Shenzhen Has Reached the Age of No Doubts. One Observer Is Full of Them | Shenzhen at 40 ⑤

"When we talk about Shenzhen, we're also talking about what China's market economy should look like."

Shenzhen's anxiety about its identity as a "special economic zone" had been building since the mid-1990s, but it didn't erupt until years later, set off by an essay posted to an online forum, Shenzhen, Who Abandoned You?. Its author, who wrote under the handle "I'm Crazy for Her," was Guo Zhongxiao, an employee at a Shenzhen securities firm. Writing at the end of 2002, he laid bare the loss and disorientation people in Shenzhen were feeling. The essay rattled a lot of readers.

What set it off was a rumor that ZTE and Huawei — at the time Shenzhen's two largest high-tech companies — were about to move their headquarters to Shanghai. The relocation rumors also reached China Merchants Bank and Ping An Insurance, two financial companies that had started in Shekou in 1987 and 1988 and stood as Shenzhen's homegrown names in finance; after 2000, word kept circulating that they, too, were headed for Shanghai. Then there was Walmart, one of the few foreign companies with its China headquarters in Shenzhen — and that one wasn't a rumor. It really was planning to move its procurement headquarters north.

On top of that, the Shenzhen Stock Exchange, founded almost at the same time as the Shanghai exchange, had gone two years without a new listing, and the growth-enterprise board it had originally planned showed no sign of winning approval. Analysts at securities firms said people had lost confidence in Shenzhen's financial markets. Even setting aside any rivalry with Shanghai, Shenzhen could not claim to be South China's regional financial center. The People's Bank of China had put its branch in Guangzhou, covering Guangdong, Hainan and Guangxi. Shenzhen had only a central sub-branch, reporting to that Guangzhou branch.

Shenzhen wasn't as attractive as it once was, and people felt it. Data from the Shenzhen Statistical Yearbook showed that from 2001 to 2005 the average annual growth rate of Shenzhen's resident population fell to its lowest point ever, just 3.4%. In the peak years of 1991 to 1995, it had been 21.8%.

When the "abandonment thesis" caused a sensation, Jin Xinyi had not yet met Guo Zhongxiao — their first meeting came a year later, at a restaurant in Huaqiangbei. But over Shenzhen's development after 1997, the two had already been sparring online for some time. Jin Xinyi took the opposite view: "Far from abandoning Shenzhen, people from across the country are flooding in." In 2003 he wrote an essay, Has the Pearl River Delta Lost Its Competitiveness?, rejecting the relocation rumors.

The piece, unmistakably in Jin Xinyi's style, listed the same ills of the city that Guo Zhongxiao had pointed to: sluggish reform, low administrative efficiency, a poor urban environment. But Jin Xinyi's main argument was against writing Shenzhen off. His cautious optimism, though, clearly didn't strike the chord his friend's pessimism had.

People in Shenzhen talk about the city they live in more avidly than people anywhere else in China. They don't dwell on the details of daily life, or the elegance of some earlier era — they like to talk about the future. The first generation of Shenzheners built the city with their own hands, and they had reason to believe that, beyond whatever the central government decided, Shenzheners could and should have a say in Shenzhen's future.

In Shenzhen in 2003, Jin Xinyi, Guo Zhongxiao and Huang Donghe were known as the "Three Musketeers of Shenzhen." They were active on a forum called "Interhoo", which had gone online in 2001 and had collected more than 5,000 posts discussing Shenzhen. Huang Donghe, who went by "Lao Heng" online, founded it.

Jin Xinyi, whose real name is Zhang Hongqiao, borrowed the name from what Lin Shu once called Qian Xuantong — a man with deep grounding in classical Chinese scholarship who turned into a reformer championing the New Culture Movement. In 1997 the 28-year-old Jin Xinyi, a native of Henan, came to Shenzhen to work at Vanke Weekly, the in-house magazine of the property developer Vanke. At the time, that corporate publication carried as much influence as a nationally distributed magazine.

In 2001, Jin Xinyi published online an essay of more than 18,000 characters, Shenzhen, Are You Arriving or Leaving. Nearly everything he would later say about Shenzhen can be traced back to it, and it can be summed up as a Shenzhen-ist's defense and reproach. That was also the defining trait of most of the grassroots commentators on Interhoo.

During the years when grassroots commentators felt most confident about Shenzhen, Jin Xinyi and the other two founded the Shenzhen Merchants Research Society, held offline forums, and compiled and published the grassroots debate on Shenzhen's problems, hoping to fill in what official reports left out. The Shenzhen government took notice, and in 2004 it ordered 3,000 copies of Interhoo's first publication, Shenzhen at the Crossroads.

