Despite headlines about high costs that are persuading companies to leave China for cheaper production bases elsewhere, places like Shenzhen, known for its expensive property prices, are attracting new investment. In the first half of this year, foreign direct investment was up 65.5% year on year.
Shenzhen tops the list in Guangdong in attracting foreign capital, with the manufacturing sector one of the highest-growth areas. At the same time, it has become a magnet for overseas companies wanting China-based research and innovation centres. A prime example is Airbus, who described the city as “the innovation powerhouse taking on Silicon Valley”.
“Shenzhen is famous for its speed, which is certainly good for our company. We need to be more open to innovation at a faster speed,” explained its CEO Tom Enders, when plane maker inaugurated the Airbus China Innovation Centre (ACIC) in February.
“Only a few years ago, you would go to Silicon Valley if you wanted the latest technology. Today, that place is increasingly Shenzhen,” added Etienne Ravaud, the chief operating officer at the research facility.
Airbus says that a deeper talent pool, a cluster of high quality startups, and the proximity to some of China’s tech giants are among the attributes that it values most in Shenzhen.
Boston Consulting Group has also decided to set up its digital Asia Pacific Centre in Shenzhen. “We decided to set up the centre in Shenzhen because the city has a lot of innovative talents who can break the boundaries of different fields,” Hans-Paul Burkner, chairman of BCG, explained at the signing ceremony in April.
Chipmaker Infineon, which has been targeting China’s chip-based payment card market, is another of Shenzhen’s high- profile wins.
Shenzhen is doing its part to win over the foreign firms. The city has a range of supportive measures and incentives to lure talent, and the local government is investing billions of dollars in R&D parks itself. In a land-scarce location, space is often a deterring factor. But for projects deemed innovative enough and with sustainable growth potential, municipal officials are willing to help in finding the space that is needed.
As more major firms pick Shenzhen to set up new research offices, its ecosystem gets better, drawing others to join them. First-half GDP growth was a remarkable 7.4% in the city, more than a percentage point above the national level. An influx of foreign investment should help Shenzhen stay out in front.