Authorities Renew Reform and Opening Amid Economic Pressures
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Executive Summary:
- The Party has updated plans to build the Greater Bay Area into a key growth driver, emphasizing attracting foreign investment and overseas talent.
- The measures from Beijing seek to make it easier for funds and elite global experts to move between the jurisdictions of Hong Kong and Shenzhen, with the goal of boosting development and cutting-edge innovation.
- Recent attempts to show support for the private sector have been unconvincing, including the Third Plenum Decision, the Private Economy Promotion Law, a meeting with tech entrepreneurs, and a front-page People’s Daily interview with Huawei founder Ren Zhengfei.
- The Party is clear-eyed about the challenges posed by low consumption, an unsustainable export-driven model, and lack of high-quality innovation, as an article in its main theory journal this week explains. The latest measures are unlikely to change this overall picture.
The People’s Republic of China (PRC) is keen to “deepen reform and broaden opening up” (深化改革、扩大开放), according to a policy document jointly released by the general offices of both the Chinese Communist Party (CCP) Central Committee and the State Council. The measures, titled “Opinions on Further Advancing Shenzhen’s Comprehensive Pilot Reforms to Deepening Reform and Innovation and Expanding Opening-Up” (关于深入推进深圳综合改革试点深化改革创新扩大开放的意见), are the latest prominent attempt to energize development in one the country’s key economic centers—the Guangdong–Hong Kong–Macao Greater Bay Area. They seek to improve the general business environment, especially for the region’s science and technology sectors, by improving integration across its different jurisdictions and in particular by attracting top talent from around the world (People’s Daily, June 11).
The Opinions were released internally at the end of August 2024, shortly after the Third Plenum meetings that sought to help reinvigorate the economy (China Brief, July 26, 2024). As with the Decision document from the Third Plenum, the public promulgation of the latest Opinions arrive at a time of persistent economic headwinds, including deflationary pressures and sluggish demand; and, as with the Decision document, this new measure does not indicate a significant shift from policymakers. They are instead a continuation of an earlier policy, issued by the same central bodies in 2020: the Shenzehn Comprehensive Pilot Reform Implementation Plan for Building the Advanced Demonstration Zone for Socialism with Chinese Characteristics (2020–2025) (深圳建设中国特色社会主义先行示范区综合改革试点实施方案(2020-2025年)) (Shenzhen Special Economic Zone Report, June 19). In case anyone needed reminding, the measures state (in the first point of the sixth and final section), “Uphold and strengthen the overall leadership of the Party (坚持和加强党的全面领导). Officials nevertheless have high ambitions for what it could achieve. One Shenzhen-based cadre describes it as signaling the “formal launch of comprehensive reform pilot 2.0” (标志着综合改革试点“2.0”正式启航) (People’s Government Report, June 20). [1] Another aims to build a “world-level scientific research hub” (世界级科研枢纽) (Shenzhen Government, June 19).
Strategy Relies on Overseas Talent and Investment
The Greater Bay Area is a dynamic region, home to 70 million people, and consciously modeled on other metropolitan bay areas such as those in San Francisco, New York, and Tokyo. As of 2022, its economic output exceeded that of South Korea (China Brief, January 19, 2024). It seeks to integrate three distinct jurisdictions, each with their own strengths. In the words of the man in charge of Qianhai (前海), one of Shenzhen’s cooperation zones, the idea is to “rely on Hong Kong, serve the mainland, and face the world” (依托香港、服务内地、面向世界) (Shenzhen Government, June 19).
Hong Kong is key in this strategy. Minister of Commerce Wang Wentao (王文涛) has described it as a “super-connector” (超级联系人) in the PRC’s national strategy—crucial for building trade relations with like-minded countries (Hong Kong Government, August 26, 2024). Its role as a major financial center has been central to the PRC’s development for decades, but now officials are trying to integrate it with the wider region. One item in the Opinions calls for allowing eligible companies listed on the Hong Kong Stock Exchange to also list on Shenzhen’s own exchange. According to a co-leader of audit services for Greater China at Ernst & Young, this move will “improve institutional support for the Shenzhen Stock Exchange, enhance its global competitiveness, and promote cross-border flows of financial factor” (完善深交所的制度供给，增强其全球竞争力，推动金融要素跨境流动). Tang also uses the “super-connector” moniker, arguing that the policy will help attract international investment into Shenzhen’s burgeoning technology and manufacturing sectors (International Financial News, June 12). The Greater Bay Area needs more than money, however.
Attracting talent is another central concern. The Opinions discuss “improving mechanisms for supporting and guaranteeing the introduction of talents from overseas” (完善海外引进人才支持保障机制), the lack of which are currently viewed as an “institutional barrier in the system” (体制机制障碍) that must be “cracked” (破解). One expert, in an article for Shenzhen Special Zone Report (深圳特区报), argues for “gathering global science and technology elites and high-level expatriates so as to inject new vitality into science and technology innovation” (集聚全球科技新锐、外籍高层次人才, 为科技创新注入新活力) (Shenzhen Special Economic Zone Report, June 19). The leader of the Haishekou (海蛇口) free trade zone in Shenzhen’s Nanshan district notes one example of a successful policy solution, namely, allowing foreign scientists to serve as “legal representatives of new research and development institutions” (担任新型研发机构法定代表人) (Shenzhen Government, June 19).
