Lin Min

    linmin@hotmail.com

    LAST week an article about technology giant Huawei’s possible exodus from Shenzhen went viral on social media, saying skyrocketing housing prices are forcing companies to leave the city.

    Although Huawei immediately issued a statement saying it has no plan to relocate its head office, which is now in Bantian, Longgang District, the company has indeed moved part of its facilities to the Songshan Lake area in neighboring Dongguan. Another well-known telecom gear maker, Huawei’s cross-town rival ZTE, is also set to relocate its production facilities to Heyuan City beginning this July. Another corporate behemoth in Shenzhen, automaker BYD, has started producing electric buses in another Guangdong city, Shanwei.

    These relocations to other cities highlight the fact that Shenzhen is short of land for industrial development and housing prices are making the city less competitive in terms of operational costs.

    Soaring housing prices have been troubling metropolises around the world like New York, San Francisco, London and Hong Kong, and Shenzhen is no exception. People from around the country seeking a better career have been flocking to the boomtown that is about one-fourth of Guangzhou’s area but houses a population of similar size.

    Despite outrageous housing prices, Shenzhen remains a magnet for professionals, entrepreneurs and companies from around the world. On Thursday, the French Welding Institute established a joint venture in Qianhai with a Shenzhen company. Last year, foreign firms signed contracts worth US$25.6 billion for investment in the city, 134 percent more than in the previous year. This shows Shenzhen remains a favorite investment destination for multinationals.

    What makes Shenzhen attractive to multinational companies? A report by the American Chamber of Commerce in South China earlier this year gives a convincing answer. The report, titled “2016 Special Report on the State of Business in South China,” states, “Shenzhen’s government has taken the lead on a number of new initiatives to become the national leader in innovation and private enterprise growth. The city has experienced rapid private economic growth, spawning about 450,000 private companies, including international giants such as Huawei Technologies Co. Ltd., Tencent Holdings Ltd., China Vanke Co. Ltd. and BYD. Available incentives include a recent VAT and business tax exemption policy for small and micro-sized enterprises. The government has also adopted specific measures in terms of equity investment incentives, e-commerce promotion and the introduction of electric vehicles.”

    But the recent relocations of facilities outside of Shenzhen shouldn’t be taken lightly. It is high time the city pondered its future after a decade-long housing market bull run that has reached a stage of “irrational exuberance.”

    Still, there are opportunities for Shenzhen to make homes more affordable.

    Shenzhen can be more creative in making better use of the huge numbers of existing “illegal buildings.” Those illegal buildings, if found safe, can be legalized if owners pay fines and taxes to the city government. These buildings, believed to account for nearly half of the city’s total and provide housing to more than 7 million people, were mostly constructed on land lots previously owned by villages but are considered illegal because of lack of government approval. An appropriate way to turn them into legal housing will definitely allow more people to own homes at lower prices.

    The city can also be more ambitious in providing public housing to low-income residents and newcomers with skills and expertise. Local governments in China used to leave housing almost entirely to market forces in the process of market-oriented reforms, ignoring the government’s responsibility to make housing affordable to the average citizen. In fact, even many Western cities spend a lot on public housing. Two years ago, New York Mayor Bill de Blasio launched an ambitious, US$41 billion “Housing New York” plan, which aims to build or preserve 200,000 affordable homes over 10 years.

    Shenzhen’s neighbors Dongguan and Huizhou have plenty of land for development. Existing plans to link the three cities with rail transports will make it possible for people to work in Shenzhen and live in satellite towns in Dongguan and Huizhou that would provide affordable housing. The cities can also explore more creative ways of integrating the three economies, such as jointly developing industrial zones and even setting up special zones like the Shenzhen-Shanwei Special Cooperation Zone. These zones can house production and support office facilities for companies while their head offices remain in Shenzhen.

    A metropolitan circle with Shenzhen at the center will strengthen Shenzhen’s competitiveness, and will also be a blessing for Guangdong, which has an alarming level of imbalance in regional development.

    (The author is head of the Shenzhen Daily News Desk.)