ASIAN AFFAIRS INTERVIEW WITH LI ZIBIN

Former Mayor of Shenzhen - Vice-Minister

HONG KONG NEEDS SHENZHEN

SHENZHEN DOES NOT NEED HONG KONG

Laurent Malvezin.- Shenzhen is often seen as some sort of a miracle and quite unique. Twenty years ago, there were paddy fields where today, there is a vibrant modern city. The experiment was tried before elsewhere, but never succeeded, until Shenzhen came up. To what do you attribute the success and the fact that Shenzhen has been able to maintain throughout the period a constant level of high growth?

Li Zibin.- President Jiang Zemin, during a tour of the Guangdong province in February 2000 summed-up the experience of Shenzhen, marveled at the fact that the small village of Shenzhen managed in a short period of twenty years to grow-up into a multi million population modern city and a successful Special Economic Zone (SEZ) (1) and to become the “pearl” of the south China region. Such success is in fact an appropriate reflection of the party’s policies on the economic reform and the decision to open to the outside world. Since the 80s, our average GPD increase rate was 32% from 1980 to 1998 (2), that places Shenzhen just behind Tianjin with just less 1,4 billion yuan in 1999.

LM.- Tianjin, because of its economic clout, is an autonomous city directly administered by the Central government. Is Shenzhen going to follow the same path and become a municipality directly under the Central Government (3), which would probably raise the issue of its relationship with Guangdong?

LZb.- Whether Shenzhen will become an autonomous city directly administrated by the Central Government is a hot topic in the Hong Kong media. In the Mainland too, many people are guessing what’s going on and what would happen if. It is all speculation. None of the officials of Shenzhen municipality, including me, can argue or comment on this question. Only the Central Government has the authority to do so. Even the provincial level has no input on this matter. Of course, if we only look at the economic size, there is no doubt that this year we are to overtake Tianjin, and get closer to the economic size of Chongqing (4) which is also an autonomous city directly administered by the Central government. Actually, if we look only at our external trade, only Beijing and Shanghai have larger ones.

LM.- How did Shenzhen cope with the Asian crisis which badly affected the trade patterns of all Asia?

LZb.- Thanks to the restructuring of our industries and economy, we avoided most of the difficulties created by the Asian crisis, but it is true that, being much more exposed than any other Chinese cities because of the characteristics of our economy, we were hit harder than any other city in China. The main reason is that 50 per cent of our exports, which amounted to 28,2 billion US dollars in 1999, go to the Asian market. You can easily imagine that, at the time of the crisis, the capacity of purchasing products by these Asian countries had dropped to a very low level. At the same time their own exports at depreciated prices were putting a lot of pressure on the competitiveness of our economy. Nevertheless, we recovered very fast.

LM.-Why?

LZb -One of the reasons was that we did not wait for the crisis to restructure our economy. When it happened, we had already started to develop our high-tech industry. Not surprisingly, our traditional production activities like clothing, household electrical appliances, or watches all dropped dramatically when we were hit, but the high-tech industry registered a 19 % growth a year from 1997 to 1999, therefore such growth alleviated the deficit in other sectors of activities. What the Asian financial crisis taught us is that the restructuring of the economy, which has been on the way for the past 5 years very intensive, was and remains today the best strategy to pursue our development. But admittedly, such a strategy was only possible because we took-off earlier than other regions or cities in China. That’s why we haven’t been damaged so far.

LM.- In that context of restructuring and reforms of the economy, some say that Shenzhen is just benefiting from the Hong Kong factor, but lacks an inner impetus. Do you agree that Hong Kong is the main factor ?

LZb.- Shenzhen’s take off is due to the vision of Deng Xiao-ping. He made the development of the SEZ possible, both theoretically and practically. Another important actor was, during the process of implementation of the reform, the State Council that had to orientate and harmonize the efforts of the Special Economic Zones, including Shenzhen. The third important factor that is often forgotten are the people. Shenzhen is populated mainly by non-Shenzhen people. Before 1980, the total population of the area was 320 000, with only an urban centre of 30,000 people. Relying solely on this population, Shenzhen could not become an international city. So, what transformed Shenzhen was a huge inflow of population coming from all around the country. I would add a fourth element, the quality of the people. Shenzhen today has very qualified people, whether they are technicians, entrepreneurs or managers.

