When Deng Xiaoping and the State Council sanctioned the creation of a special economic zone (SEZ) in the border village of Shenzhen on August 26, 1980, it was with the mandate to create a laboratory for testing practices to ease the mainland's transition from a socialist to market economy. Two decades onward, the mainland's youngest and arguably most ambitious city is quietly shedding its cloak of experimentation and embracing a new mantle - that of industrial trailblazer. In the span of only a few years, the SEZ has emerged as the mainland's leading high-technology manufacturing outpost and front runner in the country's dash towards the information age. In 1991, Shenzhen's high-technology manufacturing amounted to a paltry 2.3 billion yuan (about HK$2.14 billion), representing 8.1 per cent of the city's industrial output. By last year, that figure had increased to 65.51 billion yuan, or 35.44 per cent of the city's total manufacturing. Hi-tech exports had reached US$4.43 billion, representing about 17 per cent of the city's total. They are higher proportions than any other mainland city and helped to sustain Shenzhen's economic growth rate of 13.6 per cent during the first half of the year, neatly outpacing the average national economic growth rate of 7.9 per cent. Emboldened city leaders are now predicting that the SEZ's hi-tech manufacturing base is poised to make even larger gains in the years ahead. They point to the competitive ability of the city's leading 125 hi-tech firms, 14 of which boast output in excess of one billion yuan. Critically, more than 40 per cent of the city's high-technology manufacturing output consists of products and technologies developed locally. It is hardly surprising, then, that Beijing has given its full-fledged blessing for the city to host the mainland's first international showcase for domestic invention. The China Hi-Tech Fair, which will convene in Shenzhen on October 5, will include more than 12,000 inventions and products from 4,700 hand-picked companies from across the country. More important, the fair represents the mainland's first attempt to commercially market local research by bringing domestic scientific institutes and companies together with international capital under the same tent. According to Shenzhen Bureau of Science and Technology director Li Lianhe, more than 1,000 foreign investment companies will attend the six-day event. City leaders hope the fair will also spotlight Shenzhen's can-do attitude and liberal economic policies which allow many of the mainland's leading advanced equipment manufacturers to call Shenzhen home. They include domestic companies, such as telecommunications equipment manufacturer Huawei Technologies, Great Wall Computer and Zhongxing New Telecommunication, along with multinationals, such as Seagate, IBM and Seiko Epson. Forward-thinking government regulations include allowing college-degree holders employed in the city for more than two years to obtain a much-coveted residency permit. The city has issued 10,000 such permits annually over the last three years. The progressive policy-making extends from personnel to taxation issues. Hi-tech companies in Shenzhen benefit from a two-year corporate income tax holiday, followed by a three-year 50 per cent reduction on the SEZ's 15 per cent tax, as compared with the 33 per cent income tax rate generally paid by mainland firms. Moreover, Shenzhen is the only mainland municipality that does not tax sales of hi-tech equipment produced and sold in its limits.