Shenzhen Museum #4 – Shenzhen’s Reform and Opening Up 深圳改革开放史

Chapter 2 : Trail-blazing Ox 开荒牛

A picture tells a thousand words. This is a classic picture of a group of factory girls coming off their shift in Shenzhen. It summed up all about the miracle of the Special Economic Zones. Many of these girls would be grannies now, some of them millionaires, and all have contributed and benefitted one way or another from Shenzhen.

Many of the artefacts on display were collected from the vast army of migrant workers coming from different parts of China coming to Shenzhen to seek a better life, a way of earning money without having to toll in the fields. There were letters back to their wives and children back home, there were girls who had left their parents and boyfriends in the villages. So with the urban life came urban problems. And magazines and books about how to live an urban life became popular.

In the early 80s, many staples were still rationed. Things like cooking oil, rice, flour, sugar, etc. would need ration coupons to purchase at subsidised rates. Else you would have to pay a lot more for them. So it became quite common for factories and employers to provide three meals and lodging to attract the workforce.

Commercial agreements and contracts were uncommon back then because everything was accomplished with the State rules. When free market came, many were lost on how to ensure a fair trade. Only until 1978, the first agreement was signed between a local business with a foreign one. China’s experiment on the free market had come to a crossroad.

Financial System Reform

Before the SEZ, banks were a state-owned thing with the capital market tightly in control of the state. In the push to get more foreign investors and capital into Shenzhen, the financial system was liberalised starting with setting up of regional joint-ownership banks like China Merchant Bank 招商银行 in Shekou in 1987, followed by allowing foreign banks to open branches in Shenzhen. These measures allowed foreign investments to flow from overseas into China through the integration of these banks. More importantly, the foreign exchange centre was also setup with a futures exchange. The scene was set for the next big capitalist idea.

Shenzhen Stock Exchange

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private property, property rights recognition, voluntary exchange, and wage labour. with the setup of the Shenzhen Stock Exchange, the capitalist experiment had come full circle. For the first time, Chinese citizens can own pieces of companies, participate in free economy and make profits beyond their wildest dreams.

Land Use Reform

One of the biggest engine of the astronomical rise of China’s economy was due to the land use reform. Last I looked China is still a Communist country, and the land are technically all state-owned. So when it was proposed that the private sector can also own land, or more correctly, own the rights to use the land to build whatever they want, this was a revolutionary idea.

So on 1 Dec 1987, history was made and the first parcel of land (92,750 square feet) in China was sold to a private owner for a 50 years lease. As the general manager of Shenzhen SEZ Real Estate Company 深圳特区房地产公司, Luo Jinxing 骆锦星 won the land for RMB 5.25 million. He went on the press to say said his real estate company expected to make a 10 percent profit by building apartments. One year later, 185 apartments (total built-up area of 36,860 sq.m) in Dongxiao Garden 东晓花园 were completed and sold for RMB 1,600 per sq.m or RMB 140,000 for a typical apartment. The company made 10x on its initial bid. It last transacted at RMB 49,500 per sq.m (2022).

It marks that significant milestone that China’s fundamental law now recognises the commodity attributes of land use rights and has taken a major step towards land commercialisation and marketisation. If there is no first auction, there will be no vigourous development of the real estate industry today, because land is the basic element and prerequisite for real estate development.

Chief Architect of China Economic Reforms – Deng Xiaoping

You may be familiar with one of his most misquoted saying about a white and a black cat. Deng Xiaoping 邓小平 (22 August 1904 – 19 February 1997) did not say this with regards to the economic reform. It came from much earlier, during a theoretical argument about socialism and capitalism.

不管黑猫白猫，捉到老鼠就是好猫
“Whether it’s a black cat or a white cat, catching a mouse is a good cat.”

Deng Xiaoping 邓小平, 2 July 1962 during a meeting of Secretariat of the Central Committee of the Communist Party of China

Deng Xiaoping believes that engaging in theoretical arguments will delay the opportunity and miss development opportunities. Empty arguments are useless. Truth can only be tested in practice. You should practice it boldly and try it boldly. Don’t come to conclusions first. Let’s do it. “Whether it’s a black cat or a white cat, catching a mouse is a good cat.”

Hence after his “triumphal return” after the Cultural Revolution in 1973, he went about the economic reforms that he proposed many years ago. And by 1992, when he visited Shenzhen for the last time before his death in 1997, China’s socialist economic reforms were in full swing and the success was predominant in Shenzhen and the south of China. That was when the black cate-white cat quote became a worldwide catchphrase even though he did not say in during the visit.

One of the things that he did was to tour around Shenzhen was to go up a hill and looked southwards to Hong Kong. His greatest dream was the peaceful transition of power from the British to the Chinese and negotiated with then PM Margaret Thatcher which included the terms that Hong Kong will remain autonomous with its capitalist ways for another 50 years after the return. He never got to see the return of Hong Kong when he passed away on 19 Feb 1997.

He was succeeded by Jiang Zemin 江泽民, who became General Secretary (de facto leader) of the CCCP in 1989 after being instrumental in the squashing the uprising in Tiananmen Square and later appointed President of China in 1993. Although he held two paramount positions, he was overshadowed by Deng until his death in 1997. Then he literally influenced the business, economic and political landscape of China for nearly 20 years, until the rise of the current President of China.