Tag Archives: Qianhai

GBA’s three big zones keep reform flame flickering

The provincial government has released a Five-Year Plan for the development of its three main special economic zones of Nansha (Guangzhou), Qianhai (Shenzhen) and Hengqin (Macau). It reads like a plan for a bygone age, but nevertheless makes clear that the GBA’s masterminds still see prospects for further “reform and opening” ahead.

The document is full of jargon, talking about the three zones being carefully aligned in their planning. In fact, they have missions that appear to be largely indistinguishable. The plan is for Nansha to be some kind of central point for the GBA, while Qianhai seems to be focused on working with Hong Kong, and Hengqin with Macau. Yet all three places already have major projects well under way that obviously overlap with each other in their objectives. For example, all three have so-called international arbitration centers; special incentives for Hong Kong people and companies; and a desire to be both “financial centers” and “talent magnets”. Nansha and Qianhai are major shipping hubs. All three love their tech plans.

Among the three, Hengqin seems to have the most realistic chance of success in the foreseeable future. Macau will pursue its “diversification” mission there with zeal for the next few years. Having lots of cheap land, plus a 15% personal and corporate income tax, should make it fairly easy to attract some big SOEs to set up subsidiaries in Hengqin. Adding another 600,000 residents should also be a cinch. Its office towers, now standing empty, should fill up quickly once Macau starts pulling in Chinese companies for smart manufacturing, medicine, and financial services (with a little help from Hong Kong). Its MICE industry, meanwhile, is sure to boom, as the casinos will be keen to sponsor events that enable attendees to receive special visas for Macau. And in the longer term, the casinos will likely be invited in to build more large-scale non-gaming resorts.

(GBI has a special 60-page report on Hengqin, which is distributed to consulting clients. Please get in touch if you are interested.)

Qianhai looks more like quicksand for Hong Kong investors. It is hard to see what the zone offers that cannot be done more efficiently in Hong Kong. The land is not that cheap, the arbitration center is still a work in progress that no serious international firm would use when they can rely on Hong Kong’s courts, and most financial firms are little more than admin offices. And there is no bullet train running there yet. Cross-border currency trading is already a thriving business in Hong Kong; why would banks and insurers need to set up in Qianhai as well?

Nansha, likewise, fancies itself as a future international financial center, with its Hengli “financial island”. But what is that besides a naked attempt to hollow out highly priced commercial real estate in Central? It might be in the geographic center of the GBA, but that also means that it is in the middle of nowhere. It is a long trip by MTR from downtown Guangzhou, and getting there by bullet train from Hong Kong is not yet easy. Nansha is a better bet as a hub for scientists, but even in this respect, it is hard to see it becoming international in a way that might draw resources from Hong Kong. Its real strength remains as a cutting-edge manufacturing hub, notably for electric vehicles, and as a port, for cargo running up to Guangzhou. In both areas it will compete hard with the expanded Qianhai, which now bleeds into Shenzhen’s hi-tech district next door.

In reality, China probably is long past the need for special economic zones. It should be conducting any experiments it deems necessary directly in the two Special Administrative Regions. Still, at least the provincial government is keeping the faith with the Reform and Opening agenda. It will be interesting to see how long its ambitions last under the country’s new twin drives of Dual Circulation Theory and Common Prosperity.

Qianhai to grow 8X, boosting property developers

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?

Qianhai – a new kind of experiment

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.

Continue reading Qianhai – a new kind of experiment

Hong Kong as regional HQ: time to move?

For those who care to look, the Hong Kong protests are exposing flaws in many assumptions about Hong Kong’s competitiveness. This is not only a short-term concern, either. As revenues come under pressure, partly due to the protests, partly due to a slowing Chinese economy, operating costs are inevitably being looked at more carefully by companies based in “Asia’s World City”. It would be surprising if only a few were considering moving or scaling back their operations here.

The question is: Can other cities in the Greater Bay Area offer compelling alternatives?

The short answer would be: Yes. But do some homework first.

Continue reading Hong Kong as regional HQ: time to move?

Cambridge goes to Shenzhen

Shenzhen, is it often pointed out, doesn’t have any world-class universities. That may be about to change, as Cambridge University is exploring the establishment of a ”cooperative project” in Qianhai, Shenzhen’s special zone. 

The world-class university, which is well-known not only for its headquarters north of London, but for its curriculum that underpins millions of English-language high school exams worldwide, has sent its executive vice president to Shenzhen on what appears to be more than a fact-finding trip. 

Continue reading Cambridge goes to Shenzhen

Qianhai’s office rent seen catching up fast

Qianhai has a lot of yet-to-be leased office space on the market, with vacancy rates at historic highs for a district in Shenzhen. Never mind, says international real estate consultancy Colliers, it will catch up fast and likely overtake the neighboring Houhai district.  

Thanks to policy support for the special economic zone, which is attracting a surge of investment, Colliers believes Qianhai will benefit from near-term and longer-term trends in the coming years. (Read our primer on Qianhai to understand more.) Subsidies are currently generous, making rents here less than 70% of what they are in other districts, while infrastructure is being put in place that will soon make the district easier to access from the rest of the city.   Continue reading Qianhai’s office rent seen catching up fast

HK investment ramps up in Qianhai

In the wake of the Qianhai Cooperative Forum 2019, which was held at the weekend, the city has released statistics showing how fast the special economic zone is ramping up investments and output.

Official data shows utilized foreign direct investment in Qianhai jumped 12.1% to $2.533 billion in the first six months. Hong Kong companies were the most aggressive, and now account for nearly 90% of the zone’s total utilized FDI of US22 billion. Their utilized FDI was 60% of Shenzhen’s and 20% of the entire province’s during the first half.

Continue reading HK investment ramps up in Qianhai

Qianhai takes another bold step in forex reform

The hits keep coming from Qianhai, the special economic zone in Shenzhen that appears to be the spearhead of the next stage of major reform for the country.

The Shenzhen Foreign Exchange Bureau has issued detailed implementation guidelines for pilot reforms of foreign exchange in the zone, located in the Shekou district. These put forward a batch of initial trial policies that include allowing the use of forex earnings in domestic equity investment, a type of cross-border financing for local enterprises.

Continue reading Qianhai takes another bold step in forex reform

Qianhai is China’s No. 1 Free Trade Zone

According to a new index ranking China’s Free Trade Zones, Shenzhen’s Qianhai is the country’s No. 1.

The Institutional innovation Index for China Pilot Free Trade Zones (2018-2019), released by Guangzhou’s Sun Yat-sen University, gave Qianhai a score of 86.26 points. It was followed by the Shanghai Pilot Free Trade Zone at No. 2, and Guangzhou’s Nansha at No. 3.

Qianhai scored No. 1 in “transformation of government functions,” “investment facilitation,” “trade facilitation” and “legal environment.” 

(If you need to understand the zones better, read our primer.)

Qianhai designated Integrated Bonded Area

Qianhai has become Shenzhen’s latest Integrated Bonded Area. Centered on Mawan Bay, it will be the fourth bonded area in Shenzhen after Futian, Shatoujiao, and Yantian Port, allowing duty-free goods to be reassembled and repackaged within the area for import and export. 

The Qianhai bonded area will focus on supply chain management and the development of supporting industries such as bonded financing and leasing, testing and recognition, R&D and exhibition. The government has set aside nearly three square kilometers for the bonded area. No fewer than five railway lines will run through here, and it will be an essential part of the Qianhai Shekou special economic zone. 

Read more in Chinese.