LM.- Don't you give any credit to Hong Kong?

LZb.- What I mentioned earlier is a description from a subjective point of view regarding twenty years of progress. Objectively, particularly at the beginning of the reform, the Hong Kong factor did have its importance. The massive relocation of Hong Kong industries in the hinterland and in Shenzhen increased our industrial capabilities and built-up the dynamism of Shenzhen. Since the 80s, some of these enterprises that originally benefited from the relocation factor have shifted to high-tech industries, some moved to the hinterland because of lower costs of production there, while others have simply closed down. On the other hand, I would say that the development of Shenzhen has boosted the industrial readjustment of Hong Kong. I’m sure that without Guangdong and Shenzhen economic development during the past 10 years, we wouldn't have the Hong Kong of today (5).

LM.- So you feel, it was a win-win combination, while in Hong Kong, for long, there was a sort of denial situation, with the government very forcefully taking the line that Hong Kong didn’t need Shenzhen, or China in fact, but that China and Shenzhen needed Hong Kong. Even today, that very colonial view is still very much on the surface and factually, it looks like there is little substantial cooperation between the two cities. Is that so?

LZb.- It depends what we are talking about. On environmental issues, we have a common ground interest and good cooperation. Shenzhen and Hong Kong do hold the same vision now on port infrastructure. Also in security matters, the arrest of Cheung Tze-Keung (6) has illustrated the basis for mutual effort from both governments. But in some other areas, we obviously don’t have the same vision at all. For example, in the high-tech industry, I have personally appealed two or three years ago for both sides to develop Research & Development on a common basis. It is really important to put our strength together and work for a common human resource development scheme. But it is not the case. In the financial sector as well. The two cities can work closer, but Shenzhen is much more willing to move on this topic too.

LM.- Hong Kong is not, it seems, or not as willing as Shenzhen is. Is it because the rich does not want to help, being afraid to get robbed, in some sort of way?

LZb.- We are not in the earlier 80s. Shenzhen doesn’t need the money. The period when we did not have enough to invest is over. We have enough money. We have a different point of view. Here, we believe to develop together our potential will be much more efficient than wasting both our energy like we do every day because the Hong Kong officials react and move very slowly.

LM.- Hong Kong is said to be efficient, yet what you say means it is not. To what do you attribute this lack of efficiency?

LZb.- The first factor is that the consciousness and acknowledgement of the necessity for Hong Kong to restructure its economy and industry came very late. If the financial crisis hadn’t passed through, Hong Kong would yet have to realize it has to restructure! To some extent, the crisis has somehow helped Hong Kong to make up its mind. The second factor is that the Hong Kong financial, tourism and trade sectors are doing well. But its manufacturing sector is still under developed, not to mention its high-tech development industry which has yet to create something. The financial crisis warned Hong Kong that in its economy, the “bubble” element takes too much place. Something has to be done to eradicate it or to reduce it to the minimum. But how to achieve that? Again, in developing high-tech industries and a strong manufacturing sector.

But, some people at some level who deal with these questions in Hong Kong do not adhere to the view that to develop a closer relationship with Shenzhen and harmonize the build-up of high value industries (7) will be beneficial to both. They look down on Shenzhen, and although we repeatedly emphasized the opportunities for each side to benefit from each other, they really believe that they will do well on their own. In a way, they are just keeping an old colonial mentality. They still ignore the fact that Shenzhen can develop without Hong Kong. We have a 15 % economic growth annually; not many cities in the world, even Hong Kong, can put forward such an outstanding performance. With a fully cooperative Hong Kong beside us, we could even do improve that. Costs would diminish, development could get faster and faster. Yet, they don’t see the point (8)!

LM.- Obviously, there is reluctance from Hong Kong, but at which level? Is it the bureaucracy which is still very much entrenched into old habits or the business community or the Executive (9), or is it a problem of governance in general which in a transition period has too many constraints?

