By Laurence Brahm

It was autumn of 1981. I remember clearly the clattering sound of that old train rolling down the tracks, along the coast headed up the coast from Kowloon station to Lowu. I was a student at Chinese University of Hong Kong majoring in Asian politics and economics. In the late afternoon after class, I would often watch the sun set over the bay as the train rattled past.

We had heard that China had established four Special Economic Zones of which Shenzhen was the closest to Hong Kong, just across the border at Lowu. It was part of our discussion seminar at the university.Could China really develop special economic zones as laboratories of market economics against a socialist background professors and students pondered. One weekend I decided to find out myself. Together with classmates we went to Lowu, crossed the border and found a quite fishing village with a cute little plaza and a few houses and shops. Water buffalos were still being used to plow rice fields. The village itself was not even as big as Tai Po, the last village stop on the train in Hong Kong’s New Territories before arriving at Lowu. It took hours crossing the border.

A few years later, I was a young lawyer working in Hong Kong and Beijing. Taking the same train and crossing the border, I am met by Chinese lawyers on the other side to discuss an investment project. With a few procedures I cross the border and find myself in Asia’s fastest growing industrial manufacturing hub.Taking me to a five star hotel, the Chinese lawyers ask if I can share some of Hong Kong’s land law documents and if our law firm could offer some opinions as they were busy advising on the drafting of a new land law for Shenzhen. That law would later be the precedent for China’s national land law.

Fast forward to the 21st Century. Taking the high speed rail to Shenzhen I quickly cross the border with just a flash of my Hong Kong identity card and am lost in a labyrinth if skyscrapers. Suddenly New York seems small. This is a fast imploding hyper modern city now at the cutting edge of robotics, Internet technology,telecommunications, big data and finance.

Welcome to 2020! Within a mere forty years Shenzhen has gone from a backwater fishing village to become a major modern metropolitan city exceeding most in the world. This is the outcome of a combined set of policies adopted by China’s central government combining planning with market. Shenzhen itself as an experimental zone for testing policies locally that if successful would become national policies then law.

Celebrating Shenzhen’s significance in China’s reform and opening process, on October 14, China’s President Xi Jinping gave a speech on the occasion of the fortieth anniversary of the establishment of the Shenzhen Special Economic Zone. On the occasion, he presented with deepest respect a large basket overflowing with fresh autumn flowers to a statue of Deng Xiaoping, an icon of the late revolutionary patriarch. Deng’s statue is a symbol of China’s open policy and a memorial to his legacy in establishing Shenzhen as one of China’s Special Economic Zones.

The Special Economic Zones had been established under his experimental policies in the early 1980s.These were pockets of unrestrained regins dotting the coast, strategically positioned in Xiamen across the Straits from Taiwan, Zhuhai across the Pearl River from Macao, and Shenzhen across the Shenzhen River from Hong Kong; Shantou were near Hong Kong. In the late 1980s, Hainan Island was also declared a SEZ.These pioneering coastal regions were designated by the central government as laboratories of market economics to test how the market could be merged with socialism to create what is China’s successful model of a mixed economy today.

The SEZ experiment Deng pioneered in the 1980s had,by the 1990s, proved successful. The SEZs had become laboratories of economic explosion, vibrant industrial centers with a unique no-holds-barred gold rush atmosphere of their own. More importantly, they had become points of absorption and economic blending.Packed with Hong Kong, Macao and Taiwan cross-border investments, the SEZs had become more than models of growth—they represented the fusion of two systems.Chen Yun, Mao’s former Minister of Finance, who often supplemented Deng’s ‘white-black cat’ theory with his own ‘bird cage’ theory (the market should fly like a bird within the cage of State planning, but without a cage the bird will ‘fly away’) refused to visit the SEZs,labeling them ‘capitalist’. Deng retorted that they were not capitalist because they were administered under China’s Central Government, with Communist Party cadres serving as State officials monitoring and guiding the various stages of development. Deng said, ‘Regardless of whether you call it capitalism or socialism, does it raise productivity?’ Deng effectively eliminated labels—whether you call it capitalism or socialism or something else, the name is irrelevant.The whole point is that results are achieved from the policies applied and that those policies are aimed at achieving results.

Deng himself questioned and then challenged Western extreme theories of liberalism, which is his opinion were not actually put into practice. The apparent dichotomy fuelled Deng’s own desire to modernize and pursue economic development in China without falling into what he saw as the confused state of mind of Western liberalism which had no clear direction in practical economic terms. In his view,political emotionalism must not interfere with China’s development.

Deng, on the one hand, exalted boldness in reform yet,on the other, he warned of careless haste. He cautioned as follows: Cross the river by stepping carefully to assure the stones are in place. No-one has gone this road before so we must go carefully…In crossing a stream we must be courageous in walking across the unknown…we must walk forward, we cannot walk back…but in taking each step we must be sure it is the right step. So first feel the way and the stone to make sure it is secure before putting the weight on the stone.

In combining socialist values with entrepreneurial freedom, Deng encouraged the people to ‘grasp with both hands at the same time’. Using a symbolic leftright imagery, Deng spoke against the tendency of moving from one extreme to another by preaching a middle road. On a more practical level, he warned against the extremes that could occur in a suddenly open economy, the abuse of opportunity at the expense of those socialist values that were beneficial to society collectively. Deng adopted Mao’s axiom, ‘seek truth from facts’ as his own. However, his approach was to address specific economic needs and problems at the appropriate stage in China’s development, which marked a decisive departure from the more sweeping and theoretical economic directives, which marked earlier periods that caused economic stagnation. The culmination of this progression in opening China’s economy has proven to be a framework of pragmatism.

Laurence Brahm, a senior fellow at Center for China and Globalization (CCG)

Before arriving in Shenzhen to commemorate the 40th anniversary of the SEZ establishment, President Xi visited Guangdong Province inspecting progress in new industries there. The combined region that includes Hong Kong, Macao, Shenzhen and the coast of Guangdong has been designated the Great Bay Area.China’s Great Bay is the new focus for high technology,communications, and artificial intelligence, technology assembly and manufacturing, along with finance.Shenzhen has become the symbol of China’s open policy to the world today.

By visiting the Great Bay Area before the ceremonial speech in Shenzhen, President Xi sent a clear signal that China is open and will continue to open to foreign investment. He dispelled views that China would look inward in the future during this time of decoupling and de-globalization. On the contrary, Xi made it clear that regardless of what other nations do at this time to de-couple or sanction, China will continue to welcome foreign investment. Xi’s message: China will continue to open to the outside world. And the Great Bay Area will be Asia’s Silicon Valley.