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Shenzhen props open the China door
By Alex Frew McMillan
SHENZHEN, China (CNN) -- The city of Shenzhen will continue its experimental role at the vanguard of China's opening up, according to its mayor. The coastal city which adjoins Hong Kong will be the first to allow overseas investment in a variety of industries, Yu Youjun said at a recent briefing. "For the 21st century, it is important to map out strategies for development," he told reporters visiting on a tour sponsored by the Better Hong Kong Foundation. To that end, he said Shenzhen will speed up reforms of its state-owned enterprises and government. It is streamlining its administration and legal system, a drive it has pushed the last two years. It will also seek out overseas capital and open up to the rest of the globe under World Trade Organization (WTO) rules. "We are trying to make Shenzhen one of the best investment destinations in China and the world," Yu said. Energy, logistics, transport to openYu said China's central government will continue to let Shenzhen take the lead in experiments with overseas investment in banking, insurance, securities, fund management and intermediary services, among others.
Shenzhen is now opening its ports and logistics business up to overseas capital and recently began allowing joint ventures with travel agencies, notably from Japan. Yu said Shenzhen has just allowed overseas capital investment in the energy and transportation sectors, and has five companies open to bidding. It has also invited Hong Kong accounting and auditing firms to set up operations in the city. "The city should still play an exploratory role," Yu said. A fast startShenzhen was a quiet fishing village of fewer than 30,000 people when late premier Deng Xiaoping picked it as one of communist China's first experiments with reengaging the rest of the world. The Guangdong province city, bordering capitalist Hong Kong, was established as a "special economic zone" in 1980. Since then it has grown into China's fourth-biggest economic driver, after Shanghai, Beijing and nearby Guangzhou. Shenzhen has attracted a population of migrants from all over China, lured by its newness and the chance of higher-paying jobs. Most of its 4.7 million residents are under 30. Its output per capita is the highest in the country, a yardstick the mayor said the city aims to boost to $7,500 to $8,000 per year by 2005. 'Socialism with Chinese characteristics'But some observers have questioned the city's role now that the whole country is relaxing rules on overseas companies looking to operate in China.
Yu said the 16th Communist Party Conference earlier this month confirmed the city's role, "to be the pilot area for constructing socialism with Chinese characteristics." He noted that U.S. investment fund Newbridge Group recently bought a stake in Shenzhen Development Bank, while British-based HSBC acquired 10 percent of Ping An Insurance Co. in October. He said Shenzhen Merchants Bank is currently discussing a joint venture with a U.S. partner that is expected to start next month. In retail, Wal-Mart has begun a joint venture, and Federal Express has won approval for an air-freight joint venture. Political reform can waitThough Shenzhen is heading China's economic change, Yu would not say whether it would also be the first to experiment with political change or a "special political zone." "it is very important for the further opening up and economic reform to go with further economic reform," he said. "But political reform is a very sensitive issue that is very complex." He said improving the economic climate and living standards needs to be the first priority. Shenzhen's fate is tightly tied with that of Hong Kong, which still accounts for 70 percent of the foreign direct investment. The economic fortunes of the two cities are diametric opposites, with Shenzhen's 13.2 percent growth rate coming during a time of deflation and recession for Hong Kong. Looking for a Hong Kong reboundGuangdong province has already lured almost all of Hong Kong's manufacturing, which chased low wages across the border. A typical factory worker is lucky to make 1,000 yuan ($120) a month in Shenzhen, while Hong Kongers expect salaries of ten times that amount. Shenzhen and other mainland cities increasingly are drawing service companies and residents. But Yu played down any rivalry. "We are confident Hong Kong can break through this cycle," Yu said. "A prosperous and stable Hong Kong will also be beneficial for Shenzhen's economy and development." He said Shenzhen is in talks with Hong Kong over building a 5.8 kilometer bridge between the two cities, to link them more closely. They are also investigating streamlining customs and the border crossing process. In the future, only the admitting authorities may check a traveler's passport, Yu said, an improvement on the current lengthy process of two checks.
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