LZb.- Perhaps it is because of its political framework. Of course, from a Hong Kong point of view, its society is a democratic one. But the fact is that from government proposal to implementation, it’s always a long process and quite loaded down with a lot of steps. It is totally different from Shenzhen. Here, provided the municipal political instances reach a common understanding on a problem, the decision can be immediately turned into action. I give you an example, the western bridge project (10) to link our two cities ! In Hong Kong, we are told that it must first be tabled for approval at the Legislative Council. This step takes six months. Then, it’s the turn of the Environment and other bodies: they decide for the crossing of the vehicles. It will take another year, then to decide on the capacity of the traffic, a third year will be needed. After that, you need one more year for the acquisition of the land ! As a result, after 3 years and a half, the final project concept has yet to be finalized! Hong Kong says the project will be completed by 2007. But if you look carefully, it’s only the eastern part of the highway, just for 10 km that will be completed. In other words, it takes 8 years time for 10 km road ! That’s a typical British 150 years colonial system legacy. This kind of mentality won’t disappear in one or two days.

LM.- Will it ever disappear?

LZb.- I believe that Hong Kong people will manage to adapt themselves to the present situation. Hong Kong’s adaptability is well known and it proved it during the financial crisis. It’s just a question of time.

LM.- In your view, does Hong Kong see what is looming if we project ourselves in 20 or 30 years? Guangzhou, Shenzhen, Zhuhai, Macao, Dongguan, Foshan and other cities will then have probably merged into a single urban zone as large as Los Angeles with 23 to 30 million people living in it.

LZb.- No, I don’t think they are conscious of that. They don’t see the whole picture (11).

LM.- If we look carefully at what does make a city work or not, the first thing that has to be taken into account is its human potential and resources. It means basically the education system. In Hong Kong, the failure of the existing education framework has not only had a negative impact on the primary. secondary and higher education, but also deprives the city of potential talent. To compensate for its failure, Hong Kong thought it could import new talent for its high-tech industry but that is as well encountering some problems as people have a choice and elect not to come! Is Shenzhen facing the same sort of difficulties ?

LZb.- Shenzhen is the largest investor in education of all the big cities of the country. But our short history is a handicap in that field. By that, I mean that we have only one University, the University of Shenzhen, and an Institute of Technology as the two major higher education institutions in the whole of Shenzhen, that is six million people. It is far from other big cities like Beijing, Shanghai or Guangzhou which all have dozens of such bodies. It takes part of our specifics.

Our specifics sometimes are an asset, sometimes an insufficiency or a burden. The administration of the city has to consider each inherent specifics at the same level and replace it in a global city planning development agenda. And we have to make clear what we can do and what we must improve.

Amongst the challenges that face Shenzhen, the improvement of the educational system is a priority, including attracting massively new talents. Yet, it would be unrealistic to think that we, Shenzhen, can self-generate multi disciplinary high qualification engineers or technicians in high tech management field in sufficient numbers. Therefore, there is the need to convince such qualified people, from other provinces of the country and from the overseas Chinese students community, to come and work in Shenzhen. Moreover, we cannot wait until we reach the standard of other cities as regards the number of universities per inhabitant! If we had to do that, we could wait decades and decades before reaching that level. Famous and prestigious Universities cannot be invented. It has to prove its excellence through ages. A Beijing University or Qinghua one did not become so prestigious in ten years time. In that context, we have no choice but to attract new elites for settling down in Shenzhen and take up the challenge. We plan to import annually 10,000 students coming from other Universities in China. And we are also to setup a post-bachelor Academy (yanjiusheng yuan) which represents a 150 million Yuan investment.

LM.- In a sense, Hong Kong is taking the same view. Its Universities, for most of them, have a short history and little reputation. Therefore it needs to attract talents from overseas and it is targeting the same sort of people as Shenzhen, pretending to be more attractive because of its international image as a trade and financial hub. It has already pitched its new talent program to Beijing and Shanghai to try to reach the best of the best of the country. promising bundles of money. How are you going to compete?

