Qianhai, a special economic zone in Shenzhen, China, once touted as the country’s future international tech and finance hub, is struggling to live up to its ambitious goals. Despite initial investments of $45 billion and comparisons to Hong Kong, Qianhai is now plagued by half-empty skyscrapers, underutilized motorways, and deserted shopping malls. The area’s unattractiveness has led to a high office vacancy rate of 28.9%, compared to 23.2% in Shenzhen overall. Experts attribute Qianhai’s struggles to the limitations of China’s old growth model and the lack of market overhauls and reforms.
Qianhai was established over a decade ago as a policy laboratory to pioneer reforms and market liberalization. However, plans for an independent antigraft body, gradual opening of the capital account, and full internet freedom were gradually abandoned. The tightening of state supervision over markets, capital outflow concerns, and increased censorship and surveillance have stifled Qianhai’s progress.
Without the promised reforms, Qianhai’s remaining appeal lies in its lower income taxes, proximity to Hong Kong, and modern office and commercial facilities. The area has attracted companies like HSBC, UBS, and Standard Chartered, but many firms that registered in Qianhai never physically relocated there. Some companies only maintain a presence in Qianhai for tax reasons or to maintain good government relations.
Qianhai’s struggle to differentiate itself from other special economic zones offering similar incentives is also a challenge. Agents note that Qianhai’s rents are significantly higher than neighboring zones, making it less attractive to businesses. The lack of unique selling points and the confusion caused by multiple zones offering similar benefits have hindered Qianhai’s ability to attract new companies.
Despite the infrastructure in place, Qianhai is facing an uphill battle to convince businesses to set up shop there. A survey conducted by the European Chamber of Commerce in South China revealed that only 44% of companies were optimistic about the Greater Bay Area, down from 68% in 2022. Many businesses prefer to stay in Hong Kong, which offers a more established global system and experience in the financial sector.
While some individuals appreciate the serenity of Qianhai, the overall sentiment suggests that the area’s potential as a global tech and finance hub may never be realized. To overcome these challenges, analysts argue that China needs to resume market overhauls and rely more on household consumption for high growth. Comprehensive reforms are necessary for sustainable growth, especially as China enters a new era of sluggish economic expansion.
