From success to anxiety, Shenzhen braces for impact of Trump presidency

Shenzhen stands as a template for spectacular economic success, but now, deep anxiety looms over the impending Trump presidency

Fifty years ago, on a sultry day in August, I headed to Beijing, China’s capital, from Hong Kong on my first assignment to the country as a junior diplomat. There were no direct flights from Hong Kong, then still a British colony, to Beijing. One had to cross over, on foot, from the border village of Lowu to the Chinese side via a rickety wooden bridge across a stream. From Lowu, a local train took passengers to Guangzhou, from where one could either fly to Beijing or take a train. Lowu was in the middle of green fields of paddy, with a cluster of thatched houses in the village. There was a long wait at a large hall adjacent to the Lowu station, where foreign passport holders had to wait for the train to Guangzhou. We were assigned tables according to nationality and served a simple lunch. When a Canadian diplomat came to sit at my table, he was peremptorily shooed back to his own.

 

Last week, I paid a visit to Hong Kong for a conference on China-US relations, but a side visit to Shenzhen was included in the itinerary. Lowu is now part of the greater Shenzhen area, and the endless stretches of paddy fields have been replaced by a forest of skyscrapers. The population of the Shenzhen metro region is now 13 million — and growing. According to the Shenzhen municipal government, its current gross domestic product (GDP) is over $238 billion, and it houses China’s major high-tech companies, including telecom major Huawei; software and social media giant Tencent; electric vehicle manufacturer BYD; and drone maker DJI. I was able to visit Tencent and DJI and was impressed by the technological sophistication and innovative spirit on display.

 

Shenzhen was one of four special economic zones (SEZ) set up by the Chinese Communist Party Central Committee in May 1980, following the adoption of the “reform and opening up” policy in 1978 under the leadership of Deng Xiaoping. Its proximity to the international financial and business hub of Hong Kong contributed to its rapid success. It became the template for the spectacular economic success that China has achieved in its four decades of reform. Today, it is almost fully integrated with Hong Kong, over which China regained sovereignty in 1997. A bus took me on the expressway from the centre of Hong Kong to Shenzhen in less than an hour. The Customs and immigration formalities at the crossing point were quick and efficient. On the way back, I took a ferry from the port of Shekou on the outskirts of Shenzhen directly to the Hong Kong International Airport. I was able to check-in for my flight at the Shekou ferry pier itself and complete immigration and customs formalities before boarding the ferry. What a contrast to the Lowu crossing half a century ago!

 

Shenzhen’s impressive trajectory was almost brought to a halt in the aftermath of the infamous Tiananmen riots of June 1989, when pro-democracy demonstrations in the capital’s central city square almost brought down the regime. The riots were put down in a brutal and bloody crackdown. The more conservative elements within the Communist Party leadership held Deng’s reform policies responsible for the political and social unrest. SEZs like Shenzhen fell into disrepute and were threatened with closure. Then in 1992, Deng Xiaoping, at the age of 87, undertook his famous “southern tour”, visiting the southern provinces and the SEZs, encouraging them to persist with the “open door” policies of relying on the market, inviting foreign capital and technology, and promoting export-led growth. This turned the tide and opened the way for more far-reaching reforms introduced by Premier Zhu Rongji, who brought China into the World Trade Organisation in 2001. The top party leader, Jiang Zemin, was initially beholden to the conservative party leaders but later joined Deng in reinforcing reforms. Today, Deng’s southern tour is marked by a bronze statue honouring his memory in Shenzhen’s Lianhuashan Park, with an inscription below contributed by Jiang Zemin himself.

 

Both in Hong Kong and Shenzhen, one could sense deep anxiety over the impending Trump presidency. US-China trade is still over $650 billion, with a large surplus in favour of China. The high tariffs Donald Trump has threatened against Chinese imports — 60 per cent — would be a major blow to Chinese business. Some Chinese expressed the hope that Elon Musk, who has major business stakes in China, may be able to influence Mr Trump in favour of China. Others were deeply apprehensive of Mr Trump’s policy on Taiwan. It was conveyed that China did not have a “timetable” for invading Taiwan, but that any US move to alter the current status quo on Taiwan could precipitate a crisis, even war. While referring to the three Sino-US communiques on Taiwan, from 1972, 1979 and 1982, a suggestion was made for a fourth communiqué, which could reaffirm US policy of not recognising Taiwan’s independence and not challenging Chinese sovereignty over the island. This is unlikely under a Trump administration.

 

From interactions with several Hong Kong and Chinese mainland businessmen, one gathered that the environment for private business in China had deteriorated in recent months. There was far greater scrutiny of business dealings. National security considerations were hampering normal business activity. State-owned enterprises were being openly favoured and there had been a rise in cases of private businesses being bought over by state enterprises. Some US businessmen complained that normal due diligence and evaluation, which consultancy firms do routinely, have now become risky.

 

I had a brief interaction with some senior functionaries of the CCP’s International Department, which is responsible for party-to-party relations. The Department maintains relations with 600 political parties in over 100 countries, including both the Bharatiya Janata Party and the Congress party in India, among others. The recent meeting between Prime Minister Narendra Modi and President Xi Jinping in Kazan and the agreement reached on dis-engagement in eastern Ladakh were welcomed and there was a clear expectation that bilateral economic and commercial relations would be normalised. Much importance was given to the prospects of Brics-plus playing a stabilising role in the uncertain Trump era, with India-China cooperation being the key.

 

The Chinese rhetoric on India is changing even if the substance remains sticky.

 

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The author is a former foreign secretary