Jin Xinyi wasn't the first grassroots commentator to win official recognition. That was his sparring partner Guo Zhongxiao, summoned for a meeting in 2003 by Yu Youjun, then mayor of Shenzhen, over Shenzhen, Who Abandoned You? But Jin Xinyi showed a greater interest in working within the system; he believed that getting close to policymakers would accomplish more than speaking out online.

"I place my hope in the top leaders of the provincial party committee and government, and the city party committee and government, being far-sighted, magnanimous, and tolerant enough to listen to opinions from wider society," he said in one interview.

In 2005, Jin Xinyi was recommended to join the China Zhi Gong Party. In 2007 he became a member of the Futian District committee of the Chinese People's Political Consultative Conference (CPPCC); in 2010, a member of the Shenzhen municipal CPPCC committee, where he submitted eight proposals. In 2015 he became a deputy to the Shenzhen Municipal People's Congress, submitting at least two motions every year.

In most of those proposals and motions, Jin Xinyi has pushed for Shenzhen to be treated fairly, and complained about the administrative pecking order and the policy favoritism built into it — whether it's Shanghai getting preferential treatment nationally, or Guangzhou getting it within the region. "Using administrative means to stamp out competition is unwise."

In 2008, Jin Xinyi attended a forum hosted by Wang Yang, then Guangdong's party secretary, where he proposed that the provincial government work with the Shenzhen Stock Exchange to "cultivate" companies as listing candidates for the growth-enterprise board. "Does the Shenzhen Stock Exchange have to move to Guangzhou before it counts as Guangdong's exchange?" Jin Xinyi said. Wang Yang agreed with him, but nothing actually changed.

Meanwhile, Shenzhen was being reminded, more and more often, that it had failed to seize the opportunities of joining the WTO, and that the city's role was shrinking to that of a regional economy. This time it wasn't grassroots commentators but government officials openly voicing worry about Shenzhen's future. "You can go head-to-head with Singapore or Seoul — pull that off, and you've accomplished something. Competing with cities inside China isn't ambitious," Wang Yang said at a government meeting, adding that both the provincial and the central government were worried about where Shenzhen was headed.

By 2011, Shenzhen had cut its GDP growth target for the next five years from the previous five years' 13.5% to 10%, the steepest downward revision of any city in the country. An IBM survey that year found that Shenzhen and Beijing had the worst commutes in the world, trailing only Mexico City.

Speaking as a CPPCC member in an interview, Jin Xinyi said Shenzhen had entered the later stage of industrialization; industrial-investment growth had fallen for five straight years, and, constrained by land, environment and population, the city had run into a transition problem that "has to be the first thing solved." The same problem would later surface nationwide.

Jin Xinyi now explains "Shenzhen-ism" this way: "When we talk about Shenzhen, we're also talking about what China's market economy should look like."

Some critics, though, believe Shenzhen has become less exceptional. Ding Li, a professor at the Guangdong Academy of Social Sciences, told Southern Daily in 2012: "Reform today isn't like it was back then, starting from a blank sheet of paper. Now all kinds of vested interests have settled in, hardening into rigid interest groups, and they have become an obstacle to reform in Shenzhen too."

Last November, Guangdong province sought to bring the three major civil airports of Guangzhou, Shenzhen and Zhuhai under unified management, merging their ownership. That could affect Shenzhen airport's international routes.

On the second night after the news broke, Jin Xinyi wrote a piece, Jin Xinyi Says | On the Airport Restructuring: Why Does Shenzhen Always Get the Short End Whenever Guangdong Draws Up a Plan?, and published it online. He criticized the Shenzhen government for not taking a firm enough stance and for failing to secure the interests the city was owed, and criticized the provincial government for disregarding market principles and still issuing administrative orders with a planned-economy mindset. The article was quickly deleted.

In a later interview, Jin Xinyi said: "For the past two or three years I've been playing by the rules — staying quiet publicly, working through channels inside the system to make my voice heard. But the results over these two or three years have left me deeply discouraged."

"If the channels inside the system worked smoothly, I wouldn't choose to speak out online. But clearly, they don't work smoothly."

In late April this year, we met Jin Xinyi at a bookstore in Shenzhen's Futian district and asked him to talk about Shenzhen and about reform and opening-up.

Q = QDaily

J = Jin Xinyi

Q: How do you understand what "reform and opening-up" means today?

