Finance innovation: the untapped market in Shenzhen

August 12, 2014 / By

In my previous blogs, we discussed the big picture of Shenzhen’s ‘story’ and Qianhai’s ‘story’ in the area of policy incentives, supply vs demand balance, and analysis of industries such as technology. With regard to the question of ‘why Qianhai’, in my recent discussions with clients, including investors, developers and tenants, I have found some of them taking the view that potential demand growth in Shenzhen and Qianhai will primarily be policy and cost driven, i.e. preferential corporate income tax for qualified industries, and the advantage of lower rents in Qianhai compared to Hong Kong. However, I think this underestimates the role organic growth and innovation in key industries will play.

Qianhai is promoting five key industries, namely:

  1. Finance
  2. Logistics
  3. Information services
  4. Technology, and
  5. Other modern services industries

These are growth industries which are the focus of government reforms and where potential synergies exist by grouping them together.

Two examples of such cross-industry innovation in Shenzhen are:

  • Supply chain finance (SCF). SCF is a developing segment at the intersection of Logistics and Finance, providing credit and liquidity along the supply chain of traditional manufacturing industries such as automotive and Chinese medicine. SCF companies registered in Qianhai are pursuing business not only in Shenzhen, but also China and Asia-wide. For example, the Shenzhen-based Eternal Asia is the first listed supply chain service enterprise in China, with business across 380 cities in China and Southeast Asia.
  • Internet finance. At the intersection of Technology and Finance is the rapidly emerging area of internet finance. Leveraging the internet, smart phones, cloud computing, social networking and eCommerce, China’s internet giants and startups alike are launching securities and wealth management services, peer-to-peer lending, online high interest savings, and third party payment processing services. Shenzhen-based Tencent partnered with five securities companies to establish “Webank” in Qianhai, which is the first private bank approved by the China Banking Regulatory Commission and focuses on e-finance for individuals and SMEs. Local governments have been very supportive of the development of this sector because the financial services offered are well-aligned with key areas of financial market reforms. This will be a significant growth area of financial services in the coming years.

Riding high on the well-developed finance, high-tech, and logistics industries already established in Shenzhen, the economic development model in Qianhai is well positioned to foster the innovative companies and industries that emerge in China. Of course the preferential policies in Qianhai will play an important role in nurturing these new businesses, but their success will depend upon identifying market opportunities and exploiting them. As of end-May, the number of registered companies in Qianhai already reached 6,500, including 46 Fortune 500 companies, with 30 new companies registering each day.


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