Shenzhen has decided to widen the administrative boundary of its Shekou Qianhai special economic zone, promising to speed up long-promised reforms in financial services and use the zone as a test bed for further opening the country to international capital flows. Yet what this really is, is a property play.
Here is the SCMP story on the initial announcement, which is full of commentary about how this announcement is a massive win for Hong Kong and should be seized upon by Hong Kong businesses, which currently only account for around 10% of all investment in the zone.
This follow-up story gushes further, adding assurances that lots of experimental stuff will be happening in Qianhai, and that one-third of the newly-vacated land will be set aside for Hong Kong investment.
However, a few days later, another SCMP report hit the nail on the head: the biggest beneficiaries of the new plan are the state-owned property developers with the largest land banks in the area: China Merchants, Grand Joy, and Shenzhen Metro.
It also notes that property prices now have to deal with cooling measures being implemented across the country, which has resulted in a “cap” being placed on the Qianhai market that is 7% beneath the level reached at the most recent land auctions.
That is just for residential. Office vacancy rates in Qianhai have been climbing steadily since 2014, and now stand at around 23%. This is nearly three times higher than in Hong Kong, which has been hammered in recent years by a combination of protests and Covid-19. And yet officials say the reason they are expanding Qianhai is because it lacks room to grow?