October 22, 2018 / 6:35 AM / 22 days ago

Breakingviews - China’s tech hub warrants an upgrade from Beijing

Buildings are seen in Shenzhen, China September 18, 2018. Picture taken September 18, 2018. REUTERS/Jason Lee

HONG KONG (Reuters Breakingviews) - China’s technology hub warrants an upgrade. Nearly four decades after the southern market town of Shenzhen was transformed into a buzzing metropolis with a roughly $320 billion economy, it makes sense to designate the area as something like a province.

Shenzhen was the first so-called “special economic zone” allowed to experiment with liberalisation after reforms started under Deng Xiaoping. The policies remade it into a sprawling conurbation of 13 million people and GDP that ranks in the global top 40, ahead of Denmark and Colombia. Its relatively laissez-faire approach to business has fostered cutting-edge companies and startups, making it China’s closest approximation to Silicon Valley.

As President Xi Jinping embarks on a rare visit to the region this week, according to the South China Morning Post, a smart way to commemorate the 40th anniversary of reform would be to designate Shenzhen, in Guangdong province, a “directly administered municipality”. Though government officials have denied any such plans, conferring the status on the city would give it greater leeway to make and enforce local rules. It also would boost the city’s influence in national policymaking groups, including in parliament and the Chinese Communist Party.

Greater political heft would be important for business. Shenzhen is home to a major stock market and port, and counts gaming giant Tencent, electric-car manufacturer BYD, telecom titan Huawei and drone-maker DJI as local heroes, among other up-and-coming technology outfits. City officials would almost certainly advocate for them at the national level. What’s more, it would be a symbolic boost to Xi Jinping’s Greater Bay Area ambition of linking the city to Hong Kong, as well as put it in better position to launch cross-border initiatives in areas such as financial services.

It’s a good time for tech firms to enjoy greater clout in Beijing, too. A single sentence in an obscure education ministry document released in August erased over $20 billion from Tencent’s market value in a single day. A series of official broadsides against news app owner Toutiao led to an apology from the company’s chief executive. Policymakers are also busy writing sweeping new rules on cybersecurity that could shape the sector for years.

What’s more, U.S. President Donald Trump’s intensifying attacks have invigorated China’s plan to develop more technology at home. A political step up would help develop Shenzhen 2.0.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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