of Finance and Trade. The pattern would radiate to Bao'an and Longguang through the West Industrial Axis, the Central Living Service Axis, the East Industrial Axis and the East Coastal Developing Axis so as to consistently expedite the harmonious development and the all-round upgrading of industries.

1. High-tech Industrial Zone
   
   In the development of the High-tech Industrial Zone, Shenzhen will implement the medium and long term developing strategy in the "9+2" construction plan step by step and in a planned way. It is said that the recent key areas for development are Shenzhen High-tech Industrial Park, Guangmingnan and High-tech Export Processing Zone. Shenzhen government will give full support in land supply, fund raising and infrastructure facilities.
   
   
2. Modern Logistics Zone
   
   With respect to the Modern Logistics Zone, Shenzhen will focus on building six logistics parks and keep adjusting and optimizing their function and positioning, service range, layout, etc. Since the founding of Shenzhen SEZ, a modern transportation network by sea, land and air has been in place with urban transportation, airlines, harbor transportation, highways, expressways and railways reaching out in all directions. The progress of urbanization and modernization serves as a solid foundation for developing the city into a logistics center in the new century.
   
   
3. Axis of Finance and Trade
   
   The formation and the development of the Axis of Finance and Trade will exalt the function and radiate ability of the four biggest central districts of Shenzhen as well as accelerate the development of the eight district-level commercial centers. The municipal-level commercial centers include the Central Commercial Center, Huaqiang Bei Commercial Center, Luohu Commercial Center and Dongmen Commercial Center. The eight district-level commercial centers include Nanshan, Bao'an, Shajing, Longhua, Buji, Yantian, Longgang Central City and Longgang Greater Industrial Estate.
   
   
4. Four Developing belts
   
   The industrial layout of Shenzhen is pivoted by the "two zones and one axis" and radiates outward from downtown, the secondary functional centers, the advanced industries' habitats and the developing areas of traditional advantageous industries Four development belts will be formed gradually: The West Industrial Development Zone is an important component of the new economic zone in the Pearl River Delta and Pearl River Estuary. The Central Comprehensive Belt provides room for improving people's living conditions and developing the tertiary industries. The East Industrial Development Belt is the major gateway connecting Shenzhen with the east of Guangdong Province. The East Coastal Industrial Developing Belt serves as a functional area consisting of harbors and tourist attractions.
   
   Since the downtown area is on the fringe of "over development", the focus of urban construction in the next five years will be the secondary functional centers and the advanced industries' habitats, which will be upgraded into comprehensively functional districts. In the coming five years, Shenzhen shall establish the ideology of "Managing a City", advocate "Environmental Benefits", implement "the Green Strategy", lay the environmental foundation for the "International Garden City", and make Shenzhen a beautiful ecological city with blue sky, clean sea, dense forest and beautiful landscape.
   
   

2001 is the year in which Shenzhen invested the most in fixed assets. A batch of major projects, including Section A of Yankuai Expressway and West Marine Ecological Park, has been put into operation. The first phase of Shenzhen Subway Project is going smoothly. According to the investment plan, the scale of fixed-asset investment and the construction of key projects have both achieved best results in history.

The investment in urban construction reaches a peak in the Ninth Five-Year Plan. At the launching of the Tenth Five-Year Plan, Shenzhen has also made steady progress in this respect. The most eye-catching urban construction projects include infrastructure projects such as Shenzhen Subway Project, expressways, Citizen's Center and Municipal Children's Palace, commercial and tourist projects such as West Marine Ecological Park and Exhibition Center, and cultural projects such as libraries, museums, children's palaces, etc. These projects will directly influence the progress of the modernization of Shenzhen City and the sustaining power of Shenzhen's economic development. They are also closely bound up with people's life in the future.

1. The national key project - Shenzhen Subway Project Phase I
   
   Shenzhen Subway Project is the first national key engineering project approved since the establishment of Shenzhen SEZ. Affected by the factors such as the weather, the geographic environment, some bottlenecks, etc, the project progressed slowly from the beginning. However, since August 2001, the golden season for construction, a breakthrough has been made in this project. The tunnel grubbing goes smoothly in Luohu Station and Huanggang Station. Some of the technical problems initially encountered in China have been overcome. The construction progresses faster and faster. The planned investment of RMB2.2 billion (US$0.27 billion) for the year 2001 has been successfully accomplished.
   
   Shenzhen Subway Ltd. has signed 20 contracts with 20 companies on purchasing mechanical and electrical equipment so as to ensure the material supply for the project. The investment in this project totals RMB1.17 billion (US$0.14 billion). The contract of purchasing locomotives has been signed. So people in Shenzhen have known the appearance and the model of the locomotives for the subway.
   
   
2. The construction pace of the Central District quickens
   
   The Central District is the future political, economic and cultural center as well as the symbol of Shenzhen in the new century. At the beginning of last year, the top of the Children's Palace with a total investment of RMB538 million (US$65 billion), a coverage of 2.7 metric hectares and a construction area of 5 metric hectares was sealed. It is the earliest completed cultural facility in Shenzhen.
   