J: "Reform and opening-up" — to put it bluntly — has been distorted; you could say almost anything now gets called "reform and opening-up." Of course "opening-up" still has a fairly specific meaning, but the word "reform" has been so distorted that it no longer has a fixed meaning. Any change at all gets labeled "reform." In 2001, when we said "reform," we knew what counted as reform. After 2001, it's hard to say. The word has been abused, its meaning altered. "Opening-up" has stayed relatively clear. In the 1980s we used opening-up to force reform through; now opening-up and reform don't necessarily have such a close relationship.

Joining the WTO in 2001 was the key turning point. Before 2001, things were clear. Take marketization: people fairly clearly agreed that the market, not the government, should do more of the work of allocating resources. Take state-owned enterprise reform: getting SOEs out of competitive sectors — that was also clear in Zhu Rongji's SOE reforms.

The tax-sharing system? I don't think you can simply call it a grab for power, a recentralization. In fact, it was the first time in Chinese history that the fiscal powers of the central and local governments were divided by law — before that, there was no legal division. Usually the central government negotiated with local governments: was it a 70-30 split, or something else? Neither law nor institution determined how the center and the localities shared fiscal responsibility. The tax-sharing system was the first time it was done through law. So on the tax-sharing system, I think the significance of reform outweighed the significance of centralization.

On the other hand, relatively speaking, it also granted citizens a certain amount of economic freedom, moving toward respecting property rights. That was clear before.

We've always said that Deng Xiaoping's political line, in a word, was reform and opening-up. And Deng's signature work of reform and opening-up was the Shenzhen Special Economic Zone. Shenzhen truly was a pioneer, in the past, on both reform and opening-up. Now I think Shenzhen is going through a re-examination of its own role. As Deng Xiaoping's signature work of reform and opening-up, how do you enter a new era? Whether you like it or not, you have to enter what the central government calls the "new era." That's the question Shenzhen needs to work on now. I, personally, haven't written on this in at least the past year.

Q: In your view, what breakthrough reforms has Shenzhen carried out in the past?

J: Shenzhen's breakthrough reforms all happened before 1997. Strictly speaking, before 1991. (Before Deng Xiaoping's Southern Tour?) Right. And not just in Shekou. Shenzhen was scouting the road for the whole country then; most of the breakthroughs happened during Liang Xiang's tenure and Li Hao's tenure.

Li Hao once envisioned that Shenzhen would also carry out political reform. But that vision was already dead by 1990. He had imagined Shenzhen wouldn't set up a People's Congress or a CPPCC — but in fact Shenzhen established both in 1990. So you'll notice Shenzhen's "two sessions" run on a term cycle (note: convened once every five years) offset from the central government's. Nationally it's 1993, 1998, 2003 … with the National People's Congress convening in early 2018. Shenzhen's started in 1990 … and that's when the political reform Li Hao had envisioned was declared over.

After 1990, it's not that Shenzhen did nothing, but that most of what it did was in the economic realm.

Does the economic realm count as reform? Sure, that's reform too. SOE reform continued after 1990. After 2000, in 2004 and 2005, Shenzhen sold off shares in many state-owned enterprises and brought foreign capital into them — at the time, that put it ahead of the rest of the country.

Q: Mixed-ownership reform.

J: Right, but nothing stood out.

As for finance, all financial reforms follow the central government's arrangements, and not just in Shenzhen. Anything touching the stock market has to involve Shanghai and Shenzhen. There haven't been many other breakthroughs. Especially before 2004, Shenzhen had very few breakthroughs in finance. The reason was Zhu Rongji's financial reforms at the time — for instance, abolishing the People's Bank of China's provincial-level branches and setting up regional branches instead. The South China regional branch went to Guangzhou; the former Shenzhen branch, which used to report directly to the central bank's head office, was switched to reporting to Guangdong. That meant Shenzhen couldn't make any financial innovations or developments on its own, because everything had to go through Guangzhou. So in that sense, there wasn't much reform in finance either.

On social development there's been a little, not much, and it also followed Guangdong province's lead. After 2007 and 2008, once Wang Yang became Guangdong's party secretary and pushed social development, Shenzhen, under the province's unified deployment, made some attempts too. But the steps weren't large. For example, setting up community service centers in every neighborhood committee (now renamed "party-mass service centers") — would you call that reform? It just added fiscal funding directed at communities. No breakthrough reform was made. For instance, there was a proposal at one point to abolish the subdistrict offices; that wasn't done. If it had been, that would have been a major reform. But it wasn't done. Guiyang did it instead. There was also a proposal to break the neighborhood committees into smaller units — "one service station, several committees" — because right now a single neighborhood committee covers anywhere from three to five thousand people up to thirty or fifty thousand, and in some cases as many as a hundred thousand. The national Organic Law on Neighborhood Committees specifies one committee per one hundred to seven hundred households. So we proposed that Shenzhen break up its neighborhood committees, one per residential compound. That proposal wasn't adopted either. Competitive elections for neighborhood committees, strictly speaking, weren't implemented either. Our neighborhood-committee election model is still the old one. So, on the social layer, what actually got done?

