In city where China welcomed the world, Xi prepares for a colder one

Chris Buckley, The New York Times

Posted at Oct 15 2020 07:39 AM

The Chinese city of Shenzhen, right, is separated by a river from the neighboring financial hub of Hong Kong on Sept. 13, 2018. Hong Kong has become less important for the Chinese economy. Lam Yik Fei/The New York Times

When China first opened to overseas investors, the country was desperate for foreign technology to revive its growth. Now, as China faces rising global barriers, its leader, Xi Jinping, is urging greater domestic innovation.

Xi delivered this message Wednesday while making an anniversary pilgrimage to the southern city of Shenzhen, which in 1980 was established as a “special economic zone” next to the global financial hub of Hong Kong. Shenzhen quickly became an incubator for “reform and opening up,” the strategy championed by Chinese leader Deng Xiaoping that paved the way for the country’s decadeslong economic takeoff.

Forty years later, Xi said China still welcomed foreign investors, but he also said it must prepare for a less welcoming world. The coronavirus pandemic has accelerated the rise of barriers to the free flow of goods and technology, Xi said, a theme that he has stressed recently.

“The world economy is at low ebb, and international trade and investment have drastically shrunk,” Xi said to a conference hall packed with officials and guests wearing protective masks, in a speech that was promoted heavily by the Chinese news media.

Xi did not refer directly to the Trump administration’s efforts to restrict Chinese companies’ access to U.S. technology amid escalating tensions between the two countries. Instead, Xi broadly warned that “the world has entered a period of turbulence and transformation.” Shenzhen’s experience, he said, showed that China must “gain the initiative in the global technological revolution.”

China is striving to revive its economy and repair its international standing amid the coronavirus pandemic, which began late last year in the central city of Wuhan. The pandemic has driven negative views of China to new heights in the United States and other wealthy democracies, according to a survey by the Pew Research Center that was published last week.

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Xi is also trying to quell jitters about Hong Kong, the semi-autonomous Chinese territory where a sweeping security law was recently imposed in response to tumultuous anti-government protests last year.

Xi’s speech in Shenzhen gave a likely preview of a Communist Party leaders’ meeting late this month, when he will lay out China’s economic strategy for the next five years, including harnessing more domestic innovation and consumer spending.

Xi pledged to make Shenzhen a proving ground for upgrading China’s economy and strengthening innovation, citing plans to step up spending on technology research. He stressed Shenzhen’s importance in a regional economic initiative that also encompasses Hong Kong, a strategy that could enhance Chinese influence over the former British colony and underscore its reduced importance for Beijing.

Xi’s speech and other comments during his trip this week to Guangdong province, which includes Shenzhen, have also underscored his effort to redefine China’s decades-old strategy of “opening up.”

Past leaders stressed drawing in foreign capital and technology to help China catch up; Xi wants to shift the balance by taking Chinese technology, investment and power to the world.

“We’re experiencing a transformation the likes of which hasn’t happened for a century,” Xi said Monday while visiting a factory in Chaozhou, another coastal city in Guangdong. “We must take the road toward a higher level of self-reliance.”

This photo taken on August 15, 2020 shows people watching a performance as they cool off in a swimming pool in Wuhan in China's central Hubei province. Wuhan City, where the novel coronavirus was first detected, slowly reopened businesses to improve its economy after China largely brought its domestic epidemic under control. Stringer, AFP 

Officials have already spent years trying to shift Shenzhen from low-end industry to high-tech design and manufacturing. Xi wants to wean China off foreign suppliers for crucial components, such as silicon chips, and the city is a part of those plans. Shenzhen is home to the headquarters of big Chinese tech firms such as Huawei, one of the world’s biggest smartphone sellers. The United States has imposed several restrictions against Huawei in the past year, deeming the company a security threat, a claim that the company denies.

“This is a new spin using Shenzhen to say, ‘We can be economically strong, we can be technologically innovative, we can be socially progressive — on Chinese terms,’” said Juan Du, an associate professor of architecture at the University of Hong Kong and author of a recent study, “The Shenzhen Experiment.”

“A lot is riding on this for Shenzhen to be able to set an example for other cities in China,” she said. “Shenzhen’s importance to the national psyche is far greater than just its economic importance.”

But China remains greatly dependent on imported technologies, especially semiconductors, the brains of all electronic devices. Despite billions of dollars in state support, Chinese chipmakers are still far behind rivals in Taiwan, South Korea and the United States.

The Trump administration is threatening to block Semiconductor Manufacturing International Corporation, China’s most advanced chip manufacturer, from using U.S. software and equipment out of fear that its products are used by the Chinese military, which the company denies. The technology involved in chip production is fiendishly complex to master, making it difficult for Chinese companies to easily catch up with foreign makers.

“The Chinese government is pretty much aware that technology, by and large, comes from the private sector,” said Jean-Pierre Cabestan, a professor of Chinese politics at Hong Kong Baptist University. Shenzhen and its tech companies, he said, are “very much part of this effort to leapfrog and catch up with Western countries in high-tech.”

Xi’s vision of Shenzhen as a base for China’s rising technological prowess carries extra resonance because his father, Xi Zhongxun, was an official who helped to establish the region as a scrappy boomtown.

After former Communist Chairman Mao Zedong’s Cultural Revolution, a surge of people fled to Hong Kong, and Xi Zhongxun, then the party secretary of Guangdong, hoped zones like Shenzhen would help revive the economy and stanch the departures, said Joseph Torigian, an assistant professor at American University in Washington who is writing a biography of the elder Xi. The younger Xi mentioned his father indirectly in his speech, citing him only as an unnamed provincial leader.

Hong Kong investment and expertise were crucial to Shenzhen’s rise in the 1980s, but Xi’s speech Wednesday showed the financial hub’s reduced role in China’s ambitions.

The officials applauding Xi in Shenzhen included Hong Kong’s chief executive, Carrie Lam, who is charged with enforcing the draconian new national security law. Earlier this week, Lam abruptly postponed her annual policy speech to avoid it coinciding with Xi’s visit to Shenzhen.

“It shows again that Hong Kong is a kind of appendage to mainland China,” Cabestan said.

Xi also used his speech in Shenzhen to vow a bigger role for markets, but Chinese entrepreneurs and economists have expressed skepticism about his commitment. Since coming to power in 2012, he has stressed that the party must keep a tight grip on the economy and that state companies must dominate key sectors of industry. Last month, the Chinese party announced plans to extend its role in private businesses.

Xi’s visit to Shenzhen did not signal any shift from his established economic course, said Deng Yuwen, a former editor for a party newspaper who now lives in the United States.

“I think the propaganda pitch has been set this high this time to try to shift the outside world’s view saying that China is not reforming and is closing itself off,” Deng said by telephone. “Oftentimes, what action you take is not the same thing as in the propaganda.”


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