The new special economic zone in Shenzhen, one of three designated by Beijing for the next stage of China’s Reform & Opening, has been slow getting going, but changes are being accelerated.
As far as special economic zones go, Qianhai is not meant to impress with its size. At just 18.04 sq km, the new zone in the western side of Shenzhen, facing the South China Sea, is relatively small, with not much room for future expansion – unless further reclamation work is done. But that is just fine for local and national officials, for now. What Qianhai is set to accomplish in the coming years, under the Greater Bay Area masterplan, is all about quality rather than quantity.
The area’s official name is the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone. That gives a hint of what it is all about: bringing Hong Kong and Shenzhen together, step by step, on the road to 2047. Its location is symbolic, too, situated close to the Shenzhen Bay Bridge, which connects Hong Kong to the area of Shenzhen where Reform and Opening actually began – the original port, Shekou. Today the area is probably the most internationalized of any in China, save, perhaps, Shanghai, with an entertainment district that looks much like Lan Kwai Fong (except LKF doesn’t have a ship in the middle of it).
Situated 10 minutes north of Shekou around the Qianhai Bay (artificially constructed), the special zone has no barriers or fences. It is just a piece of reclaimed land that is populated by construction crews working around the clock, next to office workers who are also more often than not working around the clock. To say it is a work in progress would be to say it is a typical district of Shenzhen, the city that has come to define China’s frenetic pace of economic development like no other.
It is only a decade since Qianhai was founded, as the brainchild of master planners in Beijing. It was formally promulgated in 2009 under the framework of the province’s Pilot Free Trade Zone initiative, which includes Nansha in Guangzhou and Hengqin in Zhuhai. Besides being a connector to Hong Kong and a place of further economic and legal experimentation, it was seen from the beginning as being a gateway for the Belt and Road Initiative (even though that is not what it was called back then).
The area has four goals, according to its website:
- An innovation area for modern service industry sectors
- A cluster area for the development of modern services
- A pilot area for close cooperation between the mainland and Hong Kong
- A leading area for industry upgrades in the Pearl River Delta [GBA]
What this doesn’t say, because it doesn’t need to, is that a “pilot area” is a place where bold, innovative experiments can be undertaken. A place where new types of courts can be set up, for instance; a place where special incentives can be offered to investors, both corporates and and individuals; a place where the challenging influences of Hong Kong can be welcomed in, contained if necessary, and adapted to China’s needs.
Despite the fact that it is still largely a construction zone, Qianhai is already getting those challenging influences in the door. Latest available data shows that a total of 8,031 Hong Kong companies with a registered capital of RMB893.726 billion have settled in the zone. They include financial heavyweights: HSBC, Bank of East Asia, and Credit Suisse. Most of the early movers are in financial services and logistics. Altogether they contribute around 20% of the GDP generated in Qianhai and pay around 23% of its tax revenues. Their fixed assets investment is 30% of the total, with actual use of capital accounting for 86.63%.
This is nothing compared to what is coming. By the end of next year, Qianhai aims to have a total population of 100,000 people, including 70,000 working and 30,000 living there.
What took so long?
By Shenzhen’s standards, Qianhai has been a slow starter. Between 2010, when reclamation work began, and the end of last, only 182 buildings in the area had been topped-out, half of which (99) were ready to be fitted out. With just 1.95 million sqm of usage space, it was a far cry from the 23.8 million sqm envisaged in the masterplan. Today, Qianhai is a long way from a “new Manhattan”.
Why has it taken so long to get going? Two reasons, it seems: one governed by market forces, the other by administrative forces.
The market forces at work in Qianhai provide a fascinating glimpse of the area’s potential. Unlike many other parts of Guangdong where state-owned companies get projects going by reclaiming land for market development, most of Qianhai’s land was reclaimed by companies that have a longer track record of “just getting on” with development, i.e., the kind of companies that one would expect to have emerged from an experimental city such as Shenzhen. The three biggest landowners in Qianhai are China International Marine Containers Group, China Merchants Group and Shenzhen International Holdings. These are three of the most successful commercial groups in China, born in the furnace of the country’s early days of Reform and Opening. It has taken the city government a bit longer to negotiate development plans with these three than might have, perhaps, been expected elsewhere.
In any case, the short story is that until 2016, the government only had around a quarter of the land in Qianhai that it could start developing. The Guiwan and Qianwan districts went first, with 3 million sqm of the 14 million sqm total. By the end of 2017, the city government had agreed on terms of joint ventures with the big three companies that allowed the rest of the district to get cracking. Now, a drive past the area reveals a hive of activity.
Pictured: The land in Qianhai held by the three largest landlords
The second factor holding back Qianhai until recently was really just an administrative snafu that needed time to fix, as there were national-imposed restrictions on plot ratios in the area, i.e., buildings could not go up high enough to get the developable floor space the companies felt they needed to make a decent ROI. This was a central government-mandated project, and it needed the stamps to be in place.
Once the 153-meter cap was raised to 280-350 meters in 2016, however, it was all systems go. Qianhai now has a total buildable area of 23.8 million sqm. With around one third of this under construction, it will take another 13-15 years to complete the district’s development. Which happens to be in line with the government’s target date for the Greater Bay Area to be truly, er, great: 2035.
What comes next?
Qianhai is currently not the easiest place to get to from Hong Kong, unless you can drive across the Shenzhen Bay Bridge with a Cross-Boundary license, or you can afford to take a seven-seater limousine. It is easily accessible by road and, if you are living in Shenzhen, three subways connect into the area. The ferry service running into Shekou is convenient, but not as timely as busy Hong Kong investors and executives would like.
That is all going to change fairly soon.
Pictured is the planned road network for Qianhai
In the not-too-distant future (which in Shenzhen means a few years, tops), Qianhai will have no fewer than 15 railway lines running through it. In addition to Shenzhen Metro lines, these will include Intercity Railway Lines (going up the coast to Dongguan and eastwards to Huizhou), as well as High-Speed Railway Lines – possibly direct from Kowloon West in Hong Kong. Currently, the High-Speed Railway passes through Futian, which is a 40-minute taxi ride away from Qianhai.
The Qianhai transportation hub is located in Guiwan in the middle section of Qianhai’s crescent bay. It will soon offer airport check-in services and have an immigration control station. It plans to complete the underground section by next year. Upon full completion, the hub is expected to have a daily passenger flow of 750,000. (For reference, that is about twice the current number of crossings between Macau and Zhuhai at peak periods.)
Where are the opportunities?
The early construction of Qianhai concentrated in Quiwan, Mawan and Qianwan. Among the 40 development projects, Quiwan has 24, Mawan 8 and Qianwan 9.
The projects in Quiwan started the earliest. About two thirds of the land in Quiwan already has projects currently under construction. The 1.1 square kilometer Quiwan financial district was especially the priority.
Quiwan has a total of 8.84 million square meter building area. About half of that will be completed and in operation in the next three years.
Note: We will be conducting constant research work on Qianhai, and are available for consulting engagements. Get in touch if you would like to know more about our rates and other projects we are working on in the Greater Bay Area.