I can't say Shenzhen did nothing after 2001. We once had high hopes: starting in 2003, the State Council, working through the National Development and Reform Commission's Institutional Reform Department, ran comprehensive supporting reforms — first in Shanghai and Tianjin, then in Chengdu, Chongqing and Changsha. Many of us hoped those comprehensive supporting reforms would accomplish something.

Shenzhen ended up being the seventh city designated a comprehensive-supporting-reform pilot zone. (That late?) For Shenzhen, that was already strange. How could you expand reform without including Shenzhen? But it kept being held off, all the way to seventh.

The original special economic zone was about economic reform, but economic reform alone wasn't enough anymore; it needed to extend into other areas. At the time, the comprehensive supporting reform discussion covered three areas. One was the last stretch of economic reform, the hardest part to reform — the part involving resource allocation, including financial-system reform, land reform, SOE reform, household-registration (hukou) reform and fiscal and tax reform, all the unfinished parts of our economic-system reform. Land reform, fundamentally, still can't be pushed through.

The second area under discussion was the social sphere, where big reforms could be pushed. The third didn't touch political-system reform at all, only the administrative system. The reform Shenzhen eventually carried out fell into that category. The so-called "super-ministry reform" was ahead of the rest of the country. In fact, when the whole country later did super-ministry reform too, the gap in time wasn't very large, which shows Shenzhen was doing what the central government asked. If Shenzhen had worked it out on its own, it certainly wouldn't have spread nationwide so fast.

To this day I still think super-ministry reform doesn't mean much. What problem is it supposed to solve? The problem of departments passing the buck to each other? Supposedly to solve the buck-passing you merge ministries, or merge two bureaus — but whatever still needs managing still needs a division set up for it, and divisions still fail to work with each other. If it takes a bureau chief to coordinate, couldn't a deputy mayor have coordinated before? So super-ministry reform can't solve the problem of departments shirking responsibility onto each other. Cutting staff? Can you actually cut anyone? At most you can merge the back-office departments — administration, finance — and even then you can't lay anyone off, you can only stop hiring. You can't trim much staff at all. As long as it's a business-facing division, it has to stay, because someone has to be responsible for it. So super-ministry reform doesn't mean much.

Q: What would a meaningful reform look like?

Reform of the administrative approval system. But Shenzhen has gone through six or seven rounds of it, each time claiming it cut however many approval items — and it's all sleight of hand. Not a shred of power actually gets given up.

The other one is job descriptions and performance evaluation — that's the key to raising administrative efficiency. The so-called tangle of departments passing responsibility back and forth is fundamentally a job-description problem. Performance evaluation has to rest on clear job descriptions. But does the current administrative system have detailed job descriptions? Please. Only with job descriptions can you hold anyone accountable.

Back then we used to say, if you really want to push administrative reform, why not start with fiscal reform? Because if you can control the government's purse strings, you can force the government's hand. Why cut staff now, with headcount quotas locked down tight — does it work? Not at all. Even though headcount is locked, it's turned into a kind of slavery: people with formal positions draw salaries and don't work, while lots of people outside the formal headcount are hired to do the actual work, as their slaves, so to speak. This is extremely common in Shenzhen, and it's the same all over the country. So even with headcount locked down, doesn't the administrative apparatus keep swelling fast anyway? Can you just fire all these people outside the formal headcount? No, because they all have connections. So you need to control the size of the workforce the budget supports. Can fiscal spending be brought under control?

In fact, fiscal-system reform has been pushed for years — take budget transparency: where did it stop? Category, chapter, section, item — comprehensive spending disclosed down to the item level. Disclosing to the item level has no value at all; it enables no oversight whatsoever. Disclosed to the item level might mean, say, the Education Bureau's budget is 12 billion yuan this year, of which 6 billion is administrative spending — that's one item — school funding is 3 billion, that's another item, 8 billion for building new schools, and that's it. Does that let you exercise any oversight at all? None whatsoever. And yet we congratulate ourselves that we've disclosed down to the item level. The disclosure reform the National People's Congress has been pushing — disclosure to the item level — has already taken ten years, and in these ten years it hasn't moved any further. Do you dare disclose down to the sub-item level? What's a sub-item? Building a new school — spell out exactly how much money goes into that school, how much for the hardware — only then can the public actually oversee it. Just saying the education budget is however many billions leaves the public in the dark, with no idea what that even means. How much did it cost to build a bridge — the public can monitor that, because people who understand construction will say this bridge shouldn't cost that much, and we won't let it through. That's the budget-oversight piece. I believe the power to decide the government's fiscal budget should belong to the People's Congress, not just the formal power to approve it.

