ABSTRACT: In 1979 Deng Xiaoping used Shenzhen as a test for free-market principles. With that test Shenzhen has grown from a population of 300,000 to more than seven million over the past twenty years. It has also progressed from being a mostly agrarian economy to being one of China’s hi-tech leaders. Despite having one of the country’s most progressive city plans, it is also facing many challenges brought on by growth, the WTO, and economic restructuring.

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Land

Shenzhen lies in China’s Guangdong province and is part of the Pearl River Delta region. At about 2,000 square kilometers, Shenzhen is larger than just about any U.S. city other than Jacksonville, Florida. Hong Kong, which borders Shenzhen to the south, is a little over half that size; Singapore is about one third the area of Shenzhen. Comparatively, the city of Chicago is 590 square kilometers. The city is split into six districts, with the Special Economic Zone comprised of the central four districts of Luohu, Futian, Nanshan and Yantian. The lower density and more rural Bao’an and Longgang districts are outside the Zone.

Shenzhen as Special Economic Zone (SEZ)

The Central government, under Deng Xiaoping’s leadership, established Shenzhen as China’s first Special Economic Zone in 1979 to test free-market principles (and ensuing social effects) in a limited and controlled area that could later integrate with the world economy. At that time Shenzhen was a sleepy border town–a greenfield site with no infrastructure, and a citizenry uneducated in western practices–that went on to become China’s most radical experiment.

Shenzhen was chosen for its proximity to Hong Kong capital and know-how and because the Guangdong government at that time contributed very little to the central government’s coffers. Thus Shenzhen could be an experiment with negligible investment from Beijing and with little risk to the national budget.

Shenzhen’s status as a Special Economic Zone meant that (among others):

• corporations pay a 15% tax rate compared to a 33% tax rate elsewhere in China (sometimes taxes were exempt for an initial investment period).
• tariff exemptions for goods imported for investment purposes
• streamlined administrative control
• flexibility in hiring and firing workers
• negotiated access to the domestic Chinese market for SEZ-produced goods

The relatively freewheeling atmosphere as an SEZ was conducive to establishing what is now one of China’s only two stock exchanges. Many multinationals, eager to get a hold in the Chinese market, spurred investment in the hopes of gaining high returns in the future. Companies such as Wal-Mart Asia have headquartered in Shenzhen and have stayed. [Interestingly for planners in the US encountering big-box retailers in their communities, all of the Wal-Mart Supercenters in Shenzhen are multilevel and neighborhood-oriented, not auto-oriented and are often integrated into mixed-use high-rises. Only the Sam’s Club has a parking lot of any significance.]

Population

Between 1860 and 1900, Chicago experienced its headiest days of growth as it grew from a population of 110,000 to 1.7 million– a period of 40 years. Shenzhen, in slightly over twenty years has grown from 300,000 people to a population of over seven million. In 1979, the urban population of the centraltownship stood at only 30,000 and had a built up area of only three kilometers. More than 90% of the city’s residents were born elsewhere. Shenzhen has attracted many young people who have come to work in the factories and increasingly the offices of Shenzhen, making 26 the average age of a Shenzhener.

The Hukou System

Shenzhen’s population might even be higher were it not for the fact that China has in place what is called the ‘Hukou System,’ or registered permanent resident system. This system was started in the early 1950’s as a form of keeping populations in place. Effectively, people can only get education, health and other benefits in the city in which they are an officially registered permanent resident. Only about one-fifth of Shenzhen residents are permanent residents of the city. Even to live in Shenzhen one needs to apply for a renewable one-year temporary resident permit.

Out of the country’s 1.3 billion people, China has a rural population of about 900 million, of which 150 million people are considered redundant. The Hukou system has been fairly successful at limiting the number of people who can migrate to Shenzhen (by means of an internal border control system between the SEZ and the hinterland of China), which helps planners in Shenzhen more effectively forecast population trends. However, with income disparities between rural and coastal urban areas of China, people are desperate enough to defy the Hukou system; unscrupulous employers may take advantage of these people who are essentially illegal immigrants in their own country. The Central government has recently announced that over the next five years the Hukou system will be phased out. One of the factors pushing the phase out, is that as China moves to a market economy, the free flow of skilled people is vital to the efficient functioning of the market.

Economic Growth

In the early years, most of the investment in Shenzhen was for infrastructure development and came from Chinese state-owned enterprises, as western multi-nationals were deterred by the lack of infrastructure. Only later did foreign enterprises start investing in greater numbers.

