Evolving star

At 27 years old, China's economic darling and export leader for the past 14 years, Shenzhen is no longer an ingnue. She is a true star on the scene - yet ambitious youngsters are fast making a name for themselves, too.

To counter the competition, the city government has stepped out and joined the action in Los Angeles, with aspirations for a wider audience in the United States.

The first Chinese city to be opened up to outside world investment, Shenzhen was wildly successful in attracting flagship businesses from the US to China's Pearl River Delta.

The city is home to the global procurement centers of Wal-Mart and IBM.

Wal-Mart used its major operation and its first store in the city to expand into the rest of the Chinese market. Many retailers, including Home Depot and Best Buy, selected either Shenzhen or Shanghai for their first locations with good reason - among them the fact that Shenzhen has the highest GDP and disposable income per capita in all of China.

Shenzhen grew out of the vision of Deng Xiaoping, who set forth the principles of Special Economic Zones, which allowed for the transformation of the city through three free trade zones - Shatoujiao, Yantian and Futian.

Today Shenzhen has the fourth-largest container port in the world. Companies looking for a location to make and ship goods favor its access and port logistics.

Yet it is also alluring because of its culture and upwardly mobile environment.

"It's a young city - people are young and vigorous and the culture is very innovative. Shenzhen has a very good business climate. It's very entrepreneurial and in that way it's somewhat like American culture," says Andrew M. Pan, chief representative and managing director of Shenzhen's Los Angeles-based representative office.

Pan arrived from China when the office opened in 2001. He says Shenzhen's migrant culture - due to open-minded city management - an influx of young professionals from other parts of China and international investment all make for an exciting city.

The full-service Shenzhen office is headquartered in downtown Los Angeles, with satellite offices in Chicago and San Francisco.

The Los Angeles bureau's mission is to help US companies do business in Shenzhen, help Shenzhen-based companies come to the US and promote Shenzhen products in the US.

Pan says the range of effort results in a mutually beneficial relationship.

"IBM, Oracle and Microsoft bring a lot of good technology to the city and they hire Chinese employees, train the labor force and provide them with new skills," Pan says. "Another example is the service industry bringing technical know-how and opportunities. Wal-Mart, with its global procurement center and its first store, has provided wide training in management skills."

Growing from a small fishing village with a population in the thousands to over 12 million people today, Shenzhen is now the fourth-largest city-level economy in China. It has investors from 68 countries and regions worldwide with almost 30,000 different operations.

But other cities are developing fast.

"Looking to the future, it's a challenge that the second-tier cities of China are coming up and Shenzhen is losing its (advantaged) position in special policies, location and infrastructure," Pan admits.

He acknowledges the city's management sees the challenge and has acted. In addition to its US operations, it has offices in Frankfurt, Tokyo and Sydney. Plans have been approved for a second full-service US location in New York, likely to open next year.

One way to maintain its advantage is to support Shenzhen businesses that have the capability to expand overseas.

One that has already done it is Huawei Technologies, which now has more than 100 countries in its global network and $11 billion in annual revenue.

"Shenzhen has encouraged our city-based businesses to go global, not only to lesser developed countries in South America, Africa or Eastern Europe but also to developed countries like the US, Australia, Japan and European countries," Pan says. "The city considers this as our focus in order to take the lead in international business over other Chinese cities."

Pan says his office is providing assistance as a matchmaker - finding companies suitable overseas business partners, legal representatives, licensing, accounting services or land. Then the role turns to facilitator by arranging meetings, helping with tours and other accommodation and making contacts with government agencies. This formula is applied both for US companies heading for China and Shenzhen's businesses that are going stateside.

Pan cites a major Shenzhen telecom manufacturer that wanted to invest in the US.

"When they first came here they knew nothing. Then they found out that there are a lot of smaller companies with very good technology. They asked us to help identify some companies, so we used our middleman network, spread the information and afterwards we got proposals from seven different firms. We then selected three, sent the list to them in China and they picked the one to work with," Pan explains.

He adds that the telecom company then bought three smaller technology firms in Silicon Valley and New Jersey and has since opened a headquarters in Dallas, employing over 400 people.

"We helped them from the beginning. Most importantly they are building a research and development center here in order to catch the newest technology developed in the US," Pan says.

While some progress has been made, it will take time before Shenzhen's outreach creates the economic growth and number of jobs that foreign investment has generated in Shenzhen over the past 25 years.

"It takes time to educate Chinese businesses, for them to understand the American market. Plus, the American market is the most difficult to enter in the world," Pan says.

(China Daily 12/08/2007 page6)