The other piece is the tax-sharing system. Zhu Rongji took the first step, dividing taxes between the center and the provinces. He never defined how taxes should be divided between provinces and prefecture-level cities, or between prefecture-level cities and counties and districts — none of that. In every prefecture-level city the higher-level government decides unilaterally how to divide it up; the level below has no say. The problem is that with this kind of division, to this day we still haven't clarified what each level's responsibilities are — even Lou Jiwei has raised this. How do fiscal power and administrative responsibility correspond to each other?

Where's the crux of fiscal reform? Besides needing legislative consent to levy taxes, and the people's consent for the budget, what else is there? If you're a government with power divided between levels, you have to define clearly what the central government does, what the provincial government does, what the municipal government does. We're not a government with divided powers. Only a government with divided powers is rational. Isn't rationality exactly what all our reforms are supposed to pursue? We're willing to admit our goal is a government with divided powers, yet unwilling to break up this vertical hierarchy, because we've been an autocratic state for more than two thousand years — once that inertia sets in, removing it is harder than reaching the sky.

Q: What you just said seems to imply that if a reform is led by the central government rather than started by Shenzhen itself, it isn't really reform.

J: This is exactly what people have argued about for a long time — should reform go top-down or bottom-up. If it's top-down, there's the problem that different places have different characteristics, regional differences.

Local reform is best. But there's the problem of the center allowing trial and error. If you get it wrong, can you be exempted from responsibility? You can't. Including Shenzhen's proposal for legislation to exempt reformers from liability.

Q: Right, Shenzhen's 2005 Regulation on Promoting Reform and Innovation caused quite a stir — it stipulated that "if a reform or innovation effort makes a mistake, fails to achieve the expected result, or causes some loss," as long as there was no personal gain or malicious collusion involved, the responsible party could be exempted from liability.

J: But is passing such legislation meaningful? Whether you're held liable isn't up to you — it's up to the central government. It doesn't even give you the nerve to try. Legislating it is just a gimmick dressed up as reform. After that, it's no longer real reform — it's reform for the sake of looking like you're reforming.

Would you say the reforms Shenzhen carried out in the 1980s were something completely different? No. Even Yuan Geng's and Liang Xiang's reforms — if they hadn't had backers in Beijing guiding them, or vouching for them, could they have done it? Li Hao's case is even more obvious. If the very top leadership hadn't been backing him, could he have carried out reform in Shenzhen? Not a chance. So this is bottom-up and top-down combined.

Now with the "12th Five-Year Plan" they say reform has entered the stage of top-level design, coordinated by the center. What we'll see is that once you coordinate everything centrally, you stop accommodating local characteristics, and all sorts of maladaptation shows up. In the end the center either forces it through or, failing that, backs off. A nationwide, one-size-fits-all reform measure carries a very high opportunity cost. With a single special zone the cost of trial and error is low — if the stock market doesn't work, you just shut it down.

Q: Today's Shenzhen isn't the same as it was in the 1980s when people first arrived. The cost of trial and error isn't low anymore either.

J: Right. But even so, if Shenzhen tries something and gets it wrong, the opportunity cost at most affects one city. Reform that is purely bottom-up, I think, isn't workable. But reform purely led by the center has its problems too. How do you combine the two?

Q: What do you think is the biggest problem reform faces right now?

The real problem is that our reform has lost its direction — nobody knows which way to go anymore. Let me give an example I've used before. It's as if, starting in 1978, a great mass of people — imagine all 31 provinces, municipalities and autonomous regions marching toward the same goal, with Shenzhen out in front, leading. Then there's a wide river, and once Shenzhen reaches the bank it can go no further. It has to stop and wait, not knowing how to cross. Slowly the others catch up, all arriving at the bank, and none of them know whether to cross, or how to cross. This has been the situation for a decade or more. Reform has reached the river. Do we feel our way across stone by stone, or build a bridge, or find a boat? And what do we do once we reach the other bank? Nobody can say. So we just stand here waiting.

Deng Xiaoping was very clear that the goal was to build a market economy — a socialist market economy, yes, but a market economy first. What's the goal of a market economy? Honestly, right now we don't know.

