Shenzhen; the start-up springboard in southern China
A creative writing lesson I teach to my Chinese students involves us writing a short story based on the idea of a city with no adults. Upon arriving in Shenzhen, I felt like I’d been transported into the stories my students had described to me … “everyone parties all night”, “people have so much money and so much freedom”, “young people work hard all day and all night – the cars fly and people look like tall aliens with massive brains(!)”
In 1953, Shenzhen was a sleepy fishing village boarding Hong Kong. Now, in 2019 Shenzhen is home to an estimated 20 million inhabitants (albeit without the flying cars and tall aliens with massive brains). The average age of the population, many of whom come from all over China and are not native to Shenzhen, is around 30 – 8.49% between the age of 0-14, 88.41% between 15-59, and 3.1% aged 65+. In May 1980, as part of China’s opening policies and reforms, Shenzhen was formally nominated as a Special Economic Zone (SEZ) due to its proximity to Hong Kong. In Chinese the shēnzhèn jīngjì tèqū 深圳经济特区.
Since then, Shenzhen’s economy has boomed. In February 2019, China Daily – the CCP’s media mouthpiece – reported that Shenzhen’s economy had surpassed that of Hong Kong. “Hong Kong’s GDP grew 3% in 2018 to HK$ 2.845 trillion ($362.4 billion) … Meanwhile, its neighbouring city and China’s “Silicon Valley” Shenzhen earlier this year announced a year-on-year increase of 7.5% in GDP－2.422 trillion RMB in total. Therefore, Hong Kong was behind by about 22 billion RMB.”
Walking around Shenzhen, the city’s new-found wealth is crudely blatant. There is a library, museum, city hall and harbour area. Hotels are upper-end and Starbucks pops up on every other street corner. There are artisan craft beer workshops and artsy walkways. The city’s huaqiang road provides what feels like the entirety of the world’s electric products. The streets are wide and empty, the subway not too crowded and with its own women’s only carriage. People keep on one side when they go up and down stairs, and I didn’t see a single person jaywalk (because the fine is 50RMB – and enforced). Shenzhen felt like a half-way house between Hong Kong and mainland China.
The government has been pumping money into Shenzhen and its start-ups left, right and centre. The SCMP reported Shenzhen “will offer tax breaks to overseas and local talent to maintain edge in tech amid trade war. City will lower salary tax to 15 % from the current 45% to spur innovation”. What’s more, for those unphased by a life in mainland China, purchasing property and basing themselves in Shenzhen in order to commute to Hong Kong for work has become a favourable trend – thereby saving sizable chunks of income that otherwise would have gone straight to housing. A survey undertaken by the Hong Kong Planning Department found that between 1999 and 2009, the number of cross-border commuters increased from around 7,500 to 44,600.
China is growing up. It’s people have learned, imitated, moulded and shaped their ideas based on the back of some of the world’s most successful companies. “What was yesterday the place to build and ship cheap, low-quality products is turning into a high-quality, fast-prototyping hub for makers and the hardware renaissance.” In June 2007, it was reported that more than 20% of China’s PhD graduates had worked in Shenzhen. However, angel investors have noted “there is a lot of money and support systems in place here in Shenzhen and the rest of China, (but it) seems the main thing lacking is entrepreneurs and technical talent to fulfill this growing demand on the investment side.”
I briefly spoke with a senior figure in Shenzhen’s start-up industry who asked not to be named. He responded to the following 1) Which industry has the highest growth potential in Shenzhen? Anything related to manufacturing, such as e-vehicles, 2) How easy is it for Chinese and non-Chinese companies to collaborate on tech start-ups here in Shenzhen? It’s still pretty hard. Many aspects come into play, for example: guanxi, culture and expectations, 3) Could China’s Shenzhen ever rival America’s San Francisco? It depends on what you mean by that. The Greater Bay Area in China is trying to bring these two places together, but on a different level.
I had previously been in Guangzhou for a week to help a friend with his TechEd start-up, and only decided to come to Shenzhen last minute, to better understand its hype. The following pointers are based entirely on my own professional experiences in China and are not to necessarily representative of my current or future employers. I hope they provide useful insight into what to expect when doing business with China.
My top 3 tips on Chinese start-ups and general business culture
- Do not attempt to work with a Chinese start-up without, at the very least, a foundational understanding of Chinese culture, history, business – and language. You could spend a couple of months dossing around with DuoLingo or read “One billion customers” or “Mr China” and consider yourself somewhat ‘in touch’ with contemporary China. But you’d be wrong. You will never understand China until you have witnessed the income disparity between villages, towns and cities, eaten (albeit rather visceral) Chinese food from a hole-in-the-wall food ‘restaurants’, and have had lively debates with your Chinese friends, in Chinese, about the endless cultural disparities between the West and China. Don’t just go to China and expect to be willingly accepted and trusted. Behaviour such as not getting drunk when expected to, embarrassing someone else so that they lose face, or even sitting in the wrong seat when out for a meal – will offend. Surface-level ‘understanding’ won’t get you very far, you need to go deeper.
- Don’t expect the contract to be kept. Say what you expect, need and want at each stage of whatever process you’re following – both directly and indirectly. To give an example based on my experience with an elite private tutoring company I (regrettably) worked for … In China, signing the contract is a mad, frantic rush, and once said contract is signed, both parties may negotiate their terms. This, of course, is opposite practice to the West whereby both parties negotiate their terms, and once the contract is signed, the deal is final, and the project followed through. I learnt this the hard way when my former employer decided to slash my weekly salary for three consecutive weeks without notice. In China, whilst a formal contract is essential for legal purposes, I would advocate ensuring that you retain something unique that your Chinese company cannot get hold of elsewhere. They will be less likely to ditch you because legally, you’re on your own. Generally speaking, in the courts, you – as the foreigner, will lose.
- Be prepared to work like you’ve never worked. Think about a time during which you worked hard. Perhaps it was for your university final exams, or you gave up your weekend to work overtime on a project to get that promotion? Recently on Chinese social media, netizens have been discussing 996 – the accepted norm to work from 9am to 9pm every day for 6 days a week. There are 1.4 billion people in China – the pace of development is rapid, and the competition ruthless. If you don’t work hard, you will be left behind. When in Guangzhou, I offered to devote my whole time researching for my friend’s start-up. His response … “Why do you work so hard? You can’t be British!” In the West, I believe, we have become too comfortable. In the UK, we have free healthcare and our (comparatively cheap) government-funded education is outstanding. You can very easily have a nice, steady lifestyle without working like a man (wo)man to get it. In China, that’s not the case.
And finally … some useful webites on start-ups in Shenzhen
- List of coworking spaces available
- List of Chinese (and Hong Kong) accelerators and incubators, in addition to coworking spaces and events
- Top Shenzhen start-ups to watch out for in 2019