   Meanwhile, as the construction of the Exhibition Center, the Library, the Music Hall, the Television Center, the Museum and the Citizen's Center quickens, the true look of the Central District gradually becomes visible to the citizens.
   
   The city design along the central axis of the Central District is gradually perfecting. According to the city design plan for the Central Square and the southern central axis, 36 metric hectares of area will be developed into greenbelts and buildings. Xinhua Book Store will lead the fund-raising and the construction of the book plaza in the north. The Southern Square and the area along southern central axis will be partially developed on commercial purpose by three units. The government will invest in and manage the public squares and greenbelts in the Central District. Moreover, the Central District has sold land of more than 1 million square meters.
   
   
3. Yanba Expressway Section A open to traffic
   
   In April last year, after more than two years' construction, the 10.38 kilometer long section A of the expressway was opened to traffic. The whole expressway is 28.92 kilometers, starting from Yantian, stretching across Dameisha, Xiaomeisha, Xichong, Kuichong, and connecting with Huiyang Road in Bagang in the east. This scenic road is of great significance in improving the traffic situation in the east of Guangdong Province and the east coastal area of Shenzhen, in promoting the development of economy and tourism in the coastal areas such as Yantian and Longgang, and in strengthening the frontier and coast defense. The foundation of the section A of this expressway was laid in 1997. The construction started in October 1998. It won a high score of 91.5 points in the acceptance check before it was opened to traffic and enjoyed the laurels as "the Number One Road in Guangdong" thereafter.
   
   
4. Six objectives for the West Passage achieved
   
   On November 7, 2001, the Feasibility Study of Shenzhen-Hong Kong West Passage Project was examined and approved by the group of experts. After 10 year's preparation, the "Shenzhen-Hong Kong Passage" which attracts much attention will enter into the implementation phase. The estimated total investment of this project is RMB2.1 billion (US$0.25 billion). The main body of the project includes 5,260-meter long and 32.5-meter wide Shenzhen Bay Bridge, starting from Dongtoujiao, Shekou of Shenzhen to Che Ao Hum of Hong Kong, and the front-line port supervisory zone on the side of Shenzhen. The six objectives for this passage, including the environmental evaluation, the earthquake appraisal, the argumentation on the possibility of navigation, the survey on the location of the bridge, the budgeting and the selection of the design of the bridge, have been achieved.
   
   
5. Transformation of the old villages
   
   In 2001, one of the most important projects for the urbanization of Shenzhen is the transformation of the old villages. Deriving from fishing villages, Shenzhen still have many ruins of old villages in the urban area. In August 2001, 33 houses, 2 old factories and 1 apartment in the first "well-off village", Luohu Fishing Village, were demolished. This village will be reconstructed according to the city planning. Last year Shenzhen made transformation experiments in Huanggang Village of Futian, Nanshan Nan New Village, Shatoujiao Town of Yantian and Luhe Village successively. New residential quarters of high standards were built in compliance with the universal construction plan.
   
   
6. The completion of the West Marine Ecological Park
   
   The construction of the West Marine Ecological Park started on the New Year's Day 1999 and was completed and open to public during the National Day Holiday of 2001. It is the largest tourist site in the west of Shenzhen. It is situated on the coast at the intersection of Shajing Town and Fuyong Town of Bao'an District, which is located on the east bank of the Pearl River's estuary. The park occupies a total area of 24 square kilometers. With an area of 2.1 square kilometers, the first phase of the park consists of 8 theme parks including fields and ponds, woods, farming slopes, market on the boat, etc. It features nature, ecology and scenery. It also incorporates vacation and relaxation tours, sightseeing and amusement, and ecological education in one park. It is full of "marine scenery, rural characteristics and ecological charm" and is another major tourist site in Shenzhen.
   
   

V. Invest RMB220 Billion (US$26.57 billion) on major projects in the next five years

According to the Tenth Five-Year Plan of Shenzhen, investment will be made on 200 major projects in the fields of high technologies, modern logistics, infrastructure, ecologic and environmental facilities and social undertakings. The estimated investment totals RMB227.151 billion (US$27.43 billion), among which RMB187.5 billion (US$22.64 billion) will be arranged within the Tenth Five-Year period. These major projects are the most important components of the fixed-asset investment and the solid foundation for the social and economic development of Shenzhen City

1. Distribution of the 200 major projects
   
   (1) 89 projects on high technologies. The estimated total investment amounts to RMB98.269 billion (US$11.87 billion), among which RMB89.197 billion (US$10.77 billion) will be arranged within the Tenth Five-Year period, taking up 47.56% of the total investment in major construction projects to be arranged during the Tenth Five-Year period.
   
   (2) 23 projects on modern logistics. The estimated total investment amounts to RMB22.975 billion (US$2.77 billion), among which RMB21.998 billion (US$2.67 billion) will be arranged within the Tenth Five-Year period, accounting for 11.73% of the total investment in major construction projects to be arranged during the Tenth Five-Year periodRecruiting U.S. participants and their products:
   
   (3) 35 projects on infrastructure. The estimated total investment amounts to RMB76.976 billion (US$9.3 billion), among which RMB50.764 billion (US$6.13 billion) will be arranged within the Tenth Five-Year period, accounting for 27.07% of the total investment in major construction projects to be arranged during the Tenth Five-Year period.
   