Deng Xiaoping always said that without political reform things wouldn't work — only that we needed to be careful, to advance it steadily. He never said don't consider it. So what direction should political reform take? Democracy and rule of law. That's what government work reports said in the 1980s. Now we talk about socialist democracy, socialist rule of law — but what does socialist democracy mean? Should there be elections? Can we even discuss constitutionalism? Right now the whole approach is to criticize constitutionalism across the board. So, does socialist democracy have anything in common with Western democracy? Can anyone spell out what those common points are? Nobody's discussing it. You may have differences, but there should be common ground too, and common ground is the foundation. We're confused about this too.

Q: You used to talk mostly about Shenzhen. Do you now feel that discussing Shenzhen purely as Shenzhen has lost its meaning?

J: Why did we set ourselves three principles early on — rational, constructive, local? Why emphasize the local? Because discussing national political affairs carries risk, and discussing local matters carries less. Also, the Shenzhen government is relatively tolerant.

There's another reason: Shenzhen is a microcosm of the whole country. Whatever reforms Shenzhen can't pull off, don't expect the whole country to pull off either. We believe Shenzhen — in the structure and quality of its economy, its development model, its growth pattern, and also in its social structure and cultural characteristics — holds exemplary significance for the entire country.

Take social structure. Shenzhen is a textbook case of an entirely new social structure, a society of strangers. The modernization and restructuring of our society should be built on the foundation of a society of strangers. That doesn't mean people can't get to know one another; it means first recognizing everyone's legal rights, rights that have boundaries, and everyone respecting those boundaries. That's what Kant called legal right — my rights end where they don't infringe on yours. Assume everyone starts out as strangers, and build relations from there. I've spent the past few years doing community research. A community in practice is a society of acquaintances, not of strangers — but it shouldn't be a traditional society of acquaintances; it should be one rebuilt on the foundation of a rule-of-law society of strangers.

Shenzhen's social structure is a textbook case: everyone is quite clear about where the boundaries of their rights lie, and on that basis people can freely form associations — trade associations, chambers of commerce, all kinds of social organizations. The free association of free individuals. We're not allowed to use the term "civil society" now, but that's what we mean by civil society.

Q: Interhoo's final publication, in 2009, was Standing Firm at Thirty: The Shenzhen Dream and Civil Society. Ding Li, the professor at the Guangdong Academy of Social Sciences, has also said Shenzhen has the strongest claim to talk about fairness.

J: Shenzhen has the best foundation for it, because so many of us arrived as strangers to each other. On that basis of strangers we rebuilt a social structure. If we're exploring this here, and if even Shenzhen can't get grassroots self-governance to work, then… If it can be done anywhere, Shenzhen is where it's most likely to work.

That's what we mean when we say know Shenzhen and you know the whole country, and discussing Shenzhen is discussing the whole country. What Shenzhen is doing now is the direction the nation is headed. What Shenzhen does in the future ought to be the nation's goal too. So when we say we're discussing Shenzhen, we're actually discussing China. We're just avoiding the risk.

Q: Why do you call yourself a Shenzhen-ist?

The definition of Shenzhen-ism lies in this: Shenzhen is the country's scout. If Shenzhen can build a lasting market-economy system, then the whole country should be able to. When we talk about Shenzhen, we're also talking about what China's market economy should look like. For instance: should private property rights be clearly defined? When conflicts arise, should they be settled through transparent rule of law rather than the intervention of power?

Q: Guangdong province pushed "small government, big society" back in 2009. Is Shenzhen a good example of "small government"?

Shenzhen — well, it's both a small government and not a small government. Calling it a small government makes sense relative to most governments elsewhere in the country: Shenzhen's government intervenes very little in the micro-economy, basically not at all.

Because of the foundation built by past years of reform, a lot of people don't understand why Shenzhen's market-economy system is somewhat more mature than the rest of the country's. Shenzhen did two things. First, when the Shenzhen Special Economic Zone was set up, in the early 1980s, we took our first step — we didn't create any of the departments that manage the micro-economy elsewhere. No bureaus of any kind. We only set up individual state-owned enterprises, and industry associations handled sector governance. It was done step by step. The government never had the levers to intervene in the micro-economy. It doesn't get involved in managing those micro-economic matters.

The second step was SOE reform. State-owned enterprises in competitive sectors were losing money hand over fist, which gave Shenzhen an opening — merge them, shut them down, sell them off. There were two rounds; after those, the only state-owned enterprises Shenzhen had left were the ones providing public services. (Note: in 2004 the Shenzhen government brought in foreign capital again, commercializing even the public-service enterprises.)

