By Subah Ali
A Special Economic Zone (SEZ) is an area in which business and trade laws are different. It is specifically designed for increased FDI, trade, jobs, and investment. In 2014, Shenzhen (situated in Guangdong Province, China) beat out Hong Kong as the most competitive city; in what economists termed as miraculous. However, Shenzhen did not get to its position by sheer luck and miracle; its policies and structure were all built to become the top SEZ.
HERE’S HOW:
- Innovation and Technology
In the 21st century, the role technology plays in the economy cannot be denied. Hence, it is no surprise that in order for an economy to move forward, it needs to support innovation and technology. Shenzhen has done just that, spending 4.05% of its GDP on Research & Development for Innovation and Technology, while Hong Kong only spent 0.73%. - Intervention
Hong Kong believes in positive non-interventionism economics, where there’s an open market with very little government intervention. While this policy may be helpful for established firms, the absence of regulations and support spells trouble for firms that are starting out. This is where Shenzhen came in, being a nurturing haven for startup businesses. For example, Frank Wang, the founder of DJI Technology, moved his business from Hong Kong to Shenzhen. DJI now has 70% of the global market for civilian drones. - Converting Ideas into Reality
Shenzhen’s existing supply of resources, combined with its cheap manufacturing space has become the ideal place to easily turn ideas into prototypes; which is why Wazer co-founders Matthew Nowicki and Nisan Lerea moved to Shenzhen, 8,000 miles away from their homes in the USA. Their prototype, a commercial waterjet cutter that could compete with million dollar machinery, is being developed in an office provided by HAX, a venture capitalist firm. - Effective Supply Chain
What sets Shenzhen apart, and also gives them an advantage over many other entrepreneurial cities is the friendly economic environment. Producers, designers, manufacturers have formed a strong ecosystem, where creativity seems to be the only limit. The relationship between each link of the supply chain only grows at each stage, where entrepreneurs can see exactly what their products are being turned into, hence creating the best possible product. - Harmonious Economy
While it has become an incubator for start-up businesses to grow, Shenzhen is also home to some of the largest manufacturers, including, Foxconn Technology (the largest contract manufacturer of electronics, makers of hardware for Apple Inc). Not many cities have managed to do what Shenzhen has done – where both small and large businesses have flourished in the market, leading to greater economic growth – product output per land area is the highest in the country.
