WHEN Chinese leader Xi Jinping returned to the southern metropolis of Shenzhen earlier this month, it was a visit to mark the city’s 40-year transformation and also to praise it as a pioneer of China’s “New Era.”

Shenzhen has grown from a collection of small fishing villages in southern China’s Guangdong province in the 1970s into a dynamic megacity of 13 million. 

Shenzhen’s growth is mind-boggling — see “China dynamo Shenzhen’s GDP swells 10,000-fold in 40 years” (Nikkei Asia, August 26 2020). 

In 2019, Shenzhen’s GDP reached $396 billion, for the first time surpassing Hong Kong’s $366bn, its per capita GDP is approximately 65 per cent that of its neighbour but the gap is narrowing.

Shenzhen’s name translates as the slightly underwhelming “Place of the Deep Drainage Ditch,” not quite as poetic as Hong Kong’s “Fragrant Harbour.”

Yet this unpromising site was identified by Deng Xiaoping as one of four Special Economic Zones (SEZs) to spearhead the country’s opening up and economic reform begun in 1978. 

The other zones were Zhuhai and Shantou, also in Guangdong province, and Xiamen in Fujian Province. 

The four were initially chosen for their closeness to either Hong Kong or Taiwan. Subsequent SEZs were established in other parts of China. 

These territories were set aside to test out economic policies and allow foreign direct investment (FDI) without the tighter restrictions that remained elsewhere in China. 

Deng had been periodically removed and reinstated from key positions during the cultural revolution. 

More than anyone else he was the architect of these new reforms. 

While some saw them as the betrayal of socialism, Deng’s counterargument was that “revolution means carrying out class struggle, but it does not merely mean that. 

“The development of the productive forces is also a kind of revolution — a very important one. It is the most fundamental revolution from the viewpoint of historical development.”

Deng was not merely pointing to some abstract Marxist doctrine. As a student in France in the 1920s, he worked on the railways and in Renault car plants. 

He had experienced for himself the realities of industrialisation. He had studied in the Soviet Union during the period of the New Economic Policy, which married socialist state ownership and private enterprise. 

Deng was Communist Party of China (CPC) general secretary in the 1950s when China’s New Democratic economy boomed, a time when socialist industry was being established, the “national bourgeoisie” was being encouraged to invest and trade and peasant families were working their own land after agrarian reforms redistributed landowners’ estates. 

All these experiences shaped Deng’s policies from 1978 onward.

After the Chinese revolution of 1949, it had been assumed that China’s march to socialism could only be successful with a prolonged transition period. 

Mao himself had estimated in 1954 that China needed at least 10 Five Year Plans (50 years) to build the foundation of modern industry. 

However, these policies were abandoned in the late 1950s. Mao and the rest of the Chinese leadership imagined that after several years of strong economic recovery, what had been thought of as only possible in 50 years could be done just as easily in 15.

Deng had initially been a supporter of this “Great Leap Forward” (GLF). 

However, the overambitious targets of the GLF resulted in economic dislocation, disrupting the country’s food supply, triggering shortages and even famine in key regions. 

Added to this was the Sino-Soviet split, which ended Soviet economic and technical assistance. 

After a short period of restabilisation, China was plunged into the tumultuous decade of the cultural revolution.

Deng concluded from these experiences that instead of pursuing breakneck economic growth across the whole country simultaneously, SEZs would create localised laboratory conditions to see whether “black or white cats” caught more mice. 

Successful programmes and techniques could then be adopted elsewhere, while the unsuccessful ones could be abandoned without undue disturbance to the country’s overall equilibrium.

Deng’s cat metaphor was not, as some critics have assumed, an expression of scepticism over whether capitalism or socialism was better for China. 

In his view, it meant finding the right methods to increase China’s productive forces without which socialism could not survive.

The socialist sector of the economy would continue to act as the backbone of the country’s economy, with state-owned enterprises (SOEs) retaining control of the commanding heights of the economy, but privately owned enterprises, as well as a range of joint ventures and investment partnerships between the state and private sector, could develop in the other markets, and peasant households were given autonomy over the land allocated to them.

From 1981, the CPC argued that China was only in the “primary stage of socialism” and that the principal contradiction was between the country’s insufficient level of economic development and the growing material and cultural demands of its people. 

The CPC focused on transforming the country through massive state investment, torrential inflows of foreign capital and the recreation of a substantial private sector. 

All this was to maximise GDP growth, though the price paid was often horrendously poor labour conditions, social and regional inequality and terrible environmental pollution.

According to Xi’s “New Era” doctrine, China is now in a second phase of China’s “primary stage of socialism” where the main socio-economic conflict is between the growing needs of the people for a better quality of life and unbalanced development. 

It is now quality not quantity that must determine China’s future economic development. 

This entails a further shift away from purely investment-and-export-driven growth to innovation-driven growth, creating an economy that is environmentally sustainable and labour and energy-efficient.

Which brings us straight back to Shenzhen. The city has shed its previous reputation for migrant worker shanty towns and hazardous polluting factories to become a centre of China’s new economic dynamos (See “Inside China’s Silicon Valley: From copycats to innovation,” cnn.com November 23 2018).

Xi’s speeches during the anniversary tour obliquely referred to the ongoing trade war launched by the Trump administration. 

This has specifically targeted Chinese technology companies, many of which are still reliant on US and other Western suppliers for key components. 

Shenzhen is home to many of China’s cutting-edge companies, often referred to as “national champions,” such as Huawei, ZTE, Tencent, electric vehicle manufacturer BYD and the world’s largest drone manufacturer DJI.

“We are on the cusp of unprecedented changes in this century, and we must take a path towards self-reliance, and this means we must become independent in our innovation drive,” Xi said in the city.

The Shenzhen city government has its own portfolio of state-owned enterprises under the direction of the municipal State-owned Assets Supervision and Administration Commission (SASAC), which oversees around 20 major city-owned conglomerates that play a key role in shaping the city’s economy.

Shenzhen has become a model of China’s new urban transport systems. 

The city’s bus fleets are now entirely electric, as are almost all of its taxis, resulting in a dramatic reduction in carbon dioxide emissions.

The city’s metro, which only opened in 2004, already has 166 stations, eight lines and nearly 180 miles of track, handling as many as 6.5 million commuter journeys per day. 

Further expansion, linking up with similar metros in neighbouring Dongguan and Hong Kong, is planned. 

The latest proposals are to create an integrated network of 33 metro lines with a total length of 830 miles by 2035 (more than three times the size of the London Underground network).

This is a small part of an even bigger plan. The Greater Bay Area (GBA) is a scheme to progressively integrate nine Guangdong cities as well as the Hong Kong and Macau Special Administrative Regions into a mega conurbation, covering 21,600 square miles, filled with 70 million people. 

Estimates are that today these entities collectively generate £1.2 trillion in GDP, making it the 11th largest economic unit on the planet. 

The potential synergy of integration should propel the GBA even further ahead, suggesting Shenzhen’s next 40 years are likely to be as remarkable as the last.