That way, with no state-owned enterprises left in competitive market sectors, the government could finally treat everyone even-handedly. That's why no other city in the country has a market economy as mature as Shenzhen's — elsewhere they hand out market privileges and issue policies to protect state firms.

Take real estate. State-owned real-estate companies in Shenzhen now hold a very small share. Private developers have grown very large. But real estate is the sector where power intervenes most, so there's still some of that. Still, it's much better than the rest of the country.

Does that vitality still exist today? It's diminishing. We've set up some new local state-owned enterprises again. Finance, for instance — a competitive sector — and every district is setting up its own financial holding center. Some backsliding has happened, but Shenzhen is probably still a bit better than the rest of the country.

Compared with the U.S. government, ours is still big. Even compared with Japan or Taiwan, it's big. The civil-service system, plus the workers outside the formal headcount — the numbers are still large. But compared with other Chinese cities, it's small.

Q: You came to Shenzhen in 1997. What was your impression of the city then?

J: I lived in several places in Guangdong — Huizhou, Guangzhou. In 1997 I came to Shenzhen, and the city was thoroughly disoriented. Hong Kong had just returned. Before that, Shenzhen had a crucial mission: to contribute to Hong Kong's handover. The reason Shenzhen was made a special zone and given so many favorable policies was to make sure Hong Kong returned smoothly. Once the handover happened, Shenzhen was suddenly adrift. In 1996 the Shenzhen party committee and government had drawn up a whole set of plans for what Shenzhen should do after the handover to keep Hong Kong prosperous and stable over the long term. But the central government didn't adopt most of those proposals.

After 1997, some people really did leave Shenzhen.

Guo Zhongxiao and I held diametrically opposed views. He wrote that essay, Shenzhen, Who Abandoned You? Looking back now, from 1997 to 2002 Shenzhen had a net inflow of 1.5 million people every year — what does that tell you? It means that far from abandoning Shenzhen, people from across the country flooded in. All of them came looking for work, which means Shenzhen created more than 7 million jobs over those five years. Why could it create that many? Because Shenzhen's high-tech industry grew fastest in those five years.

Q: You've stayed optimistic about Shenzhen's development all the way to now.

J: Even now, Shenzhen's population keeps growing on a large scale. In 2016, by a conservative estimate, Shenzhen had a net inflow of 800,000 people. Eight hundred thousand is the size of a major city. Whether you're a farmer or someone from a small town, if you're going out to find work, Beijing, Shanghai or Shenzhen will be your first choice. A city is attractive precisely because it has the most opportunities.

Q: You've also proposed expanding Shenzhen's territory.

J: Population density is too high. 1,980 square kilometers, 23 million people. But every year another 500,000 to 800,000 people squeeze in, and people feel the city can still take them. Some say Shenzhen could hold 40 million with no problem. Whether it's necessary to expand Shenzhen's outer boundary is something the central government has to consider.

We've always said Shenzhen, Dongguan and Huizhou have formed an integrated industrial cluster. Take the thirty, forty years of reform and opening-up — the most important result has been an electronics-and-information industrial cluster on the eastern shore of the Pearl River Delta. How big is it? Shenzhen alone accounts for something like 2.3 to 2.4 trillion yuan, Dongguan roughly 1 trillion yuan, Huizhou 200 to 300 billion yuan. Add it up and you get 3.5 to 3.6 trillion yuan — around 600 billion US dollars — of industrial cluster. How many clusters like that are there in the world, or in all of China? This cluster is extremely valuable, it's globally competitive, and it grew up on its own terms, led by Chinese companies. The Yangtze River Delta also has a large electronics-and-information cluster, but it's led by foreign capital — European, American and Japanese, plus Taiwanese. So should the country pay attention to this cluster or not?

The Greater Bay Area isn't set up that way. The Greater Bay Area is supposed to solve the problem of Guangdong-Hong Kong-Macao cooperation. But the way it's being run now still can't solve it. Handing the Greater Bay Area plan to the province of Guangdong is absurd. The Greater Bay Area should be built around a Shenzhen-Hong Kong international metropolitan core; Guangdong province will only ever recognize a bay area centered on Guangzhou. How is that supposed to work? It can't.

Q: You always frame your discussion in terms of cities, and you often bring up Jane Jacobs's idea of city clusters.

J: Right. We think Hong Kong, Shenzhen, Dongguan and Huizhou form the most tightly connected city cluster — more tightly connected than Guangzhou and Foshan, because of this 600-billion-dollar industry chain, the upstream-downstream relationships, the service relationships.

