
Shenzhen, Shanghai show China’s skill in playing to pioneering cities’ strengths
- Major cities such as Shanghai and Shenzhen are vital to China’s economic future, but none are more important than the other as each has a unique role to play
- By recognising and investing in the strengths of pioneering cities and regions, China has built a powerful mechanism for driving its economic transformation
When China first created the Shenzhen SEZ, some questioned its judgment. For example, as a postgraduate student at the University of Cambridge in the 1980s, James Kai-sing Kung, now of the University of Hong Kong, asked why the government chose an unknown village like Shenzhen, rather than an economic centre like Shanghai or Tianjin, as an incubator for Deng Xiaoping’s “reform and opening up” strategy.
The decision must, Kung concluded, be politically motivated; China’s government was preparing for the return of neighbouring Hong Kong, which was already a global financial centre. While sovereignty over Hong Kong formally transferred back to China in 1997, Hong Kong’s impact on Shenzhen’s development was rooted less in sovereignty than in proximity.
This is not to say other areas of Hong Kong are not flourishing. In fact, that is the point. Shenzhen’s development along the border with Hong Kong reflects the “urban pile-up effect” – the accumulation of densely urbanised clusters along the frontier with a more developed area, generating cross-border spillover opportunities for the less-developed region.
The same phenomenon is seen along the border between Mexico and Texas. An aerial view reveals sprawling suburbs on the wealthier American side – making it appear almost barren – and dynamic, populous cities on the Mexican side, where local workers flock to jobs at American-owned manufacturing plants and other opportunities.
Hong Kong has had similarly powerful spillover effects on Shenzhen. The result is a thriving metropolis where annual economic output will soon reach 3 trillion yuan (US$457 billion) – one-third of Guangdong province’s total.

06:40
The Yangtze River: Why China’s ‘beating heart’ is too big to fail
In the last 30 years, growth in the Pudong new area has reinforced Shanghai’s regional primacy while also driving development in the Yangtze River Delta. Today, the Yangtze River economic belt accounts for more than 40 per cent of China’s total output. This region, together with the Greater Bay Area, constitutes almost 60 per cent of China’s total output.
Shanghai and Shenzhen are both vital to China’s economic future, but neither is more important than the other. Each has a unique role to play.
Shanghai is still first in terms of overall technological prowess. But, rather than replacing Shanghai in the areas where it leads, Shenzhen is becoming a laboratory for experimentation in both technology and policies that incentivise innovation. Shanghai cannot play that role because it must continue to serve as a predictable environment for global trade and finance.
Guiding an economy as large and diverse as China’s will always be a challenge. By recognising and investing in the strengths of pioneering cities and regions, China has developed a powerful mechanism for advancing its economic transformation. Judging by the success of Shenzhen and Shanghai, it seems clear China will continue reaping the rewards of this approach for decades to come.
Zhang Jun is dean of the School of Economics at Fudan University and director of the China Center for Economic Studies, a Shanghai-based think tank. Copyright: Project Syndicate