As Shenzhen started opening-up to the world in 1979, its GDP was US$ 23.6 million, but 20 years later stood at US$ 17.3 billion. In the same period per capita GDP jumped from 606 yuan to 35,908 yuan per year, equivalent to US$ 4,335, six times the national average. Shenzhen also had the greatest number of exports among any city in China–an amount equally almost one-seventh of the nation’s total.

In 1978, 70% of Shenzhen’s output was agricultural. But by 1999, at $US ten billion, Shenzhen’s hi-tech output was the highest in China in 1999 and 36 times higher than 8 years earlier–no doubt helped by the fact that an estimated one fifth of China’s PhD’s reside in the city. Recognizing that fact, the central government has approved Shenzhen as one of China’s three hi-tech development centers, Beijing and Shanghai being the others.

Government Finance

Shenzhen’s government financial revenue increased from $US 2.4 million to $US 2.2 billion in 1999. When Shenzhen first started out as a Special Economic Zone, the Central government and its various ministries were the prime providers of funds. Currently, most city revenues come from the lease of land use rights which funds infrastructure construction and from a corporate and personal income tax which helps support city services. Last year, the person who paid the most in Shenzhen income tax was a non-resident–an American…Tiger Woods. He played in a one-day exhibition golf match at one of Shenzhen’s new golf courses, collected $US two million for appearing, and promptly paid just under $US 500,000 in taxes.

The Master Plan

Shenzhen’s current Comprehensive Plan stretches from 1996 until 2010 but was only approved by the State Council in 2000. In 1999 it won the UIA Honorable Mention Sir Patrick Abercrombie Award for town planning and territorial development. According to the plan, Shenzhen will build its economy around the finance, trade, commerce, information technology, transportation and high-tech industries. The objectives are that Shenzhen will be a regional economic center, a garden city, and a modernized international city.

The master plan attempts to attract talent and capital to the city’s most important industry, the hi-tech industry, by improving education, and building infrastructurally modern hi-tech industrial parks with extensive links to education institutions throughout China. To feed the hi-tech industry is Shenzhen’s logistics industry with six proposed distribution parks in two categories–transition hub and distribution center. Shenzhen plans a three-level hierarchy of commercial service centers to service the city core and its outlying districts. There will be one city-level commercial center, five district-level centers and 23 town-level centers. The city will offer increased numbers and depth of services at each higher level. Between 1980 and 2000, the city attracted US$ 20 billion in foreign investment, and will try to attract that same amount in a time span of only five years in order to spur the growth and pay for needed infrastructure. Over the next 15 years the city will invest almost 7 billion dollars in infrastructure improvement projects, on par with Hong Kong.

Linear Spine Linked by Three Major Clusters

Because of Shenzhen’s shape and topography, planners decided that a linear system connecting dense clusters will be the most resource efficient and quality of life enhancing way to build the city. The city’s spine, Shennan Boulevard, connects three main clusters. Nanshan, to the west, is an industrial, shipping and education center. The Luohu-Futian cluster is the main business area, while the Yantian cluster, to the east, serves logistics and leisure activities. In between the clusters are open areas with less dense development.

The Central Business District

Shenzhen’s greatest development so far is in the fully built-out Lowu district. In 1996, the city held international competitions to design a proposed CBD and its major buildings. The business district will lie south of the city’s main thoroughfare, the landscaped Shennan Boulevard, while the new City Hall will lie north. Arata Isozaki from Japan designed the multifunctional Cultural Center that will house the library and music hall. A local architect designed an interactive "Children’s Palace" across the plaza.

Japan’s Kisho Kurokawa designed an "eco-media corridor" which links the southern mangrove preserves along Shenzhen Bay through the CBD up north to Lianhua mountain. The design of underground parking and ground level retail and street-crossings create a broad park and plaza on the top level, which allows for a seamless pedestrian park-like promenade through the middle. A subway stop will be integrated within the underground level. The eco-media corridor is so called because it puts ecology forefront in the park that dominates the corridor, is the information hub of the city, and provides a multi-modal junction that gives pedestrians a prominent place in the CBD.

Public Transport

For the past year, work has started on the first of six planned lines of the Shenzhen subway. Two of the lines will connect directly with Hong Kong’s public rail system. City planners are trying to quickly get the subway running and integrated with planned light rail systems and other means of public transport so that an efficient transit system will reinforce land use decisions in a virtuous public transit-land use cycle.

