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Part of Shenzhen’s success is down to contributions by leading players in different sectors. Photo: Martin Chan

Business China Business

Explainer | Surpassing Hong Kong and Singapore was easy. Shenzhen’s next economic miracle rests on Tencent, Huawei and its top companies

Shenzhen’s success is underlined by the fact that its gross domestic product surpassed that of Hong Kong in 2018
Xi promised more autonomy for Shenzhen to create another economic miracle; climate change projects will be big over the next five years, analyst says

Shenzhen

Nadia LamandPeggy Sito

Published: 9:15am, 18 Apr 2021

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Shenzhen, the richest city in southern Guangdong province known as China’s Silicon Valley, surpassed Hong Kong and Singapore over the past two years in terms of gross domestic product.

By 2025, the city is projected to become a 4 trillion yuan (US$611 billion) economy under its five-year development plan, outgrowing Portugal, Israel and Ireland, among others. The city expanded by 3.1 per cent to 2.77 trillion yuan.

The city’s transformation from a fishing village to the forefront of global technology innovation was hailed by President Xi Jinping in October on its 4oth year as the first of China’s four special economic zones, ahead of Zhuhai, Shantou and Xiamen. Shenzhen will be given more autonomy to create another miracle, he said.

Under its 2021-2025 plan, Shenzhen aims to become the country’s “core engine” of reform and to power growth and innovation in the Greater Bay Area, a region comprising nine Guangdong cities, Macau and Hong Kong. Much of that drive will come from some of the world’s best known companies including Tencent Holdings and Huawei Technologies.

“The outlook for Shenzhen is still promising and it will continue to be a leading city in China,” said Liu Guohong, the director of Shenzhen-based China Development Institute’s Finance & Modern Industry Department. Part of its success is down to contributions by leading players in different sectors, Liu said.

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“If you look at leading companies in major industries across the country, many of them are based in Shenzhen,” said Liu. “You can name China Vanke and Poly Group as leaders in the property sector. Tencent is a leader in information technology and Ping An leads the insurance industry. In manufacturing, the leaders are Huawei and BYD.”

Shenzhen had the third-highest concentration of members in China’s 500 most valuable private companies in 2020, according to Hurun Report. Three Shenzhen-based companies were in the top 10, while 59 firms made it top 100, based on valuations published in October last year.

While more than 60 per cent of Shenzhen’s companies are engaged in sectors such as IT, property and finance, projects concerning climate change and sustainable developments will also report big growth over the next five years, Liu added.

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According to a document published by the Shenzhen government recently, the city wants to grow its GDP to 4 trillion yuan by 2025, turning itself into a model city of digital China along the way. Here are the five companies that will help fuel Shenzhen’s growth and pivotal role in the Greater Bay Area.

Tencent Holdings

The internet giant, with a market cap of about HK$6 trillion yuan as of Friday, overtook Alibaba Group Holding, which owns the South China Morning Post, as China’s most valuable private company in 2020, according to Hurun.

Tencent, which operates the WeChat messaging app and owns stakes in a number of gaming firms, including the developer of League of Legends, was ranked 197th in the Fortune Global 500 List as well. Tencent Music, its music streaming subsidiary, was listed on the New York Stock Exchange in December 2018.

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Despite the economic dislocation created by the Covid-19 pandemic and increased scrutiny from Beijing, the company reported a 175 per cent rise in profit for the fourth quarter. Its profit for the whole of 2020 stood at 159.8 billion yuan, a year-on-year increase of 71 per cent.

Pony Ma Huateng, 49, Tencent’s owner, had a net worth of US$60.4 billion as of Wednesday, according to Forbes data. He surpassed Alibaba founder Jack Ma as China’s richest person in June last year, thanks to strong demand for mobile games during coronavirus lockdowns in the country.

Ping An Insurance

Ping An, whose name literally means “safe and well” in Chinese, provides insurance, banking and financial services. The company, which is China’s largest insurer, has a market cap of HK$1.65 trillion and is ranked 21st in the Fortune Global 500 List.

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The insurer also reported a better-than-forecast full-year result for 2020, with its net profit falling only by 4.2 per cent to 143.1 billion yuan.

The pandemic kept its agents from meeting clients because due to the Social distancing measures, the insurer saw 598 million customers, an increase of 16 per cent, use its online platforms to buy insurance, wealth management and health care products last year.

Huawei Technologies

Founded by Ren Zhengfei in 1987, Huawei has emerged as the leading manufacturer of telecommunications equipment and smartphones globally.

However, after its 5G networks became a bone of contention between the United States and China, the company has faced a number of hurdles, such as restrictions on accessing US technology and calls for banning its 5G networks across different countries.

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It reported 3.8 per cent growth in revenue to 891.4 billion yuan last year, the slowest pace at which its revenue has grown in a decade. The company recorded negative growth in overseas markets, with sales down 12.2 per cent across Europe, Africa and the Middle East. Sales in Asia-Pacific fell as well, declining 8.7 per cent. Huawei, however, relies mostly on its home market, which accounts for 65.6 per cent of its total sales.

Shenzhen Mindray

The Shenzhen-based company is China’s biggest provider of medical devices and solutions. Thanks to the coronavirus pandemic, during which it reported growing demand for patient monitoring systems and ventilators, its market cap had risen to 493 billion yuan as of Friday.

Patient monitoring and life support devices made up 50.5 per cent of the sales at the company in the first half of last year, up from 38.3 per cent in 2019. It reported an increase in sales overseas too, and China’s dominance in its sales declined from 58 per cent to about 50 per cent last year.

The company expects demand for its systems to continue to increase ever after the pandemic has subsided.

BYD

The carmaker has been backed by US billionaire Warren Buffett since 2008. It started out as a battery maker in 1995 and had cornered 12.9 per cent of China’s new electric vehicles market as of last year. As of Friday, it had a market cap of HK$548 billion.

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Amid the pandemic last year, it reported a 162 per cent jump in net profit to 4.23 billion yuan. The carmaker has also been producing face masks and revealed in May last year that it was making 50 million masks a day.

The company was hit hard by the pandemic, and the sales of its battery-powered cars fell 11 per cent to 130,970 units last year. It has launched two models this month priced at between 129,800 yuan and 166,800 yuan to cater for lower and middle-income owners.