LZb.- One of our priorities is to convince overseas Chinese students from all around the world to return to Shenzhen for their professional and personal lives. There are some 300,000 overseas Chinese students. Most of them are studying in western countries like the United States or Japan, Europe. I would say that the first 30 % are successful abroad, 30 % are mildly successful but not so much, while the rest drift but do not want for psychological reasons in general to return to the motherland. It is those ones that we can realistically convince to come to Shenzhen to live and work with us. Of course, one condition of their return is for us to provide them a good environment, give them the feeling that they will be successful in Shenzhen, both as entrepreneurs and scholars. And this relies on the system of governance of Shenzhen. In other words, if we offer just the average standard of living of the rest of the country in China, it’s not enough. We must innovate by creating a new system.

LM.- But this policy needs time before getting results that are known outside the country?

LZb.- It will take some time to become effective. For the return of overseas Chinese, it’s a long process in itself. Look at the overseas Taiwanese studying abroad, they have just begun to return only a few years ago. I‘m sure that will too occur in Mainland China. We have to make sure that they feel better once they return than staying abroad. Nowadays, those who stay abroad are much more numerous than those who decide to return. I guess that within ten years, this process will reverse and we would see a majority of students coming back.

LM.- I fully understand the reasons for them to come back if the environment is better than anywhere else, but why should they leave their host countries if they feel “at home” there?

LZb.- I know many of these students or post-graduates living in many countries. I know them, and I know the way they live. They may have plenty of reasons to come back but the most decisive one is certainly that, although some of them are successful, China is definitely a better environment for them. They are the first who don’t argue on this point. I know personally an overseas Chinese in the United States, who gets a 8,000 USD monthly salary, but even if he has a good situation, he told me that his life was “boring” there ! What then is the mind of those who can just sustain a decent life with little hope for a better life? There are so many overseas Chinese students without the minimum, that sooner or later, they will realize that the way they live abroad is not acceptable, because, after all, in the US like in Japan, people of Chinese origin are segregated. I might even say that in the United States, even black people are treated with more consideration than the Chinese. If Li Wenhe was not Chinese, such spying story would never come out ! (12) Just because he is a Chinese. That man is a victim of racism, like many of the Chinese abroad. In Japan, it’s even much more difficult to find a job when you are Chinese. The Japanese look like the Chinese but it remains very difficult for the latter to integrate into the Japanese society.

LM.- What are the challenges and ambitions of Shenzhen, as a SEZ in the South China area ?

LZb.- We are to give Shenzhen the best conditions to become a regional major city, with a central role. Shenzhen will achieve that status not only in the economic field, but also in the social and cultural arena. You live in Hong Kong, so you may have heard or read about our improvement in maintaining social order and public security in Shenzhen. So, I would say that in the context of the “transitional” phase of the reforms, we have audaciously managed to get the best of both local and international models for our development.

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Notes:

1.- Located in the south of Guangdong Province, bordering with the New Territories of Hong Kong SAR, Shenzhen became a city under the jurisdiction of Guangdong Province in March 1979. In August 1980, it was designated as a special economic zone (SEZ). In 1992, Shenzhen legislature was granted the authority to enact its own laws and regulations.

Shenzhen now includes the original Shenzhen Special Economic Zone (SEZ) and Bao’an county. Shenzhen has been at the forefront of economic reform since China started its open-door policy. In 1994, Shenzhen’s economy was the 5th largest amongst Chinese cities, after Shanghai, Beijing, Guangzhou and Tianjin. Shenzhen has a total area of 2,020 square kilometers, of which the Special Economic Zone covers an area of 327.5 square km. At the end of 1998, the total population of Shenzhen was 3.95 million, including 1.85 inside the SEZ. Two-thirds of the total population are temporary residents.

In December 1991, Shenzhen established a stock exchange offering the shares of Chinese companies (“B” shares) to overseas investors. At present, around 44 “B” shares are traded at the Shenzhen Stock Exchange. There are 11 overseas brokerages that have seats in the exchange, including Standard Chartered and Wardley James Capel. Forty-eight foreign banks and financial institutions have set up branches and offices in Shenzhen. Overseas banks account for more than 30% of the foreign exchange loans and 20% of the foreign exchange deposits in Shenzhen.