   (4) 4 projects on ecological and environmental protection, agriculture and tourism. The estimated total investment amounts to RMB18.179 billion (US$2.2 billion), among which RMB15.745 billion (US$1.9 billion) will be arranged within the Tenth Five-Year period, accounting for 8.4% of the total investment in major construction projects to be arranged during the Tenth Five-Year period.
   
   (5) 21 projects on social undertakings. The estimated total investment amounts to RMB10.752 billion (US$1.3 billion), among which RMB9.824 billion (US$1.19 billion) will be arranged within the Tenth Five-Year period, accounting for 5.24% of the total investment in major construction projects to be arranged during the Tenth Five-Year period.
   
   
2. Sources of the huge construction funds
   
   The huge sum of RMB220 billion (US$26.57 billion) for the construction investment mainly comes from the following four sources: self-financing of the construction units, loans of the commercial banks, foreign investment and governmental investment (including the central government and the local governments).
   
   (1) Self-financing and loans
   
   Most of the construction funds will be acquired through self-financing of the construction units and through loans of commercial banks (mainly referring to domestically raised funds and loans). The amount of funds from these sources is about RMB112.899 billion (US$13.64 billion), taking up 60% of the estimated total investment on major projects during the Tenth Five-Year period. The majority of the capital will be invested in competitive industries and government-subsidized projects involving high-tech industries, modern logistics, infrastructure projects, ecological and environmental protection projects, etc. The estimated investment in high-tech industries (electronics and information, bio-engineering and medicine, new material and new energy) is RMB49.564 billion (US$5.99 billion). The estimated investment in modern logistics (comprehensive transportation, information network, logistic bases and the construction of wholesale markets) is RMB19.998 billion (US$2.42 billion). The estimated investment in infrastructure projects (buildings, water supply, power supply, parks) is RMB33.408 billion (US$4.03 billion). The estimated investment in ecological and environmental protection projects (garbage disposal, river treatment, sewage treatment) and agricultural and tourist projects is RMB7.901 billion (US$0.95 billion).
   
   (2) Foreign investment or Sino-foreign joint investment
   
   The estimated foreign direct investment or Sino-foreign joint investment in major construction projects totals RMB40.421 billion (US$4.88 billion), accounting for 22% of the estimated total investment on major projects during the Tenth Five-Year period. The majority of the foreign capital is invested in electronic and information projects of the high-tech industries. The estimated foreign investment in electronic and information projects amounts to RMB30.378 billion (US$3.67 billion), reflecting the vitality of the electronic and information industries in Shenzhen. The foreign investment in infrastructure projects mainly involves a few large-scale construction and energy projects with an estimated investment of RMB5.744 billion (US$0.69billion). According to the Tenth Five-Year Plan, the foreign investment in electronic information industries, modern logistics, infrastructure projects and of ecological and environmental protection projects accounts for 7.5%, 5%, 14.2% and 5.7% of the total investment.
   
   (3) Governmental Investment
   
   During the Tenth Five-Year period, the estimated governmental investment is RMB34.307 billion (US$4.14 billion), taking up 18% of the total estimated investment. The majority of the governmental investment will be utilized on improving the investment environment, upgrading the quality of people's material and mental life. The rest will be spent on guiding the industries and supporting the environmental protection programs. The government invested projects concentrate on infrastructure, ecological and environmental protection, social undertakings and some important high-tech industries. The estimated governmental investment in infrastructure projects (city construction, water supply, public utilities, parks) is RMB11.613 billion (US$1.4 billion). The estimated governmental investment in ecological and environmental protection projects (river and sewage treatment) is RMB5.544 billion (US$0.67 billion). The estimated governmental investment in science, education, recreation and sports is RMB7.896 billion (US$0.95 billion). The estimated governmental investment in high-tech projects (focus on the preliminary processing of integrated circuits) is RMB9.255 billion (US$1.12 billion).
   
   (4) Broaden the fund-raising channels and introduce enterprise groups
   
   It is an arduous task to raise such a large amount of funds during the Tenth Five-Year period. Whether the self-raised funds and the loans can be in place is of vital importance to the launch of these projects. The high-tech projects are in urgent need of bank loans because their funds accumulated from self-rolling are extremely limited. Meanwhile, it is important to actively broaden the channels of fund raising, such as attracting venture capital, raising funds in the stock exchange market, etc. Banks are interested in investing infrastructure projects because most of them are operated exclusively and are partly invested by the government. So fund raising is not a big problem for these projects. Some of the key projects involving foreign capital are invested by Sino-foreign joint ventures or by exclusively foreign-invested enterprises. Therefore, the investment in these projects is also guaranteed. However, Shenzhen still needs to vigorously attract internationally renowned enterprise groups to participate in the construction and broaden its fund-raising channels.
   
   
   
   

    

    

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