David Fong made his way from a poor village in central China to the southern boomtown of Shenzhen as a youth in 1997. Over the next 25 years he worked for a succession of foreign manufacturers before building his own multi-million dollar business. School bag for toothbrush.
Now 47 years old, he plans to branch out internationally by manufacturing Internet-connected consumer devices. but after two years coronavirus The lockdown has pushed up the cost of shipping and dented consumer confidence, worrying whether their business will survive at all.
“I hope we make it through the year,” said Fong, talking bears in his top-floor office, surrounded by machine parts and his company’s catalogs, in a gleaming area of Shenzhen. One overlooks the towers, which were once full of giant factories. “It’s a tough moment for a business.”
The story of Rags for Money, now threatened by a widespread recession worsened by the coronavirus, mirrors that of his adopted city.
Created in 1979 in China’s first wave of economic reforms that allowed private enterprise to play a role in a state-controlled system, Shenzhen transformed itself from a collection of agricultural villages into a major world port that used some of China’s key technology. ‘s home. , finance, real estate and manufacturing companies.
For the past four decades, the city has recorded at least 20% annual economic growth. As recently as October, forecasting firm Oxford Economics predicted that Shenzhen would be the world’s fastest-growing city between 2020 and 2022.
But the crown has since been lost to San Jose in California’s Silicon Valley. Shenzhen reported an overall economic growth of just 2% in the first quarter of this year, the lowest figure for the city, different from the first quarter of 2020 when the first wave of coronavirus infections brought the country to a standstill.
Shenzhen remains China’s biggest goods exporter, but its overseas shipments fell by about 14% in March, disrupted by a COVID lockdown that caused bottlenecks at its port.
The city has long been viewed as one of the best and most dynamic places for business in China and a triumph of the country’s economic reforms. President Xi Jinping called it a ‘miracle’ city when he visited in 2019.
If Shenzhen is in trouble, it is a warning sign for the world’s second largest economy. Richard Holt, director of global cities research at Oxford Economics, said the city is a “canary in a mine shaft”, adding that his team is keeping a close eye on Shenzhen.
Fong, who mostly sells his goods to domestic customers, said sales are down about 40% from 20 million yuan ($3 million) in 2020, hurt by a recent two-month lockdown in Shanghai and a general decline in consumer confidence. Is. China’s strict travel rules mean it hasn’t been able to tour Europe to try to expand there.
lose attractiveness
Shenzhen, now a city of about 18 million people, is under constant attack from inside and outside the country.
Shenzhen-based Telecom Equipment Manufacturer Huawei Technologies and ZTE Corp were placed on a US business blacklist due to alleged security concerns and illegally sending US technology to Iran. Huawei denied wrongdoing, while ZTE came out of probation in March five years after pleading guilty.
Best-selling property developer China Evergrande, one of the city’s major companies, feared a collapse last year under its heavy debt that would have wreaked havoc with China’s financial system. Down the road, China’s largest insurer Ping An Insurance Group Co. took a big loss on property-related investments.
Small companies have also suffered. The Shenzhen Cross-Border E-commerce Association said Amazon.com Inc. had affected more than 50,000 e-commerce merchants last year, affecting more than 50,000 e-commerce merchants.
On top of that, Shenzhen was closed for a week in March to prevent the spread of the coronavirus. That lockdown and in other Chinese cities, domestic demand for goods made in Shenzhen plummeted. The city’s 2% growth in the first quarter was less than half of China’s overall 4.8% growth rate.
Business registration also fell by about a third in that time. City officials are sticking to their 6% growth target for this year, set in April, but the slowdown has raised alarm in China’s establishment.
“Shenzhen’s economy is faltering, leaning back, and sluggish, while some are skeptical whether Shenzhen has enough momentum,” Song Ding, a director of the China Development Institute, a state-linked think tank, said in a May essay. written.
The Shenzhen government did not respond to a request for comment for this story.
City officials admit privately that it is becoming increasingly difficult to keep the “miracle” of Shenzhen alive.
“A lot of people with stake in Shenzhen have estimated balances unlike before. You can’t just experiment freely and see what sticks now,” a city official told Reuters on condition of anonymity. Told.
On June 6, state news agency Xinhua reported that Shenzhen is planning to build 20 advanced manufacturing industrial parks for telecommunications and high-technology companies that will cover 300 square kilometers (115 sq mi). It did not provide any further details.
‘time to go’
The cancellation of most international flights to China, a port that has been engulfed by lockdowns and a once-frequent border with Hong Kong that is now completely closed, have made Shenzhen a difficult place to do business. . China’s plans for the Greater Bay Area – merging Shenzhen with Hong Kong, Macau and several mainland cities – appear to have stalled.
“It is losing allure, and they (the authorities) need to realize it,” said Claus Zenkel, president of the European Chamber of Commerce in South China. “We always say that they need to balance sanctions and economic growth to find a way to spend more money on the Greater Bay Area and these free trade zones.”
In September, the Chinese government said it would expand a special zone within Shenzhen’s borders, known as the Qianhai Economic Zone, from 15 square kilometers to 121 square kilometers. British banks Standard Chartered and HSBC have set up offices there, but border closures mean the region is struggling to attract foreign businesses, Zenkel and five diplomats from the region said.
Foreign entrepreneurs who flock to Shenzhen to turn their designs into products no longer make regular visits to its factories and the world’s largest electronics market in Huaqiangbei, forcing dozens of expatriate bars and restaurants to close or adapt to local tastes. Huh.
International trade circles have warned the Chinese government of an exodus of foreign talent. A diplomat at a major European consulate told Reuters he estimated the number of its citizens in south China had fallen from 3,000 before the pandemic to 750.
The recession has long made it harder for graduates to find jobs in China’s youngest metropolis, where the average resident is 34. The green, subtropical city that combined manufacturing, technology and finance into one entrepreneurial hub, sometimes referred to as China’s Silicon Valley. , was a magnet for aspiring and talented graduates from across the country.
“I’ve done internships at companies where classmates who were older than a year or two got jobs, but it’s very difficult for them to reach a position,” said 22-year-old Jade Yang. To find work in Shenzhen Tech Firm from Central Chongqing. She said she initially expected a salary of up to 10,000 yuan per month, but now thinks 6,000 yuan is more realistic.
In a thicket of apartments near High Tech Park, one of the city’s clusters of tech companies, property agents will typically be paired with graduates looking to find a home in May. An agent, who gave his name only Zhao, told Reuters last month that business is down 50% from a year ago.
“This place should be full of people, I shouldn’t have a moment of rest,” he said, on his e-scooter outside a building with 30 studio flats, where the rent is 2,000 yuan a month. He said many have been vacant since November.
Shenzhen businesses have always opened and closed at a high turnover, but ‘too late’ signs are increasingly common in once bustling malls, especially close to border crossings with Hong Kong, which have been closed since the beginning of 2020.
The situation is dismal for Shenzhen’s low-income migrant workers, who are struggling with rising living costs and out of home ownership by some of the highest real estate prices in the country.
Xu Xuan, a 44-year-old masseuse, said her friend recently returned to her small hometown near Chengdu and opened a hotpot restaurant, and she is looking to join him.
“Even food and drink are getting too expensive, work is hard, and living standards have improved greatly in the rest of China,” Xu said. “Maybe it’s time to leave.”