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China’s Xi Jinping spotlights Shenzhen as future for economic growth, Hong Kong given back seat

China’s President Xi Jinping praised the tech-hub city of Shenzhen in a landmark speech on Wednesday, leaving some puzzling over the future of nearby Hong Kong, as China’s traditional global foothold.

Xi said Shenzhen, often dubbed China’s Silicon Valley and home to tech giants Huawei and Tencent, was making “historic leaps” and “achieving miracles.”

He also announced that the area would be given more leeway to pursue opening-up reforms and become a “model city for a strong socialist country.”

Once a small fishing village adjacent to Hong Kong, Shenzhen is now home to about 13 million and was transformed in 1980 by veteran Chinese leader Deng Xiaoping, after he designated it a “Special Economic Zone,” carving out capitalist privileges in the staunchly communist country.

Retracing Deng’s footprints 40 years later during his own southern tour this week, Xi announced Shenzhen would again become a testing ground for foreign investment and talent, and a symbol of China’s place as a global economic power, he said.

His speech follows a five-year plan for the city published on Sunday, to ease regulations including land reforms, encouraging foreign workers and reducing red-tape in sectors such as bio-tech and telecoms. The city will also pilot China’s first digital currency.

Analysts see the focus on Shenzhen, which now has a GDP higher than Hong Kong’s, as a signpost to how China intends to manage its dizzying economic growth — with strict political dominance, while nearby economic powerhouse Hong Kong becomes less relevant.

“The strategy is to submerge the Westernized Hong Kong with more powerful Chinese rule,” said Kent Deng, professor of Chinese economic history at London’s LSE University.

“Xi will not give the West an inch. He sees Hong Kong as a threat to his rule over China. The Shenzhen model is political zero tolerance and business on China’s terms.”

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Carrie Lam, Hong Kong’s leader, notably postponed her annual policy address to attend Xi’s speech on Wednesday. The chief executive of Macau, Ho Iat Seng, was also at the ceremony.

China’s ruling party has long planned to integrate Hong Kong, Macau and nine other cities in the Guangdong province, including Shenzhen, to form a “Greater Bay Area” that would serve as the country’s tech belt.

“In the journey of the reform and opening up of Shenzhen and the nation, Hong Kong has been both a contributor and a beneficiary,” a Hong Kong government spokesman said in a statement on Monday, downplaying any rivalry.

Downtown Shenzhen in China's Guangdong Province on Saturday.Xinhua News Agency / Getty Images file

Beijing passed a National Security Law in Hong Kong in June, which led to widespread international criticism for being too draconian and caused Washington to withdraw preferential trade conditions to the former British territory. Beijing said the law was necessary to protect national security and wouldn’t erode the city’s freedoms.

The roles played by Shenzhen and Hong Kong in China’s economic development are “complementary not competitive,” said Yongjin Zhang, professor of international politics at Bristol University. With the former focused on tech and the latter on financial markets.

“It is true, though, that compared with twenty years ago, the leading role that Hong Kong plays in China’s engagement with global financial today is no longer as exclusive as it used to be,” Zhang said.

Adding that much would depend on whether Xi would create a similarly “imaginative vision” for the region as his political predecessor Deng, forty years ago.

Reuters contributed to this report.

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