In this sense, opening up is imperative. But it is imperative, as the press conference makes clear, to “take on the mission of shouldering the national strategic platform” (扛起国家战略平台的使命担当) and support Chinese-style modernization—the Party’s primary ambition (Shenzhen Government, June 19). The Party has made this priority abundantly clear over the last decade. The Greater Bay Area has been referenced in the last nine government work reports (GBA, March 5). The Opinions, meanwhile, describe Shenzhen as an “important engine” (重要引擎) in the Greater Bay Area’s construction, which radiates out to spur on the overall national system (在全国一盘棋中的辐射带动作用).
Recent Support Measures Have Failed to Convince the Private Sector
The Party believes that by focusing on creating a world-leading science and technology sector, capable of innovating at the cutting edge and efficiently bringing new ideas to market, it can resolve its broader economic problems. Hence the need to “deepen integration of the innovation chain and the capital chain and the talent chain” (创新链产业链资金链人才链深度融合) and engineer the “efficient coordination of industry, academia, and research” (产学研高效协同) (People’s Daily, June 11). Vice Premier Zhang Guoqing (张国清) usefully highlighted these ambitions in a trip this week to Guangdong Province (Xinhua, June 17).
It is unclear whether the CCP will be successful in this endeavor. An article published on June 15 in Qiushi, the Party’s theory journal, warned of some of the problems the country currently faces—problems that no other country has ever experienced. This candid assessment, from a pseudonymous byline, echoed many of the critiques more often heard from external observers. On the economic side, “the export-driven, extensive growth model has become unsustainable” (以出口为导向的粗放型增长方式已经难以持续), and “insufficient effective demand has become a prominent issue, reflected in weak consumption capacity and willingness among residents, sluggish consumption demand, and slow growth in effective investment” (有效需求不足已成为当前经济运行的突出问题，主要表现为居民消费能力和意愿不足，消费需求不振，有效投资增长偏弱). On the technology side, problems include “insufficient high-quality scientific output, dependence on others for some key technologies, a lack of major original and disruptive innovation, and low conversion rates for research results” (存在高质量科技供给不足，部分关键核心技术受制于人，重大原创性、颠覆性创新缺乏，科技成果转化率相对较低) (Qiushi, June 15). This latter point was echoed by He Jie, the Shenzhen official, who noted that the conversion rate for scientific achievements was less than 30 percent (科技成果转化率不足30%) (People’s Government Report, June 20).
The Party’s prospects of success will lie in its ability to promote private enterprise and foreign investment, but recent indicators do not provide much cause for optimism. After the disappointing results of the policies announced at the Third Plenum in July 2024, the Party has made a number of moves this year to showcase a more positive disposition toward the private sector. One such move was to fast-track the Private Economy Promotion Law, which came into effect on May 20 (NPC Observer, April 30). This law was the country’s first “foundational” (基础性) law intended to support and regulate the sector. As the scholar Jamie P. Horsley notes, however, it largely serves as a political statement of the CCP’s intent to better ensure that the country’s private firms continue to invest, hire, train, and innovate, and “seems unlikely to succeed on its own to substantially reassure private investors and spark entrepreneurial enthusiasm” (Brookings, March 28; NPC Observer, May15).
Other interventions have focused on optics, such as a January meeting between Premier Li Qiang (李强) and leading technology entrepreneurs, or a recent interview with Huawei founder Ren Zhengfei (任正非) that was published on the front page of the People’s Daily (Xinhua, January 20; People’s Daily, June 10). (The last time an entrepreneur featured so prominently in authoritative Party media was Jack Ma, in 2015 (People’s Daily, August 11, 2015).) In the interview, titled ““The More Open a Country Is, the More It Will Drive Our Progress” (国家越开放，会促使我们更加进步), Ren discussed many of the themes in the Opinions, noting for instance that “the real challenge lies in building our education and talent pipeline” (困难在我们的教育培养、人才梯队的建设). Huawei is likely to reap the benefits of a more prosperous Greater Bay Area, as its main campus in Dongguan is not far away from Shenzhen.
Conclusion
The Opinions for advancing reform and opening up constitute an ambitious signal from Beijing that it is serious about its goal of building a world-leading science and technology sector and is willing to marshal significant regulatory and financial firepower to pursue it. The measures that follow will likely go some way to helping build the Greater Bay Area into an impressive metropolis that contributes substantially to the national and global economies. It nevertheless faces headwinds, as it remains reliant on attracting investment and talent from overseas that is increasingly unwilling to support the Party’s national rejuvenation agenda.
Notes
[1] The official, whose article on the topic is featured on the website of the Chinese People’s Political Consultative Conference (CPPCC), is called He Jie (何杰). He is the Chair of the Shenzhen Municipal Committee of the Revolutionary Committee of the Chinese Kuomintang and sits on the national committee of the CPPCC.
