
Shenzhen’s economy under strain: blame the trade war? - baybal2
https://www.gbabrief.com/2019/11/shenzhens-economy-under-strain-blame-the-trade-war/
======
lanyusea
6.6% is incredibly low and this number has been discussed a lot in Chinese
forums.

as a Shenzhen guy,

I'd like to say the most important reason may be the price of the land has
been increased quite a lot in the last years.

Many manufacturing companies, even Huawei moved out of Shenzhen this year,
some go to Dongguan, Huizhou, which are other cities of Guandong, and some go
to Vietnam, Thailand.

The reason is quite simple, they cannot afford the price of land to build the
factory, and the salary cost is higher since the housing rent price also goes
higher. Some factory owners work hard for a year, while the incoming is even
less than the value increased of lands he owns.

So the business all goes to the lands, housing, malls. People don't know where
is the top, but people believe is far more yet. Because Hong Kong, the city
next to Shenzhen, has a higher land price.

For the future, the great bay area may solve this issue. Shenzhen will focus
on the development of high-tech technology as a research center and enterprise
center. The manufactory will move to Dongguan, Huizhou. While HongKong serves
as a business/finance center. Guangdong will be the transaction center.

It is possible with the highly developed traffic net. The high-speed railway
connected every city of the great bay area. People and things can move fast.
Taking trains has become easier and more convenient than taking buses now.

~~~
pertymcpert
Why did they name it Greater Bay Area when we already have a place called the
Bay Area?

~~~
baybal2
Because it is an even greater bay area, greater than the original one, and
that's the point. Subtlety is not a thing here.

~~~
pertymcpert
It’s either a coincidence then or a really petty/inferiority complex based
name.

------
aazaa
> Growth in the first three quarters of 6.6% was substantially down on the
> same period last year, and a lot slower than the first six months of this
> year.

Is it really that hard to include the growth rate for the previous period?
Without that, it's impossible to put the "strain" into any kind of context.

> Indeed, the implication is that the economy barely grew at all between July
> and September.

How about a graph showing monthly growth rates?

> News that Shenzhen is losing steam has seemed more ominous because it is
> home to some of the country’s most dynamic companies and newest industries.
> ...

I'm not inclined to trust the anecdotes in the rest of the piece given that
the author hasn't done basic numerical and visualization legwork.

~~~
kevstev
I found it surprising that 6.6% is "slow" or "strained." Those are numbers
akin to a massive boom in the US.

~~~
hnarn
Are you surprised that growth is higher in China than in the US?

~~~
kevstev
No, but I am surprised that 6.6% growth is a cause of concern, even if it is
lower than whatever the previous number may have been.

The last time we saw growth rates above 5% in the US was during the .com boom
and even in the midst of it that was considered unsustainable long term.

~~~
Waterluvian
You can't compare US and Chinese growth rates. It's easier to grow when you
still have a lot of growing to do.

~~~
onlyrealcuzzo
Also when your non-farms workforce participation is increasing, instead of
flat or decreasing.

Most of GDP growth comes from 1) population growth, 2) inflation, and 3) non-
farms workforce participation.

------
nexus6mike
Short-term demand seems to be shifting to Vietnam. This seems to have enabled
a 'wait and see' approach re: China + tariffs. However, I'd question if
Vietnam has enough long-term manufacturing capacity [1] [2] [3] to sustain the
short-term advantage it seems to be currently enjoying.

Today, China has 16 of the world's 50 busiest ports, including Shenzhen at #3
(all as measured by 2018 TEU volume). [4] However, this is less indicative of
_capacity_ than it is of current demand / throughput.

Both countries could benefit from building more deep-water ports. China
currently has two Panamax ports, with a third on the way. Vietnam has none and
is building its first. The U.S., by comparison, has 42 by my count. [5]

Separately, there's a great Wired documentary on Shenzhen:
[https://www.youtube.com/watch?v=SGJ5cZnoodY](https://www.youtube.com/watch?v=SGJ5cZnoodY).

[1] [https://www.latimes.com/world/la-fg-vietnam-trade-
war-201907...](https://www.latimes.com/world/la-fg-vietnam-trade-
war-20190712-story.html)

[2] www.scmp.com/economy/china-economy/article/3018403/chinese-manufacturers-
returning-home-inefficient-vietnam

[3] [https://www.wsj.com/articles/for-manufacturers-in-china-
brea...](https://www.wsj.com/articles/for-manufacturers-in-china-breaking-up-
is-hard-to-do-11566397989)

[4] [http://www.worldshipping.org/about-the-industry/global-
trade...](http://www.worldshipping.org/about-the-industry/global-
trade/top-50-world-container-ports)

[5]
[https://en.wikipedia.org/wiki/List_of_Panamax_ports](https://en.wikipedia.org/wiki/List_of_Panamax_ports)

~~~
baybal2
Vietnam's entire industrial capacity is like that of a single district in
Dongguan, and they are very US centric.

One man told me recently that Samsung's factory makes 50% of Vietnam's export
value.

~~~
Mirioron
Doesn't that just mean that Vietnam is becoming the new China? China started
their improvements in somewhat similar circumstances.

~~~
latchkey
Indeed... but it will take some time for it to develop.

------
maxander
This is perhaps the first time I had heard of China's "Greater Bay Area"
(according to wikipedia a "megalopolis" consisting of 11 cities besides
Shenzhen) and, particularly in the context of this article on Shenzhen's SF-
like woes, I can't help but be struck by this masterstroke of English-language
branding on China's part.

