While its high house prices have many companies considering relocating, China’s megalopolis Shenzhen, home to tech giants like Tencent and Huawei, still has its relative advantages, Chen Yongwei, director of research at Chinese magazine
Comparative Studies, wrote in
The Beijing News. The city needs to improve its institutional environment, including administrative efficiency and intellectual rights protection, Chen said.
Shenzhen is famous for both being a tech hub and for its high property prices – recent data from real estate agent Lianjia put its average house price at nearly 60,000 yuan (US$8,734) per square meter. The latter has a negative impact on the former; high house prices not only increase the costs of enterprises, but also make it more difficult to recruit and retain employees, Chen noted. The city risks losing some of its companies to other cities.
Nevertheless, after decades of development, the megalopolis still retains unique comparative advantages, including a developed infrastructure, complete industrial chain and concentration of skilled workers due to its traditional talent-friendly policies. These are particularly important for research and development companies, while those leaving Shenzhen are mostly labor-intensive industries.
With due attention paid to this industrial reconfiguration, Shenzhen needs to use this as an opportunity to upgrade its own industrial structure to focus on the higher-end, and more profitable R&D and sales sectors, Chen said. Besides, institutional costs have a greater impact than economic costs, especially so for R&D companies. If Shenzhen improves its administrative efficiency, judicial justice and intellectual rights protection, this could offset the negative impact of rising economic costs.
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