
Shenzhen may have grown too fast, too soon, for its own good - raleighm
https://www.ozy.com/fast-forward/chinas-silicon-valley-faces-meltdown-fears/87115
======
baybal2
A history lessons:

Once there were only 4 original SEZs in China, Shenzhen was the one with the
least of official blessing.

Back in days, Shantou was the official favourite of the government, so all of
China's money was poured into it.

But the party officials made huge, grave and extremely banal mistake: they
thought they will suddenly institute growth where there is none just by
issuing official edicts. People who used to the idea of getting anything from
others with a simple "I want," were shocked, and felt disbelief when they saw
for the first time that building "that market economy thing" was completely
outside their capability. It showed them how inept they, the elite class,
were.

Shantou was full of "5 star hotels" and first shopping malls in China, and
Shenzhen was full of factory dorms and omnipresent smell of unwashed socks.
You know, there rest is history. Where is Shantou now, and where is Shenzen?

Now, we live in Shenzhen where not only the empty hotels and shopping malls
being constructed in droves, but also there are 10 empty investment funds for
each remaining manufacturing company.

It appears that nor the government, nor the industry has learned this lesson.

Make your conclusions.

~~~
thisisit
This is interesting. So, you are saying the meltdown is due to government
actively sponsoring malls/hotels instead of more manufacturing capacity?

~~~
baybal2
Yes, totally.

Their desire to turn Shenzhen into "Fancy Global City®" borders on being a
maniacal obsession.

These people have really hard time distinguishing in between cause and effect.

SF, and SV got the title of a global tech capital not because of dotcoms
moving there, but because these localities made it possible for these dotcoms
to grew up there. Them turning into global cities as a result is a consequence
of this, not the cause.

Shenzhen was on track to becoming of a city where 80% of worlds production of
anything electronic takes place, until demolitions of 2009-2011 that were
catastrophic to the industry, and the later pivot to being a "Fancy Global
City".

~~~
danmaz74
> demolitions of 2009-2011 that were catastrophic to the industry

Sounds interesting; any references?

~~~
baybal2
Not much on it in English, but that was like a magnitude 9 seismic event for
the electronics industry globally. Any industry insider will confirm that.

[http://www.lankadesha.com/china-to-close-down-polluting-
fact...](http://www.lankadesha.com/china-to-close-down-polluting-factories-in-
beijing-shenzhen/)

[http://www.bjreview.com.cn/headline/txt/2011-11/28/content_4...](http://www.bjreview.com.cn/headline/txt/2011-11/28/content_408262.htm)

First, demolitions began in 2009, the month new mayor moved in. At first,
compensations were laughable. Imagine putting a factory for $20m USD just to
discover a year after that you have to shutdown and and only be compensated
for the land it stood on for $1m? In 2010, they began offering a relocation
option to Shanwei, a totally middle-of-nowhere town without even one percent
of Shenzhen's workforce. And in 2012, they very well made an ultimatum:
"demolition by the end of the year, or right now if you refuse"

In total, around 15000 to 16000 factories were closed over the years and their
land expropriated.

~~~
justinclift
Any idea if those factories outright closed, or did many of them move location
to somewhere else?

If many of them moved somewhere else, then maybe that location(s) will become
future areas of high growth?

~~~
baybal2
Most moved to outskirts of Shenzhen _municipality_ , just to be 1 cm outside
of Shenzhen _city_ jurisdiction.

Longhua, Baoan outskirst, Dongguan. Zhuhai in particular scored a lot of heavy
hitters, to Shenzhen mayor's disdain. Zhuhai gave "refugees" a complete carte-
blanche to setup any factories they wanted.

Very very few factories did use their relocation option to Shanwei. Those were
real heavy industry companies in their majority, because for them facilities
relocation cost was a genuine life and death matter.

Best to say that 2009-2012 events have led to growth being scattered, and
great loss of "cluster effect."

While Longhua was a rural locality before these event, it did scored few
companies who moved into already existing, vacant plan economy era factories
and refurbished them. Our Wi-Fi OEM contractor rents one of such factories.
Longhua's officials were, of course, very glad to see such developments. There
are few residential high rises there now for people who moved to work in those
factories from Shenzhen. It will certainly acquire title of a city before the
end of a decade.

Dongguan was already the second biggest manufacturing hub in the province
after Shenzhen, and will soon take the first place from it.