Shenzhen as a Second Testing Ground

The Central government will soon introduce the US political idea of "divisions of power". Much like the legislative, executive and judicial branches of the United States federal government, this division will separate policy making from policy implementation and supervision. The hope is to improve efficiency, increase transparency, reduce bureaucracy and eliminate opportunities for corruption. Analysts have said that this is the first crack at restructuring the political system in China since 1989.

Challenges

In 2000, Shenzhen beat out cities such as Chicago and Phoenix to win the International Federation of Park and Recreation Administration’s ‘Nations in Bloom’ competition. The competition recognizes cities for creating livable communities through the following components: 1) Enhancement to the landscape; 2) Community involvement; 3) Heritage management; 4) Environmental sensitivity; and 5) Planning for the future. Despite that accolade, Shenzhen still faces and is actively addressing challenges for the future:

• WTO. With the nation’s entry into the WTO, Shenzhen’s advantages as an SEZ are being phased out. However, Beijing wants Shenzhen to be a role model for other cities to comply with WTO. If Shenzhen does gain a reputation for strictly adhering to WTO rules, it will be easier to attract foreign investment, as some multinationals are still wary of the legal system in China.
• Infrastructure. Shenzhen has China’s most modern infrastructure, yet faces the same infrastructure problems of any city that has grown so quickly.
• Environment. An early emphasis on economic growth at all costs has left many quarried and scarred mountainsides that the city is now trying to re-green. The entire region is facing environmental problems arising from manufacturing and automobile use.
• Culture. Shenzhen is building museums, enhancing cultural institutions and has a vibrant outdoor sculpture program. However, as a city barely 20-years old, it lags behind Beijing, Shanghai and other cities in the cultural scene to attract some top talent with a higher quality-of-life issue.
• High Costs. Shenzhen has a head start on other Chinese cities in understanding the competitiveness of market-economy conditions, but its high wages and land costs cause some investors to second-guess Shenzhen as a corporate home.

Other challenges are more in line with what the average city in China is facing:

• The automobile. Entry into the WTO will dramatically slash import duties on automobiles. That, coupled with rising incomes in China, will put the price of an automobile within reach of many in Shenzhen. For the first time, the first quarter of this year saw sales of automobiles to individuals account for more than half of automobile purchases. This will exacerbate road congestion that the city is already experiencing in some areas. Unfortunately, Shenzhen has shown the primacy of the automobile by taking out the once ubiquitous segregated bicycle lanes and forcing bicyclists on the sidewalk. Besides having to share the sidewalks with bicycles now, pedestrians are now also forced onto an increasing number of pedestrian overpasses in order to cross the street and allow for the free flow of the auto.
• Social Services. Shenzhen does not face the problems of many ‘rust belt’ cities in China that have inefficient state owned enterprises forced to lay-off workers. Nonetheless, the city needs to find the funds to provide social and training services for its citizens as it makes its transition to a market-economy.
• Income Segregation. In the past, a person’s work unit provided housing, and much housing is still subsidized. In the future, almost all housing will be market rate. Already, citizens are choosing to live in areas with the best schools and amenities, which may mean greater economic segregation and attendant problems.

References:

Ng, Mee-Kam, and Wing-Shing Tang. ‘Planning and Development of a Modern Socialist City in Shenzhen, People’s Republic of China." Paper presented at 34^th EAROPH Meeting. Batam, Indonesia. July 2001.

Reuters. Golf's Woods Is Biggest Taxpayer in China Boomtown. http://story.news.yahoo.com/news?tmpl=story&u=/nm/20020228/od_nm/woods_dc_1. Feb 28, 2002.

Huang, Cary. "Shenzhen to Test Political Reform." Hong Kong I-Mail. Jan.23, 2002.

Hong Kong Planning Department. Hong Kong 2030: Planning Vision and Strategy. http://www.info.gov.hk/hk2030/hk2030content/home_eng/2030_e.htm 2002.

Li, Clara. "A Land of Opportunity." The South China Morning Post. Jan. 28, 2002.

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Author and Copyright Information

Copyright 2002 by author

Michael Gallagher has been a planner at the Shenzhen Urban Planning and Design Institute for the past two years.

Michael R. Gallagher
10/F, Jianyi Building, No. 3 Zhenxing Road
Shenzhen, China 518031
e-mail: mrg91@yahoo.com