26 October 2016
Shenzhen allocated 4.05 percent of its gross domestic product last year to research and development for innovation and technology. Photo: Internet
Shenzhen allocated 4.05 percent of its gross domestic product last year to research and development for innovation and technology. Photo: Internet

How HK lost its ‘best city for business’ crown to Shenzhen

Shenzhen was a dust bowl on Hong Kong’s doorstep less than 40 years ago while the former British territory was a glittering beacon for multinational companies.

Last year, Shenzhen overtook Hong Kong to become China’s most competitive city in a ranking by the Chinese Academy of Social Sciences, the mainland’s main think tank.

The survey of 294 cities on urban competitiveness was released Thursday in Beijing.

The Pearl River delta dominated the rankings with. Guangzhou was No. 5 and Macau No. 9. Shanghai remained third from the 2013 survey while Beijing fell two notches, landing in eighth place.

Hong Kong lost its leader-of-the-pack position largely because it did not support innovation, according to Forbes.

Its Census and Statistics Department reported that in 2013, the last year for which figures are available, its public and private sectors and its educational institutions spent an amount equal to 0.73 percent of its gross domestic product on research and development for innovation and technology.

Shenzhen, on the other hand, devoted 4.05 percent of its GDP last year to such areas.

Why the heavy emphasis on innovation?

Perhaps because Chinese Premier Li Keqiang, with his much-publicized “Internet Plus” plan unveiled in early March, has placed his hopes on new businesses to revive the country’s economy.

His concept is that Beijing can invest in innovation and CASS has evidently adopted the theme.

Hong Kong, on the other hand, has its non-interventionist philosophy and refrained, for the most part, from picking winners and losers.

In any survey conducted by a Beijing-based organization, Hong Kong is bound to lose out to cities implementing activist policies favored by the country’s leaders.

For decades, Hong Kong has worried about losing out to Singapore, run by world-class interventionists.

Now, its concern focuses on next-door Shenzhen. After all, Hong Kong could have been the home of DJI Technology.

DJI, which stands for for Dajiang Innovations, was founded by mainland-born Frank Wang, who graduated from Hong Kong’s University of Science and Technology in 2006.

He had wanted to start his business in Hong Kong but left the city for Shenzhen after not getting support.

That year he founded DJI which now has 70 percent of the global market for civilian drones.

Fast Company magazine ranked DJI 22nd on its 2015 list of the world’s most innovative companies.

Frank Wang’s business is estimated to be worth about US$8 billion, and many see it going to US$10 billion after further rounds of funding.

Now, it seems every Chinese drone-maker has flocked to Shenzhen. There are about a hundred companies chasing DJI, and about 80 percent of them are located in that city.

Like the tiny one started by John Ma and two friends. They pooled savings; moved to Shenzhen in July; and built 70 drones, which they offered for sale on Alibaba Group’s Taobao platform for 468 yuan apiece.

Why Shenzhen?

“It’s easy to find hardware factories to turn your idea into products, no matter if you only have just a few thousand yuan or just order one unit,” Ma said.

Start-ups like Ma’s need the cheap manufacturing space Shenzhen offers as well as its existing supply chains.

Yet, Shenzhen has much more than an industrial infrastructure.

There are in the northern part of that city rusting industrial buildings where young businesses have replaced old-line manufacturers, where thousands of John Mas have set up shop to become Frank Wangs.

No wonder Shenzhen now leads China as its most competitive city.

Li Chao, who worked on the CASS survey, said Shenzhen’s “product output per land area is the highest in the country”.

Of course, Shenzhen’s productivity is helped by hosting Hon Hai Precision Industry Co.

That’s better known as Foxconn Technology Group, the world’s largest contract manufacturer of electronics and the maker of products for Apple and other consumer products companies.

Foxconn’s Longhua facility, by some measures the largest factory on the planet, is just down the road from dingy buildings hosting some of the world’s smallest– and soon to be recognized as most innovative — companies.

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