Stance on the Plan to Develop Shenzhen into a Demonstration Area of Socialism With Chinese Characteristics in the Next Five Years Go back »

2020-10-21 | South China

Background

On 11^th October, the Communist Party of China Central Committee and the State Council jointly issued a new implementation plan, announcing pilot reforms that would see the city of Shenzhen developed into a demonstration zone for socialism with Chinese characteristics within the next five years.

The original Chinese text can be found here.

This was followed by an event on 14^th October, celebrating 40 years since Shenzhen was designated a Special Economic Zone (SEZ). At the event, President Xi Jinping reiterated pledges that China will continue to advance its reform and opening agenda.  

Stance

The European Chamber is encouraged by certain measures under the plan that indicate a commitment to creating a market-orientated, international business environment, such as those aimed at strengthening intellectual property rights (IPR) protection.

The European business community also welcomes the plan to establish an “internationally competitive talent introduction system”, with the stated intention of improving the approval process for foreign work permits and work-related residence permits. It is hoped that these plans will apply to all types of talent, regardless of which industry they work in, and the Chamber expects to see more concrete and detailed implementation measures in the near future.

In general, more clarification of the announced measures is necessary to signal the significance of the announced plan.

For example, the document introduces special measures for Shenzhen to relax market access restrictions based on the existing negative list for foreign investment. However, if opening is to be based on the negative list it is unclear what would be unique to Shenzhen.

It is also unclear how the stated intention to promote internationalisation of the renminbi and the improvement of the foreign exchange management system would be carried out in Shenzhen alone.

On a broader note, it has long been the case that Shenzhen takes the lead in opening and reform. Since the founding of the SEZ and the subsequent Southern Tour of Deng Xiaoping in 1992, South China has been at the forefront of economic opening. However, the European Chamber continues to advocate for consistent, nationwide market opening and improvements to the business environment, rather than just limiting them to one city or zone.

Building a demonstration area of socialism with Chinese characteristics also raises questions over the direction that Shenzhen, and South China more generally, is heading in the coming years.

European companies may well question whether the region really will continue to develop as China’s most open economy or if this new zone signals an echoing of the sentiment contained in the Opinions on Strengthening the United Front Work of the Private Economy in the New Era. Promulgated on 15^th September 2020 by the General Office of the Central Committee of the Chinese Communist Party, this document advocates increased Party involvement in the private economy.

The European Chamber will keep a close eye on the plan’s implementation.

“The European business community echoes the sentiment that the overall development of Shenzhen in the last 40 years has been extraordinary to witness,” said George Lau, vice president of the European Union Chamber of Commerce in China. “We hope that this new plan will indeed drive further meaningful economic liberalisation that can then be quickly expanded nationwide.”

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