There are eight port areas in Shenzhen including Yantian, Shekou, Chiwan and Mawan. Yantian Port is the largest port in Shenzhen and excluding Hong Kong is the only deep water port in the Pearl River Delta.

At the beginning, the viability of the SEZ was not yet proved. In 1985, Deng Xiaoping qualified the first SEZ of Shenzhen as “an experience”. The South China tour of Deng Xiaoping (known as nanxun jianghua) in 1992 and the visit to the SEZ by Jiang Zemin in 1994 confirmed that the Central Government would not change its policy and announced the willingness for continuity in implementing and assisting the SEZ policy.

In the mid-90s, the SEZ “preferential policy” (youhui zhengce) went under attack by some Chinese scholars and politicians because of the tax and other commercial privileges granted, particularly to Shenzhen, compared to other regions and cities. Since 1995, the policy target and vocabulary have changed: the success of the SEZ is obvious and its role for the 15 first years as a “window” or a “pioneer” of the reform has shifted to a “model” (shifan) for the whole country, to “propagate” (fushe), and “drive” (daidong) the restructuring of the economy and the reforms at large.

2.- Shenzhen GDP is the 6th largest of Chinese cities, after Shanghai, Beijing, Guangzhou, Chongqing and Tianjing and ranked fifth in utilization of FDI.

3.- There are four centrally-administrated municipalities in China (zhixiashi) : Beijing, 12.6 million population, Tianjin 9.5 million, Shanghai 14.2 million and Chongqing 30.6 million.

4.- Chongqing is situated in Sichuan Province, some 1,500 km west of the East-China coast. In 1997, Chongqing was the fourth city to be upgraded to the status of centrally-administered municipality in China Its population is approximately 30,6 million. By the end of 1996, about 81,4 % of the total population of Chongqing lived in the rural areas. Non-State Owned businesses accounted for about 30 % of Chongqing economy.

5.- Hong Kong is the leading investor of Shenzhen SEZ, accounting for about 70% of the total foreign investment. The investments were mainly in hotels, property, textiles, garments, electronics, toys, and watches. Hong Kong businesses have been especially active in the outward processing sector. They have set up more than 10,000 export processing factories in Shenzhen. In recent years, Hong Kong firms have started to invest in infrastructure projects. About 80% of Shenzhen’s exports are typically designated to, or transshipped via Hong Kong.

6.- Cheng Tze-keung, a chief of the organized crime gang “Big Spender”, was executed on December 5 1998 in China. He faced explosives smuggling and kidnapping charges. Zhang Yongqiang, former political commissary of the Criminal Investigation Department of Guangdong Public Security Bureau, was appointed Shenzhen Public Security Director on May 1999. Zhang is reported to have played an important role in the arrest of "Big Spender’’ Cheng.

7.- Early in 1999, the Guangdong Province released a document that called for a new push between Shenzhen and Hong Kong, particularly in the High-technology field. The paper (“Some opinions about the further opening of the Guangdong”) also highlighted the importance of the twice-yearly Hong-Kong-Guangdong Cooperation Joint Conference. Significantly, this conference has not been held since the last meeting, nearly 12 month ago.

8.- Nevertheless, a Hong Kong government think-tank, the “Commission on Strategic Development” released in early 2000 February a special report entitled “Hong Kong long term development needs and goals” in which we can observe a certain consciousness of the urgency in developing links with the Mainland : “Hong Kong development and much of its success, has always been linked with that of the Mainland. Historically, the Mainland has provided the impetus for Hong Kong’s economic growth and, similarly, Hong Kong has played an important role in supporting the Mainland’s development particularly its increasingly global economic links. Since the 1950s, Hong Kong has developed in two distinct phases. In the first phase between the 1950s and 1970s, Hong Kong developed as a low-cost manufacturing and trading centre.