Hong Kong serves the whole chain too. The Hong Kong Stock Exchange provides financing; mergers and acquisitions also go through the exchange. Do you know how many bosses from Shenzhen, Dongguan and Huizhou live in Hong Kong? Is Pony Ma a Hong Kong businessman or a Shenzhen businessman? He's both. But he lives in Hong Kong year-round. Likewise Li Dongsheng of Huizhou lives in Hong Kong year-round. This extends to Hong Kong's universities, which have close ties to these cities. Some equipment exists only in Hong Kong and not on the mainland — chip-testing equipment, for instance, which is banned from being shipped to the mainland. So some big Shenzhen companies still have to send people carrying chips to Hong Kong to test them.

It's just that Shenzhen is increasingly taking over Hong Kong's service functions in this network. Shenzhen now has a stock exchange too, financing capabilities, an M&A platform. There are also many accounting firms and law firms serving these deals, and research and development serving the region. Hong Kong's airport handles international flights; Shenzhen's airport is also serving the region's domestic flights. When people from Dongguan or Huizhou fly domestically, they still use Shenzhen's airport.

So these three cities are very tightly linked along the electronics-and-information chain. But administratively they're cut off from each other. It's hard to imagine setting up a city-cluster government — impossible to imagine, really. Especially where it involves the relationship between Hong Kong and the mainland, it gets more complicated. Hong Kong is not like Shenzhen, which is open to people from across the country — how hard is it to get Hong Kong residency? And Hong Kong's fiscal funds definitely can't be spent outside Hong Kong's borders. So it looks like an open city, but in fact a lot of its flows are restricted.

In the same way, Shenzhen and Dongguan have an integrated industry, and daily life is becoming more integrated too — even organized crime is integrated — but the two governments guard the boundary between them strictly. It's the same with Shenzhen and Huizhou.

Q: Is this unsolvable?

J: It's unsolvable. China runs on administrative-region economics. But look at Shenzhen's Pingshan district and Danshui, in Huizhou's Huiyang district — there's a line between them, and on the Shenzhen side housing sells for 40,000 yuan while on the Huizhou side it sells for 10,000. And a lot of Shenzhen people live over there. That shows our urban-management system can't keep up. Is adjusting administrative boundaries the only way out? Or is it reforming the tax system? The reason administrative-region economics exists at all is the tax system. But will the central government touch the tax system now? Clearly not, because it sees this as one of the successes of the past thirty years: making corporate income tax a local tax spurred competition between cities, driving them to chase investment, compete for companies, compete for headquarters — and that's what produced economic growth.

So either Shenzhen, Dongguan and Huizhou merge into one city, protecting the industry chain and letting market forces allocate resources more fully — or, as things stand, Shenzhen keeps trying desperately to stop companies from moving out. Huawei moving its R&D to Songshan Lake was the right call for Huawei, but a big loss for Shenzhen — not just in tax revenue, but in people. If Shenzhen, Dongguan and Huizhou were integrated into one, the problem wouldn't exist.

Q: Last question — how do you understand the theory of successive "rounds" of reform, and Shenzhen's role in it?

J: On how many rounds of reform there have been, China's intellectual circles differ. The mainstream view holds that from 1979 to now, reform has been continuous and unfinished — it never stopped. Call that the single-reform theory.

The two-reform theory could also be called the three-reform theory. It holds that the first round of reform ended in 1989 and was proven a failure. The second round ran from 1992 to WTO accession in 2001, and it succeeded. Was there a third round? Some say yes, some say no. The official line will always say there's just one reform. In academic circles some say there were two, and hope for a third.

If we go with two rounds, the center of gravity of the second wasn't Shenzhen. Joining the WTO benefited Shanghai and the Yangtze River Delta most. Guangdong didn't harvest much of the WTO dividend. Export trade did benefit, of course, but the dividend from the foreign investment that followed was taken entirely by Shanghai and the Yangtze River Delta. That's a view I've held for more than a decade, and I'm not afraid to say it again. It's nobody else's fault — it's on Guangdong itself.

People in Guangdong have a path dependency, a reliance on Hong Kong. Second, people in Guangdong only keep their heads down and walk the road in front of them; they don't look up at the sky. They did very little predictive research on the opportunities WTO accession would bring, and very little policy preparation, while Shanghai and Jiangsu prepared thoroughly. On top of that, a huge amount of investment from European, American and Japanese multinationals landed in Shanghai and Jiangsu. So the protagonist of the second round of reform was Shanghai.

And a third round — could it be Xiong'an? Hainan?

Cover images from Deva Darshan on Unsplash, and chuttersnap on Unsplash