Zhuhai, I bet, will be becoming what mayor of Shenzhen city originally wanted,
a high-tech, high-value service/product hub. The city was very receptive to
genuine tech companies, and was very accommodating when it was coming to
securing land for factories and campuses, as well as guarding newcomer
companies from overzealous bureaucracy.

P.S. I think I need to clarify what to understand under factory. The digit of
15000 companies is given for all "manufacturing enterprises," which could be
anything from a garage workshop, to a one man factory ran from a flat.

------
paulgerhardt
Shenzhen has changed a lot in the past three years (when hasn't it) - but the
specific trend I've noticed is the electronics factories moving out and the
high end malls moving in.

The cost of maintaining a 3x3 meter booth in HQB has continued to rise
(especially now that the subway line construction has finished) while real
business has shifted online to TaoBao.

Yes, it's still the undisputed electronics center of the world but there's a
palatable shift on the street from wholesale to retail. Factories I work with
there say as much. Permitting is becoming a chore. Home ownership in a
licensed complex (as opposed to unlicensed) is unattainable. Even trips to
T2's are going further and further afield.

~~~
Canada
Why would I want to bother going to HQB when I can just order from those guys
on taobao? The consumerization of the electronics market is sad for those into
browsing.. it's fun. But really, if you want to prototype something it's way
easier to order online and if you actually want to produce something then
random stuff from HQB or taobao isn't going to cut it anyway.

~~~
paulgerhardt
Going to HQB is (was) valuable because:

1) You get a visceral read on what's up and coming - every month and half it's
different but volume doesn't lie. Reading the tech news you're in a filter
bubble for whatever company is spending the most on PR but on the street you
get a real sense for what's being made in volume. Pulling the threads on why
this new widget is trending this month is _always_ educational.

2) For prototyping something I find HQB _quicker_ \- you can get supplies,
programmers, and adapters all in under an hour - usually it was just a new
test fixture for isolating a QA issue you've found but having it down the
street is wonderful. For production, yes, by all means go through your
supplier network.

3) Going in person let me build up guanxi with the niche vendors where I was a
repeat customer. As a 6'4" huge foreigner I left an impression, and in turn
was able to leverage that network to find things I couldn't/didn't know of.
WeChat has streamlined this but the tone is completely different there between
people I've met in person and people I haven't.

------
adventured
Assuming China's economy continues to grow over time (a good bet, regardless
of pace), one certainty is that there are going to be plenty of euphoric runs
and meltdowns to match. With the immense wealth that China has compiled, it's
inevitably going to push bubbles in asset classes from time to time, whether
in real estate or tech. Culturally the Chinese seem to enjoy speculative
investment at least as much as the US does. The meltdown in question is about
as interesting in terms of consequence, as the guaranteed flood of worthless
stories that will claim Silicon Valley is dead (again, for the nth time) after
the next recession hits.

------
zhte415
I was struck by the map showing the emptying out of the minor towns and
cities. While it's something I've been aware of for years, that visualisation
is particularly stunning (and, tangentally, with such concentrations things
like high-speed rail and China's delivery/Taobao culture look very efficient).

------
sho
I don't see anything in the article that supports the thesis of the title?
Shenzhen has grown 858% in 25 years, and faces growing pains. OK, but that's
not a "meltdown" like the title suggests.

~~~
danmaz74
Yes, the title is completely detached from the article - usually there is at
least a small reference in the copy to justify sensationalist titles, but here
I didn't find any.

------
erikb
I probably didn't read every word carefully, but does the article really
reflect the HN title? I don't really see it in there. What I read is "It grew
a lot, and it's not perfect". Of course such kind of project is government
created and therefore is kept alive as long as the government sees value in
it. It's not different in California. Such kind of areas don't survive all by
themselves. In reality innovation/investing is not something that can keep a
city alive by itself.

~~~
floatrock
> does the article really reflect the HN title?

No. This is a clickbait post.

------
amac
Lived in SZ for 2 years, the comments in the media are too negative. Shenzhen
is losing manufacturing, all the while the city's GDP continues to grow. Why?
Because it's moving into more higher value areas such as software. I don't see
any downside for SZ, it's location at the heart of the region, between HK, GZ
etc, makes it well placed to continue to thrive.

------
Canada
This article basically said nothing. So there's a bunch of wanna be maker
spaces where nothing gets made? So too are there a bunch of wanna be
accelerators in the bay area that never fund anything. So what?

