Attention grabbers from Shenzhen 1st-quarter GDP data

Against the backdrop of a weak global economic recovery from the COVID pandemic and uncertain geopolitical environment, China, the world's second-largest economy, has become the focus of attention as the Asian country is expected to be a major driving force for global economic growth.

Shenzhen, meanwhile, serves as a pivotal window to observe the vitality, resilience, and potential of the Chinese economy.

The impressive economic figures reported by Shenzhen on Thursday for the first quarter of the year could bode well for China’s goal of growing the country’s economy by around 5% this year while fending off geopolitical obstacles, trade frictionsand Western tech curbs.

Official data show that Shenzhen’s gross domestic product (GDP) grew 6.4% compared with the same period a year ago from January to March to 831.50 billion yuan (US$114.75 billion), allowing the southern China booming city to rank second in growth rate among China’s 10 largest economic cities and trailing only eastern China’s manufacturing hub Suzhou’s 7.9%.

But at 554.90 billion yuan, Suzhou’s economy is much smaller than that of Shenzhen and Shenzhen’s 831.50 billion yuan economy places the city in third place in major Chinese cities by GDP, only after Shanghai’s 1.11 trillion yuan and Beijing’s 1.06 trillion yuan.

China’s economy grew 5.3% in the first quarter from a year ago, accelerating from the 5.2% growth in the previous three months. Meanwhile, Guangdong’s economy achieved an increase of 4.4% from a year ago between January and March, an increase of 0.4 percentage points over the same period last year.

Given the fact that Shenzhen’s economy achieved a year-on-year 6.5% growth in the first quarter in 2023 and the large size of the city’s economy, this year’s 6.4% expansion compared with the same period a year ago coming on last year’s large base in the first quarter was an odds-defying feat.

A breakdown of Shenzhen’s overall economic performance shows that the secondary industry, which takes raw materials as input and creates finished products as output, expanded 10.3% from a year ago to 281.23 billion yuan, beating out the 0.6% year-on-year increase of the primary industry and the tertiary industry’s growth of 4.5% to become the city’s main growth driver.

According to China's GDP accounting and data release system, the primary industry refers to agriculture, forestry, animal husbandryand fisheries, while the tertiary industry produces services.  

As an export powerhouse, Shenzhen has long led major Chinese cities in shipping products to overseas markets. Official figures released April 19 show that Shenzhen’s foreign trade grew 28.8% year on year to 1.02 trillion yuan in the first quarter, with exports growing 28.2% year on year to 642.44 billion yuanand the city's imports jumping 29.9% to 377.85 billion yuan.

The strong showing of foreign trade is one of the bright spots that is worthnoticing when examiningShenzhen’s first-quarter economic figures. But some other sectors have emerged as attention grabbers amid external uncertaintiesbrought by Western countries’ tech-containment efforts and attempts to reduce exposure to China’s supply chains.

Industry is the main sector of the secondary industry and Shenzhen’s long-term adherence of allowing industry to play a prominent role in the city’s economy and adopting a growth model of manufacturing-led strategies are paying off.

Manufacturing remains an important mainstay growth driver of Shenzhen’s economy. Official data show that the added value of industrial firms above designated size, referring to firms with annual main business revenue of 20 million yuan or more, in Shenzhen increased 11.5% year on yearin the first quarter, an increase of 7 percentage points compared with the same period last yearand far exceeding the national growth rate of 6.1%. 

The added value of manufacturing firms above designated size rose 11.8%, with high-tech manufacturing growing 13.1%.

Among the major industrial categories, the added value of pharmaceutical firms above designated size grew 24.1% year on year, while the computer, communication, and other electronic equipment manufacturing increased 16.7% from a year ago.

The technology sector is the beating heart of Shenzhen’s economyand some of China’s largest tech names are headquartered in the city– Huawei, Tencent, ZTE, and DJI, just to name a few.

The city, known as the "Silicon Valley of China,"has long pinned high hopes on the tech sector to play an important role inits economy. Last year, Shenzhen introduced the “20+8” industrial policy guideline to cultivate and develop industries with huge growth potentials, in a bid to improve the city’s industrial landscape and help local manufacturers climb up the value chain. 

According to the blueprint, Shenzhen will focus on fostering 20 strategic emerging industry sectors led by advanced manufacturing, and at the same time, strategically investing in eight emerging but promising industries. The city has launched two batches of funds dedicated to the"20+8" industrial initiative, covering synthetic biology, intelligent sensors, new energy vehicles, biopharmaceuticals, new materials, high-end equipment, digital creative equipment, brain science and artificial intelligence to cell and gene.

The "20+8" industrial initiativehas further boosted Shenzhen’s high-tech sector, with official data showing that 10,456 new firms related to the initiativewere launched in the first two months of the year and billions of investment have been pouring into those industries deemed to be the future growth engine.

Shenzhen’s supportive policies and the city’s mature industrial chain have proved to be a fertile groundfor the tech sector, as shown in the first quarter economic figures.   

The production of major high-tech products continued to grow rapidly, with the production of 3D printing equipment, electronic components, and service robots increasing 62.9%, 72.0% and 45.6%, respectively.

Fixed-asset investment, a gauge of expenditures on items including infrastructure, property, machinery and equipment, turned out to be another pivotal growth driver, expanding at a faster-than-anticipated clip in the first quarter amid a big bet on manufacturing and high-tech sectors.

Fixed-asset investmentgrew 17% year on year in the first three monthsand the growth rate was primarily supported by increased investments in manufacturing, notably a sharp increase of 106.1% year on year in investment in high-tech manufacturing.

The fast growth in fixed-asset investmentis regarded as a vote of confidence by businesses in Shenzhen’s long-term growth potential. In fact, businesses' confidence in the economy of Shenzhenand their willingness to invest in the city are closely related to the city’s good investment environment.

A recentreport on business environment of Chinese cities, compiled by Peking University Guanghua School of Management and Wuhan University School of Economics and Management, shows that Shenzhen ranks first among 296 prefecture-level and above cities in Chinain business environmentrating.

Open, inclusive and innovative, Shenzhen has also become a hotbed for global investment. The number of newly established foreign-funded firms in Shenzhen recorded an increase of 86.6% year on year in 2023 to 8,002 and the actual use of foreign investment in the city reached 62.62 billion yuan, ranking first in Guangdong.

The momentum of foreign capital making its way into Shenzhen remains strong this year, with the number of newly launched foreign-funded firms expanding 29.8% year on year in the first two months of the year to 1,121, or about 15.7% of the country’s total, and the actual use of foreign capital hitting 7.04 billion yuan, accounting for 32% of Guangdong’s total.