China’s Cities: Understanding Hong Kong, Shanghai and Shenzhen

In little more than a decade, mainland Chinese attitudes toward Hong Kong have changed from admiration to condescension. 

Opinions about the city of Hong Kong vary widely in mainland China. Before 1997, mainlanders admired what Hong Kong had to offer were heavily influenced by Hong Kong’s cultural exports to China – such as TV dramas, pop music, martial arts novels and fashion. 

After 1997, the year the British handed Hong Kong back to China, attitudes toward Hong Kong began to shift. China’s entry into the World Trade Organization in 2001 accelerated the nation’s already fast-growing economy. Mainlanders were getting rich. The city of Shenzhen, located right next to Hong Kong, was growing in importance. Meanwhile, Hong Kong’s economy was slowing down. When China began allowing mainlanders to visit Hong Kong as individuals, tourists flooded into Hong Kong for shopping sprees at designer-label stores. Conflicts intensified between mainland visitors and Hong Kong residents – the latter viewing China’s nouveau-riche as uncouth and arrogant. Chinese media heightened tensions by playing to mainlanders’ emotions with words of nationalism.

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Mainlanders and Hong Kongers don’t really know much about each other, but both tend to use irrational thinking and extreme words when talking about the other.”

Mainlanders bought more and more of Hong Kong’s designer goods and real estate. To do business, many Hong Kongers (who speak Cantonese) had to learn Mandarin (which most mainlanders speak). Mainlanders took on an air of superiority. In a little more than a decade, mainlanders went from admiring Hong Kongers to looking down on them.

Hong Kong’s manufacturing industry has declined, while other industries remain strong. 

When Shenzhen’s GDP surpassed that of Hong Kong in 2018, economists, academics and media in China were quick to diagnose Hong Kong’s problems, pointing to Hong Kong’s real estate bubble, the lack of space and the city’s unaffordable housing that put residents in cramped homes. Critics also attributed slow growth to Hong Kong’s discrimination of outsiders. Such analyses stem from a superficial understanding of Hong Kong that fails to appreciate the city’s unique history, perseverance and success. 

Mainland Chinese view Hong Kong from a big-nation perspective, but it’s a small region. Many say that Hong Kong isn’t doing well because its manufacturing industry has declined and left few industries to carry the economy. In reality, a strong finance industry has replaced manufacturing, which is what happened also in New York City.

Hong Kong’s finance, international shipping and trade, professional services, and biomedical industries are still top-tier in Asia. While China encompasses enough land, resources and people to aspire for both breadth and depth of industries, economies of small cities can thrive with just a handful of industries. 

The biggest difference between Hong Kong and mainland China’s first-tier cities is that Hong Kong’s market is entirely open – whether in terms of its currency, information or trade. Subject to international market forces, Hong Kong has weathered countless storms to become what it is today. China’s cities haven’t passed the same tests, because the government heavily regulates currency, real estate and many industries. 

Hong Kong’s main challenges are land shortage, loss of talent and large corporations to other cities, declining domestic investments, and inefficient political and social governance. 

One of Hong Kong’s biggest problems is population density. Hong Kong can’t expand geographically, so Hong Kong’s growing population has nowhere to go. Plans to reclaim parts of Lantau Island and to build artificial land have stalled, and Hong Kong administrators have been unable to resolve land shortage problems. And yet, Hong Kong manages to house a population that is one-third of Beijing’s in just 1/15th the area of Beijing. Anyone over the age of 18 can apply for affordable housing in Hong Kong. The average wait time for affordable housing is 4.7 years (2.6 years for the elderly). The small homes that the media publicize as the norm in Hong Kong are usually interims for people who are waiting for public housing or people with extremely low credit ratings.

Hong Kong also struggles because it loses talent and companies move to other mega cities. It doesn’t have enough domestic capital investment, and its political and social governance is weak. Public benefits have declined, leading to an increase in social unrest. Yet people shouldn’t brush Hong Kong aside as many mainlanders have done, nor should people ignore its underlying problems. Rather, people should monitor these critical issues closely to understand where Hong Kong is headed. 

As mainland China’s most international city, Shanghai emits vibes of elitism and is more professional than entrepreneurial. 

Shanghai’s residents have a reputation for being stingy, haughty and unwelcoming of outsiders. Many are pessimistic of Shanghai’s future, believing that the city’s pride will get in the way of its ability to adapt to change. Compared with the youthful, creative energy of Shenzhen, Guangzhou, and Hangzhou, Shanghai feels less dynamic. The white-collar city embraces foreign investment and multinational corporations but snubs its nose at small start-ups. That’s why many critics believe that Shanghai lacks entrepreneurial spirit.

Shanghai – like New York, Tokyo, London and Hong Kong – is more professional than entrepreneurial. A city usually starts off entrepreneurial – which sparks growth – and eventually evolves to become more professional once its economy reaches a certain level. 

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Each of China’s cities has its role to play. Shanghai’s job is to be high-end, attract foreign investment, be a Chinese counterpart to New York and have its doors open to the world.”

Shanghai is the earliest city in China’s modern history to open its doors to the world. Today, Shanghai is still the first choice for foreign companies and foreigners to settle. No other city in China’s mainland is as international as Shanghai. As long as China keeps its doors open, Shanghai’s importance will only increase. The entrepreneurial city of Hangzhou, which neighbors Shanghai and is home to China’s largest internet company Alibaba is complementary to Shanghai rather than a competitor.

China’s Greater Bay Area (Hong Kong, Guangzhou, Macao) could challenge Shanghai if Hong Kong facilitates the area’s internationalization.

Shanghai’s true competitor would be the Greater Bay Area of Hong Kong, Guangzhou and Macao. Shanghai is mainland China’s most international city, but Hong Kong is much more international. If Hong Kong strengthens cooperation with nearby port cities along China’s southern coast, then China’s Greater Bay Area might surpass Shanghai in foreign investments and open Southern China’s economy to more global influences that will drive growth. 

Being a new city built for trade and business and populated by young, healthy working adults, Shenzhen has enjoyed economic success at relatively low costs to the government. 

Shenzhen officially became a city in 1979, when China began its economic policy of “reform and opening up.” It became the country’s first special economic zone in 1980. Being a new city with a blank slate facilitated its economic rise. It had no historical burdens, was tied to no particular culture, and was a center of neither politics nor heritage. It was simply an open market, and this concept attracted young talent from all over China. 

The city’s rise since the 1980s is nothing short of a miracle. Its finance, tech and manufacturing industries are strong; the economy is booming; and the local government has plenty of cash. The environment and weather are great for living. Shenzhen is known for being open and for valuing equality, hard work, grit and entrepreneurship. Young people flock to Shenzhen, where the population has been increasing by close to 500,000 annually.

Shenzhen must catch up in public services, including education and medical care.

Shenzhen invested little in building institutions of higher learning, because its working population comprises graduates from other large cities. And for a long time, the local government didn’t need to spend too much on hospitals, retirement homes and even schools, because the city’s population was mostly healthy young people of working age. They created wealth for the city but needed few public services, which is why Shenzhen has been able to sustain a high surplus. But after forty years of growth, demographics are changing. Even though Shenzhen’s population – at an average age of 33 years – is still the youngest of China’s big cities, the city has a high birth rate. Shenzhen needs more schools and teachers. 

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Shenzhen plans to build 900 kindergartens in 2020 and to double the wage for teachers.”

Shenzhen is still far behind Beijing, Shanghai, and Guangzhou in terms of medical expertise, treatment options and facilities. While Shenzhen has money to spend, schools and hospitals will take time to build and to fill with competitive talent.