Major Chinese technology, logistics and economic hub Shenzhen is to reform its market access, as China allows the city to relax various rules in a bid to re-assert the country’s global trade power.
Guidelines published on Wednesday by the National Development and Reform Commission (NDRC) will allow Shenzhen more relaxed cross border data trading and trade settlements.
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“The Shenzhen moves come as part of a mid-term policy mix to buttress the position of Greater China in the global economy with Shenzhen the tech hub and with Hong Kong acting as the international capital market and international finance hub,” says Michael Orme, senior analyst and China specialist at GlobalData.
While the NDRC guidelines don’t place the Shenzhen reforms in a geopolitical context, the number of areas opened up to reform means the city is advancing from its roots as a pilot zone for “socialism with Chinese characteristics.”
Aside from data and finance, more relaxed rules will become available for the areas of medicine, education, elderly care, agriculture, aviation, electric vehicles, transport and even gaming and jewellery.
“These measures treat Shenzhen as a special case because it is a special case,” says Orme. “It is China’s Silicon Valley on steroids and the spearhead for much of China’s penetration of foreign markets across the world.
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By GlobalData“Beijing doesn’t dare to do anything that gums up Shenzhen’s global trading platforms or douses the legendary animal spirits and innovative drive of its entrepreneurs.”
The Shenzhen Component Index of the China Stock Market rose 0.70% to close at 13780.30 points in light of the news on Wednesday. According to GlobalData forecasts, China’s economy is expected to grow by 5.5% in 2022.
Shenzhen becomes more special for China
Shenzhen was designated as China’s first Special Economic Zone in 1980, with the aim of following Beijing’s socialist market economy.
Over the years Shenzhen Special Economic Zone has developed into a globally significant metropolis for China, and the country’s answer to Silicon Valley. The city is home to the headquarters of some big Chinese hitters, including BYD, Huawei and Tencent.
From 1979 to 2019, Shenzhen’s GDP increased annually by an average of 21.6%, reaching 2.69trn yen ($415.3bn) by the end of that period, and then rising further to 2.77trn yen in 2020 in spite of the Covid-19 pandemic.
The Shenzhen Component Index meanwhile is outperforming pre-pandemic levels as of January 2022, according to Marketwatch data.
The city reforms may be China's attempt to bolster its prize asset during another year of supply chain woes. According to global trade data in Q4 2021 from Tradeshift, pandemic lockdowns saw China suffer a 10 point fall in transaction volumes against the forecast range in the last financial quarter.
Tradeshift's data was assessed using cumulative transaction volume growth from orders and invoices made in 2021.
