Shenzhen’s growth revised to 6.7%

Shenzhen’s GDP in 2019 officially came in at 2.69 trillion yuan, a rise of 6.7% over 2018, the city’s statistics bureau announced yesterday, according to local media. This was lower than the preliminary estimate released by the government two weeks ago during its annual Work Report, when it said 7% was expected.

As expected, trade and manufacturing were the heaviest drags on growth. Manufacturing rose just 4.9%, compared to +6.9% in 2018, while trade was negative for the year, at -0.6%, mainly because of a sharp -4.7% fall in imports (+19% in 2018). 

Retail sales were not stellar, either, growing by 6.7%, down from 7.61% in 2018. 

Services, however, were a bright spot, with growth of 8.1% at a total of 1.6 trillion yuan. This was only slightly below 2018’s 8.25%. The total size still lags neighboring Hong Kong, where the services industry in 2018 was worth 2.2 trillion, but that is likely to change in the next few years. No further breakdown was given, probably because it would indicate the prevailing dominance of real-estate services, which is a sensitive topic in China as cities seek to prevent property prices from taking off again. But the resilience is also likely due to the growth of the internet industry, particularly fintech services. The bureau said only that the “digital economy industry” grew 18% to 159.659 billion yuan, accounting for around 10% of total services output. No separate line item was given for growth in overall financial services.

The breakdown of manufacturing shows a trend toward higher value-added goods being produced. Pharmaceuticals grew the fastest, at +10.2%, followed by “special equipment” at +8.9% and general equipment at +7.1%. The traditional core of the sector, advanced manufacturing (+5.5%), high-tech manufacturing (+5.9%) and devices (+5.5%) are obviously in structural decline, but were also weighed down by the US-China trade war.

Naturally, the government stepped in. In 2019, fixed-asset investment increased by 18.8%, led by growth in infrastructure spending (+33%). However, private industrial investment was also highlighted by the statistics bureau: it grew by 9.2%, but surged in Q4, after having grown by only 3% in the first three quarters.

Although overall retail sales might have been disappointing, up 6.7% at 658.285 billion yuan, online sales jumped by 41%. 

Exports actually improved over 2018, with growth coming in at 2.7%, but imports fell sharply (-4.7%).

The city’s financial situation looks steady. As of the end of December, the balance of deposits in local and foreign currencies of financial institutions (including foreign capital) in Shenzhen was 83 trillion yuan, an increase of 15.7%; the balance of loans in local and foreign currencies of financial institutions (including foreign capital) was 59 trillion yuan, an increase of 13.2%.

Mayor Chen Rugui has said the city’s GDP growth target for this year is about 6.5%. This reflects that the economy is facing some challenges: mostly, these are related to a difficult external environment and the task of industrial upgrading, yet he also identified that real-estate prices and rents are placing a tough burden on companies. The government will focus on bringing in more talent and boosting livelihoods, he said.

Looking further ahead, the mayor said he sees the economy on a steady track, and GDP should break through the 3 trillion mark within the next two years. This would equate to an effective 50% growth since 2016.

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