SHENZHEN: Zhao Wen Fa did not grow up rich, but he had ambition. He knew that if he wanted to make something of himself, he would have to go somewhere with the infrastructure that would allow him to.
So he set his sights on the up-and-coming Chinese city of Shenzhen. Zhao was working for a state-owned enterprise for very little money when he decided to quit and start his own business in the southeastern city.
“Like the American dream, Shenzhen can be seen as the land of the Chinese dream,” he said.
In 1987, Zhao established Aoxing Audio Visual Equipment, a projector and interactive whiteboard manufacturer. The company used to import equipment from America to make the projectors, costing him about RMB3,000 (US$450), but this was too expensive, said Mr Zhao.
“I started manufacturing the parts myself here, (and now) I only spent one tenth of the price I used to pay,” he said, highlighting Shenzhen’s ubiquitous presence of hardware suppliers.
Today, Zhao’s company is one of the biggest of its kind in the industry and is witness to Shenzhen’s development as China’s tech capital.
FROM FISHING VILLAGE TO COMPETITIVE METROPOLIS
The sleepy fishing village has come a long way from being a small outcrop lying in the shadow of Hong Kong to becoming the booming commercial centre it is today – one that is home to some of the world’s biggest tech giants.
When former Chinese leader Deng Xiaoping declared Shenzhen the country’s first Special Economic Zone in 1980, the city’s financial and banking infrastructure, along with its established transport network, made it attractive for tech and hardware companies to set up shop.
Since then, Shenzhen has been outperforming China’s first-tier cities in economic growth over the past couple of years, and is now dubbed as the Silicon Valley of the world’s hardware startups.
The city’s population of nearly 12 million comprises mainly of young Chinese migrants lured by promises of working for tech heavyweights such as Huawei or Apple supplier Foxconn – or hoping to start their own tech driven business.
“Out of China’s so called frontier cities … Shenzhen is the youngest and most vibrant. It is the experimental and vanguard city of the opening up era,” said Ling Nan director of the Academic Committee at think tank Shenzhen Innovation and Development Institute.
“If you want to see the 1000-year-old China – visit Xian, the 100-year-old China – visit Shanghai, and the most modern China – visit Shenzhen.”
More than 40 per cent of Shenzhen’s economic output is tied to innovation driven industries such as information technology, biotech and green energy. International companies like Google, Apple and Facebook have all purchased Shenzhen-based hardware companies with billion-dollar valuations.
Shenzhen’s sprawling network of hardware markets and factories act as a support system to the tech companies, enabling concepts and ideas to enter production faster, saving time and money.
This can easily seen at Huaqiang Electronics World, a massive components emporium where traders sell circuit boards and LEDs as well as the bolts and screws that go into the world’s electronic gadgets.
In the mall, cubicle after overfilled cubicle of factory salesmen offer to sell one or a hundred tiny hardware components that can be delivered to your factory within a week.
According to Shenzhen Innovation and Development Institute, the number of patents in Shenzhen account for 50 per cent of the patents in the whole country. Some estimates put Shenzhen at approximately nine months ahead of anywhere else in the world or any other hardware company in terms of developing innovative new products.
INTERNATIONALISING SHENZHEN’S CAPITAL MARKET
As well as being set up to become China’s technology centre, Shenzhen is also looking outwards.
One such example is Qianhai industrial zone, a commercial development being primed to become a pilot area for closer cooperation between Mainland China and Hong Kong. Covering an area of approximately 14 sq km of reclaimed land, is it expected to be completed by 2020.
With restrictions on currency flows relaxed, the two financial centres are looking at opportunities for increased innovation and partnership.
To entice companies, goodies such as a 15 per cent preferential corporate income tax rate and an exemption from personal income tax have been put in place. And thousands of companies have flocked to register their companies – at a rate of around 100 a day in a strong demonstration that illustrates what locals call “Shenzhen speed”.
Now, more than 4,500 Hong Kong companies have settled in allowing cross-border e-commerce practitioners to integrate online and off-line sales strategies, and allowing Hong Kong shipping enterprises and investors to invest in the mainland shipping industry.
“We employ the best developers from Hong Kong to build developments that will attract Hong Kong market,” said Sun Hai Wei- assistant director-general of the Qianhai Administration. “We’ve also implemented a comprehensive transport system.”
Like many modern cities, the Qianhai administration has stated that it will prioritise public transportation and sustainable development in its urban planning. There is a planned RMB150 million (US$22.9 million) investment in reforestation and investments in clean energy, water and waste recycling.
Putting the city on the world map are some of the biggest tech names that call Shenzhen their home. Headquartered in Shenzhen is Tencent – China’s largest social networking and gaming company.
Originally conceptualised as a clone of Israeli-made instant messaging service ICQ, Tencent today is one of the world’s largest Internet companies.
For Pony Ma, the CEO of Tencent, his story is similar to that of many entrepreneurs in Shenzhen. He founded the company 19 years ago in a cramped Shenzhen office with three college classmates and a friend.
The Tencent office in the Anshan district is a bright and airy building with streams of people ebbing in and out. Heading this digital behemoth is a cute penguin with a red scarf, which stands in the lobby area smiling over guests.
Inside, giant LED screens flicker with maps, statistics and graphics. At the centre is a glowing map headed by a number – 243, 947, 245 – which was the number of current Tencent users at that moment.
Overall there are 900 million active user accounts, with China as the biggest market.
More than two-thirds of Chinese use Tencent’s two messaging apps – WeChat and QQ – for everything: From texting to shopping, flirting, dating, watching videos, playing games, booking doctor’s appointments and ordering food and taxis.
In September 2015, Tencent became the largest Internet company in Asia by value. In April 2017, Tencent surpassed Wells Fargo to become the tenth largest public traded company in the world.
According to Limin Chen, Tencent’s Deputy Director of Global Communications, 70 per cent of users are mobile-based so the company is no longer limited to geography.
Also known as the world’s drone capital, Shenzhen has a 70 per cent market share of the global consumer drone market with more than 300 companies dedicated to the unmanned aerial vehicle business alone.
This high concentration is the result of the Shenzhen government announcing it had singled out drones as one of its key industries in its Development Plan of Aerospace Industry of Shenzhen 2013-2020.
The possibilities are endless as these drones are developed.
Chinese retailer JD.com has begun using drones from Shenzhen to transport goods between distribution centres in the Jiangsu province, while another company MicroMultiCopter is building drones capable of spraying fertiliser on crops, analysing plant health and creating prescriptions for improving yield.
Shenzhen’s metallic geometric buildings tower over clean streets hemmed in by pockets of greenery and sculptures. A constant stream of young and ambitious millennials flow in and out of the buildings filtering into the many tech start-ups and incubators that dot the city.
Further out, factories and electronics markets churn out hardware in their thousands feeding these innovation hubs with the supplies they need.
In only thirty years Shenzhen has exploded into a technological nirvana created by the perfect confluence of supply and innovation that the city has built itself around.
This article was written with the help of the Jefferson Fellowship supported by the Freeman Foundation.