Coronavirus: China’s hi-tech hub Shenzhen suffered record economic contraction in first quarter of 2020

Shenzhen’s technology-based economy was unable to avoid a hit from the coronavirus pandemic, shrinking 6.6 per cent in the first quarter of 2020

China’s hi-tech hub across the border from Hong Kong is the home to the likes of Huawei, ZTE and Tencent

3-MIN READ3-MIN

The technology sector in Shenzhen, which is the home to the likes of Huawei, ZTE and Tencent, proved particularity vulnerable to the coronavirus, shrinking by 8.8 per cent. Photo: Xinhua

Published: 8:30pm, 29 Apr 2020Updated: 10:28pm, 29 Apr 2020

Shenzhen’s economy shrank by 6.6 per cent in the first quarter of 2020, marking the worst performance in the city’s 40-year history, as China’s Silicon Valley was unable to avoid the impact of the coronavirus.

The local government data showed Shenzhen did little better than the rest of the economy, with the national average dropping 6.8 per cent in the first quarter.

Shenzhen, which officially has a larger economy than Hong Kong, is facing a testing year as production and services contracted while the city’s property prices kept rising. The province of Guangdong, in which Shenzhen is located, reported a 6.7 per cent economic contraction in the same period.

In comparison, Hong Kong’s economy could shrink by between 4 per cent and 7 per cent in the financial year ahead because of the serious and sustained impact of the coronavirus pandemic, the city’s finance secretary Paul Chan Mo-po said on Tuesday.

Factories already in Shenzhen may choose to stay, but it will be increasingly difficult for Shenzhen to attract new investors

Larry Hu

Larry Hu, chief China economist of Macquarie Capital, said Shenzhen's weak economic performance was expected as the coronavirus has dealt a heavy blow to the young Chinese city with a huge migrant population.

“The city was completely empty during the Chinese Lunar New Year, and the coronavirus has stopped many from returning on time,” Hu said.

At the same time, Hu said that as Shenzhen is at the forefront of the disintegration of the international value chain, the city is more exposed to decoupling risks between China and United States.

“Factories already in Shenzhen may choose to stay, but it will be increasingly difficult for Shenzhen to attract new investors,” Hu added.