By Zhou Bajun (China Daily)
Updated: 2007-08-29 07:11
The Shenzhen Special Economic Zone, which borders on Hong Kong, has been juggling a big question since the late 1980s: How to handle the zone’s relationship with Hong Kong?
The government of the special economic zone was once torn between different options. People have occasionally entertained the idea of getting closer to Hong Kong while distancing the zone from the localities on the mainland. At other times, however, they have leaned toward the notion of competing with Hong Kong. For example, some have gone so far as to draw up plans to expand Shenzhen’s territory inland to increase its physical power to compete with Hong Kong.
Such debates raged right up until the beginning of the period of the 11th Five-Year Plan (2006-10), when the Shenzhen government finally came to a decision – to cooperate with Hong Kong in an all-around way and accommodate the latter’s needs in order to achieve common development and the integration of the two economies.
Shenzhen’s unique resources and institutional factors dictated the municipal government’s strategic choice.
Shenzhen occupies what was once Bao’an County, before the reform and opening-up of the late 1970s. The county had a population of barely 30,000 people, many of whom made a living fishing.
In May 1980, the central government decided to set up the “special economic zone” of Shenzhen.
There were many reasons to set up the Shenzhen Special Economic Zone: to take advantage of its geographical proximity to Hong Kong, to learn from Hong Kong’s market-economy expertise, to absorb capital from Hong Kong and other parts of the world.
The preferential policies granted to Shenzhen by the central government eventually translated into institutional advantages over other localities on the mainland and, in turn, into resource advantages. This was the root cause of Shenzhen’s dazzling development in the first decade after its founding. But the special economic zone’s small space – it occupies a mere 396 sq km – arrested its further development. So some people came up with the idea of totally opening Shenzhen’s borders to Hong Kong, while retaining control over the inner city. In this way, they hoped to make still better use of the institutional advantages of Hong Kong as a market economy and also to “magnify” Shenzhen’s limited land space. Of course, this was mainly wishful thinking, because the borders could not be totally opened while Hong Kong was still under British rule.
In early 1992, Deng Xiaoping, the chief architect of China’s reform and opening-up, toured the country’s southern coastal areas and made some important speeches on economic reform. That year, the 14th National Congress of the Communist Party of China made it clear that the goal of China’s economic reform was to build a socialist market economy.
Now that the reform has taken hold and the mainland opened to the rest of the world in an all-around way, the institutional advantages enjoyed by the Shenzhen Special Economic Zone have faded a bit. In response, Shenzhen started looking beyond the narrow special economic zone at the city’s 1,952.8 sq km of land.
In its efforts to increase Shenzhen’s economy, the city government has said time and again that the city should do its best to accommodate the needs of Hong Kong, reinforce its cooperation with the special administrative region and enhance Shenzhen’s declining institutional superiority over other localities on the mainland.
Over the years, the driving force that powered Shenzhen’s economic development has been the reform of the economic system. Between 1980 and 1985, for example, Shenzhen pioneered the reforms of the capital-construction, pricing, finance and investment and wages and employment systems. On July 8, 1985, the mainland’s first shares of stock since 1949 were issued by the Bao’an County United Investment Corp. That same year, the mainland’s first foreign-exchange redistribution center was set up in Shenzhen.
Shenzhen, in its economic reform, has been drawing upon the experiences of Hong Kong and studying its mechanisms as a successful market economy. When the Shenzhen Stock Exchange was being established, many Hong Kong experts were taken on as advisors.
How to retain Shenzhen’s institutional advantages over other mainland localities since China’s reform and opening-up are making big advances? This question has been at the top of the Shenzhen government’s agenda over the years.
In 2003, the city government attempted to usher in the reform of separating government functions. This meant that government organizations would be reorganized along the lines of decision-making, executive and supervisory bodies. The experiences of Britain, the United States, Singapore and the Hong Kong Special Administrative Region were used as references.
Although the separation of powers is stalled for various reasons, this author believes that the pilot reform project will be kicked off in Shenzhen. Political infrastructure reform is moving ahead on the mainland, and the cooperation between Shenzhen and Hong Kong is getting increasingly closer.
Funds from Hong Kong have always claimed the lion’s share of overseas investment in Shenzhen. By 2004, for instance, more than 10,000 Hong Kong corporations had made investments in Shenzhen, and the total investment volume had reached $35 billion, representing 67.5 percent of Shenzhen’s overseas investment.
In view of this, further expanding Shenzhen-Hong Kong all-around cooperation will facilitate the two economies’ ability to optimally allocate resources.
The author is a senior research fellow with China Everbright Group.
(China Daily 08/29/2007 page10)