City of dreams

The shimmering skyscrapers and neon haze of boomtown Shenzhen are testament to the border town's spectacular rise since gaining special economic zone status almost three decades ago.

Because of the rapid transformation of the once quiet fishing village and farmland community into one of the mainland's trade and industry powerhouses, Hong Kong came to view its emerging neighbour as a threat to its long-held dominance in the region's trade and business.

But with the more recent emergence of greater Guangdong as a booming industrial heartland, there is growing support for a merger of Hong Kong and Shenzhen into a mega-metropolis.

The idea was given its latest hearing last month when the highly respected Bauhinia Foundation suggested that Hong Kong and Shenzhen join hands to create, by 2020, a mega-metropolis and economic powerhouse that eclipse such world cities as London, Paris, Chicago or Los Angeles.

The foundation's 10-point blueprint included introducing a multiple-entry electronic smart card for Shenzhen permanent residents to enter Hong Kong, a rail line between the two cities' airports and jointly developing border land in the Lok Ma Chau Loop.

All of the suggestions are aimed at enhancing the flow of people, goods, services, information and capital between the two cities. Last month's proposal argued that if the combined metropolis maintained 8 per cent growth a year until 2020, its gross domestic product would reach US$1.11 trillion, surpassing Tokyo and New York.

The proposal to merge the two neighbours is nothing new: Shenzhen made the first overture to Hong Kong about 10 years ago but received a cool response. A decade later, Hong Kong's attitude has changed dramatically, and the government is promoting the concept.

As recently as 2000, the disparity in the size of the two cities' economies enabled Hong Kong to look disparagingly at a merger proposal. Shenzhen's GDP, at 166.5 billion yuan, was then about 13 per cent of Hong Kong's HK$1.293 trillion. Now, Shenzhen's GDP is about a third the size of Hong Kong's and merger proponents say the synergy created by the combined metropolis would be greater than the sum of the two parts.

The motivation for both cities lies in the fear of being marginalised as cities further north continue to grow amid the mainland's unprecedented economic boom.

Perhaps the starkest articulation of Hong Kong's fears came last year when the unveiling of Guangdong's 11th five-year plan, outlining its ambitious development strategy, prompted a warning from then-chief secretary Rafael Hui Si-yan that Hong Kong could be left on the sidelines.

Shenzhen's privileged position dates back to 1980, when paramount leader Deng Xiaoping declared it China's first SEZ, giving it political and economic advantages.

Until the late 1990s the city's top officials were directly appointed by the central government, giving it the status of major mainland cities such as Guangzhou and Nanjing . The city has since returned to provincial administration. Beijing's early support transformed the sleepy fishing and farming backwater into a hi-tech hub that would become China's version of Silicon Valley, as well as developing manufacturing and financial services.

Last year, Shenzhen's GDP soared to 568.4 billion yuan - the fourth-largest of any mainland city. But it has now used most of the land in its territory and the present strategy of massive industrialisation is reaching its limit.

Shenzhen has asked for land from neighbouring Huizhou and has sought more special policy privileges to reinforce its special economic zone advantages - but to no avail.

Thomas Chan Man-hung, head of the China Business Centre at Polytechnic University, said Shenzhen now viewed an alliance with Hong Kong as the best way out of its development dilemma.

'The purpose is to use Hong Kong to get special favours from the central government at a time when the central government is very worried about the economic future of Hong Kong,' said Mr Chan, who is also a special researcher for the Guangdong provincial government.

A major obstacle to any development plan is that they would need the blessing of Guangdong, which is unlikely to be sympathetic as it lacks the advantages provided by Shenzhen's special economic status, even though it assumed administration of the city in the

late 1990s.

'Conflict is rooted in such circumstances, and difficulties emerged for Guangdong and Shenzhen to achieve closer

co-operation,' said Zhu Wenhui , a commentator on cross-border issues. Dr Zhu is also a consultant on the Hong Kong-Shenzhen Metropolis study sponsored by the Bauhinia Foundation Research Centre - a think-tank with close ties to Chief Executive Donald Tsang Yam-kuen, and which many observers say reflects his thinking and plans.

The government has adopted a proactive approach towards integration since Mr Tsang became chief executive in 2005, with one of the planks of his re-election manifesto this year being a strategic partnership with Shenzhen, followed by a joint effort to build a metropolis.

It is clear that Hong Kong would gain from Shenzhen's connections with the rest of the mainland. Hong Kong would have little chance to maintain its function as the middleman between the mainland and the outside world by standing alone.

But there are fears that such an alliance would undermine efforts at co-operation between Hong Kong and greater Guangdong.

Mr Chan said it would be 'politically incorrect' and would enrage Guangzhou and Guangdong if Hong Kong stepped away from the integration of the Pearl River Delta region as a whole.

'The only way for Hong Kong to become an international metropolis is creative destruction - to give up its own identity to help the PRD to become the world's top metropolitan region,' he said.

Mr Chan said that by embedding itself in the delta, Hong Kong would enjoy all the benefits of scale, scope, agglomeration of economies and networking with the rest of China, in particular the south, through the emerging national high-speed train network, which would be completed by 2010.

According to another expert, Hong Kong might be able to do both. Li Huiwu , deputy director of the Guangdong Province Government's Development Research Centre, does not believe the relationship between Hong Kong and Guangdong would be harmed by further integration with Shenzhen, as such a move would be based mainly on infrastructure and the services industry.

Strategic co-operation between the city and province, on the other hand, would focus on the pan-Pearl River Delta - the economic grouping of Guangdong, eight neighbouring provinces, Hong Kong and Macau - in which the level and scale of co-operation was more sophisticated.

'We need Hong Kong, our friend, to expand the economic efficiency in the pan-PRD together,' Mr Li said.

Some analysts say what Guangdong really wants is its own capital - not Shenzhen, Hong Kong or a merged metropolis - to steer

the development of the delta and meet challenges from the Yangtze River Delta and Beijing-Tianjin-Hebei region.

'All parties should not underestimate the difficulties for Hong Kong in building a metropolis with Shenzhen and taking a strategic role in the PRD,' Dr Zhu said.

'It just would not work without the blessing of Guangdong and the central government.'

Plans for a Hong Kong-Zhuhai-Macau Bridge, still under negotiation more than a decade after the idea was floated, stand as an example of the difficulties faced in any merger plan that did not have widespread support.

Another indication of potential obstacles came during the annual congress of the Chinese People's Political Consultative Conference in 2005, when Shenzhen delegates formally submitted a proposal on integration with Hong Kong, but other Guangdong delegates opposed it.

Dr Zhu said he remained 'relatively optimistic' about the idea, despite the negative response to repeated initiatives from Shenzhen, saying the proposal had a better chance of being accepted in Beijing if it came from Hong Kong rather than from its smaller neighbour.

Rhetorically at least, that is already happening. Chief Secretary Henry Tang Ying-yen drew an expansive picture last month when he told an audience of 300 at the Hong Kong-Shenzhen Co-operation Forum: 'This metropolis, covering 3,200sqkm and with a population of about 20 million, would be one of the top metropolises in respect of economic size, trade volume and investments.'