~~~
spectramax
"masterstroke"? I am not so sure. It doesn't take a genius to come up with
similar names.

China loves playing these cunning, deeply callous, and reprehensible games,
for e.g. CE mark: [https://www.ybw.com/vhf-marine-radio-guide/warning-dont-
get-...](https://www.ybw.com/vhf-marine-radio-guide/warning-dont-get-confused-
between-the-ce-mark-and-the-china-export-mark-4607)

China has a branding problem like no other nation. The Chinese businesses keep
sacrificing long term goodwill and image over short term benefits by employing
shallow tactics.

------
simula67
This was India's moment to shine. But as usual, it looks like this opportunity
will also be squandered.

~~~
est
GDP estimated to grow at 5% in 2019-20, much lower than 6.8% recorded in
2018-19

[https://timesofindia.indiatimes.com/business/india-
business/...](https://timesofindia.indiatimes.com/business/india-business/gdp-
estimated-to-grow-at-5-in-2019-20-as-compared-
to-6-8-in-2018-19/articleshow/73139543.cms)

~~~
krtkush
If you take out government spendings form this, the GDP is around 3.8%

------
kccqzy
> But a downturn in its economy in the third quarter has been equally
> accelerated, casting doubt on its reputation as a pacesetter for the nation.

It's probably still a pacesetter, because the economy of the rest of China is
under strain as well, especially other formerly rapidly growing cities.

------
dogweather
Could the loss of e-packet subsidies be having an effect? Or is that too
small-potatoes?

------
ghostcluster
> Analysts have highlighted the steep plunge in private sector investment, for
> instance, which barely grew in the January to September period compared to a
> year ago, versus 12.3% growth over the first half of this year.

My understanding is that China's meteoric rise in places like Shenzhen has
caused local wages to increase and the city to become more expensive to live
and do business in, thus giving manufacturing an incentive to seek less
expensive areas, like Vietnam, in which the sector is rapidly growing.

~~~
baybal2
At least a part of the saga of rising salaries without rising productivity is
due to China being very lax on interest rates and Xi's government genuinely
believing in that being a recipe for growth.

Xi himself is said to be very emboldened by what he sees as success of his
previous attempts of running the economy by throwing money on SOEs, and he
uses that to parry any attempt of central committee to reason with him.

There is a well known video going around of the plenum session opening, where
Xi basically says "bigger, better resourced state enterprises," and Li says
"smaller, and nimbler ones" right after him.

Xi ignores that China saw its fastest growth at the time of Chinese rates
being rather high.

Low rates demoralise the entrepreneurial community.

Too many business owners exit because they can go to higher rate countries for
rentier lifestyle.

Too many business owners think it makes no sense to compete with people who
can get billions at 1% interest and throw that to bruteforce their market
position.

More so, this makes it really appealing for gambling minded, and well
connected individuals to take state money, and gamble them on speculations,
becoming instant billionaires.

~~~
seanmcdirmid
This sums up china’s problem quite nicely. A good correction/recession would
be very useful to being things back down to reality, but the party might be
too brittle to weather it very well, especially since the cab has been kicked
down the road for so long.

The USA and by extension the rest of the world is playing a similarly
dangerous game with low interest rates, though in this case connections aren’t
as required. The next downturn could make 2008 look mild when it all unravels.

------
blackrock
I think China's next move should be to turn all their citizens into
programmers. They have all the factories, the fabrication equipment, and the
general know-how.

And by doing so, then they get all the network effect benefits. They become
programmers, researchers, programming language designers, QA engineers,
systems analysts, etc., and eventually technical managers and business
leaders. And they also get all the benefits of having a very technical and
highly educated workforce. It's interesting that a recent survey of their
school children, said that 56% wanted to become Astronauts.

The next phase of their national development should probably be to move into
design, research, development, and ultimately indigenous intellectual
property.

The past 10 years of smartphones have changed the country, that their children
are exposed to all the software and technology at a young age. This should
make it easier for them to become engineers, programmers, scientists, and
mathematicians, as they enter college.

Their current generation of engineers has proven that they have the technical
capabilities to achieve that. They appear to be very good at building massive
infrastructure. So they can plan, design, architect, and build out massive
things (high speed rail, rockets, military planes). But let's see if they can
build out small things, like software systems (OS, compilers, AI, etc.)

It will be interesting if Huawei takes the lead, and their new Harmony OS
becomes a viable contender in the mobile space in China. Or if it even
displaces Windows and Linux as the primary desktop or server operating system
within China. Maybe Microsoft would eventually port over Word and Excel to the
Harmony OS?

And I'm still waiting for them to come up with their own programming language.
Although this might be a tall order, as C is quite popular there. However, the
guy who created Vue.js is of Chinese descent, but it seems America snatched
him away. Now I could be wrong, but the current perception appears as if the
Trump administration is hell bent on alienating everyone of Chinese descent
from working in America.

If they can succeed at all this, then a slowdown in the Shenzhen manufacturing
economy for export, is irrelevant. They would have evolved to the next level.
They would build out their own software systems for internal consumption, and
eventual export.

------
rolltiide
Double whammy as its probably a spillover from an anathema to visiting/doing
business in Hong Kong as well

~~~
ETHisso2017
It is a spillover from Hong Kong, but in the sense that mainland capital that
would have entered HK is now investing in Shenzhen and is hence making the
city too expensive for manufacturing.

