Home > The “Tech” Of Two Cities Why Hong Kong failed where Shenzhen succeeded

The “Tech” Of Two Cities Why Hong Kong failed where Shenzhen succeeded

This is a fascinating comparative case study of two world systems that fate placed together. There is much to learn from both sides of the equation!

Hong Kong and Shenzhen are located side by side geographically, but have a very different history, grounded in two radically different socio-political systems. As a Special Administrative Region, Hong Kong has a high degree of autonomy and will maintain its British-incepted capitalist system until 2047. In contrast, Shenzhen is subject to the socialist economic system of China. Hong Kong used to be an economic superstar in the region: Milton Friedman referred to it in 1990 as the best example of a free market economy. On the other hand, Shenzhen was described as a “sleepy border town” in southern China. The story is entirely different now when Shenzhen is comparable to, if it has not already outshone, its once proud neighbor. Shenzhen’s Nanshan district, home to a huge High-Tech Industrial Park, is now China’s richest, with a higher per capita GDP than even capitalist Hong Kong, and the city is the cradle of tech giants like Huawei, ZTE and Tencent.

This surprising development begs an explanation, and this article seeks to provide it. The authors compare the two cities with respect to their economic development, discuss the institutional differences that might account for their respective growth stories, and finally consider the possible synergy between the two. Shenzhen’s rise was driven by the Chinese Government’s resolve to make it a success, through its designation as a Special Economic Zone enjoying advantages and incentives conducive to the attraction of capital and talent. It used its advantage to transform itself from light industry to high value-added technology manufacturing, and to assert itself as China’s prime innovation hub. However, the government is intent on leveraging the advantages of both cities through its creation of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, a national level initiative to combine the core strengths of Hong Kong and Shenzhen in an attempt to boost the existing tech center to a new level.

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About the Author:

Horace Yeung – Assistant Professor, University of Leicester.
Flora Huang – Associate Professor, University of Essex.