The Mainland was an important source of resources and Hong Kong became a focus for substantial inward investment. In the second phase, during the 1980s and the 1990s, high-labour-content production activities were relocated from Hong Kong to low-cost centres in the Mainland. As a result, Hong Kong’s role changed to become a major international financial, business services and trading centre. Looking forward, it is clear that Hong Kong is now poised to enter a third major phase of development as the Mainland embraces the knowledge economy. The speed of this development will be greatly assisted by the various Mainland market reforms currently planned or underway.

Understanding the implications and the associated opportunities of this third wave of development will be vital to Hong Kong’s continued success. Hong Kong needs to develop a new and better understanding of the importance of its Mainland links. This is true of all sectors in the community including the Government, non-governmental organizations and the private sector. But, to some extent, the ambition to become a world class-city, whatever that means, rather than a Chinese world class city seems to take the first place amongst the priorities of Hong Kong, and seems to place it above all the others. Moreover, some people in the Administration at a top level think that in getting closer to the Mainland, Hong Kong will lose its specificity and will become a second Shenzhen.

9.- A survey from the Hong Kong-China Relations Development Strategic Research Fund, released in April 2000, shows that 82 per cent of the respondents think that Hong Kong should push for the amelioration of cross-border communication conditions, jointly with Shenzhen. Other 15,6 % per cent plan sooner or later to move to live in Shenzhen. More than two-thirds of them hope to see the Lo Wu border opened 24 hours a day, and not be restricted from 6.30am to 11:30pm.

10.- The project, the Shenzhen western corridor and the Lingdingyang Highway bridge, got Hong Kong‘s Executive Council's approval last year. The last official document from the Shenzhen Municipality was presented to the Cross-boundary Infrastructure coordinating Committee in January 2000 and detailed proposals on cost-sharing on construction, including border-control security. The Highway will link New Territories North with Shekou when it is completed in 2005.

11.- The Pearl River Delta is situated in the southern part of Guangdong Province. It was formed by the sediment flow from the Pearl River into the South China Sea. Historically, the Pearl River Delta was known as the area encompassing Guangzhou, Macau, and Hong Kong, where business venture pioneers from all over the world gathered.

The Pearl River Delta includes the cities of Guangzhou, Shenzhen, Zhuhai, Dongguan, Zhongshan, Foshan, Jiangmen, Shantou and the urban district of the City of Huizhou. It also includes the affiliated counties of Huiyang, Huidong, and Boluo, the Duanzhou District of the City of Zhaoqing, as well as those of Sihui and Gaoyao. There are 420 cities and towns in the region. The important cites are Guangzhou (the capital of Guangdong Province), Shenzhen Special Economic Zone, Zhuhai Special Economic Zone, and Foshan. The population of the Pearl River Delta is 20,560,000 (excluding Hong Kong) representing 31.24% of Guangdong Province’s total population.

The number of cities in the Pearl River Delta has been increasing for the past 15 years. According to growth trends the area is estimated to become the largest community of big cities in the early 21st century. The community will include Hong Kong, Shenzhen, Guangzhou, Foshan, Macau, Zhuhai, Huizhou, Shantou and Dayawan. The GDP of the Pearl River Delta Economic Zone (established on November 1994) is expected to grow by an average 16 percent annually and reach 530 billion Yuan by year 2000 (USD 66 billion, 280% more than Vietnam's GDP).

In 1996, the exports of the zone amounted to US$53.7 billion, accounting for 90% of Guangdong total export. In the same year, the zone signed more than 4,842 foreign-invested projects with contracted and utilized foreign capital of US$12.8 billion and US$9.8 billion (more than ten times the FDI of Vietnam in 1999), accounting respectively for 81.3%, 73.6% and 70.5% of the province total. The majority of export-processing activities is located in this region, which has virtually become a production base for Hong Kong.

12.- Li Wenhe (Lee Wen-ho), 60, was nuclear Scientist at US Los Alamos Laboratory since the 80’s. He’s charged with 59 counts of breaching laboratory security by downloading material from secure computers to unsecured computers. Moreover, he would have failed to report some contacts with Chinese scientists. He is being held without bail and could spend the rest of his life in prison if convinced. He is not accused of espionage.

published in Spring 2000

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