Shenzhen partnership the key to growth
Shenzhen's decision to increase the minimum wage to attract migrant workers is both encouraging and puzzling. The development is encouraging as it is a sign of increasing prosperity for Hong Kong's closest neighbour and of better farm life keeping more people in the countryside. It is puzzling as it raises questions about the city's rigid labour market.
Ever since its designation as a special economic zone in the early 1980s, Shenzhen has developed at a break-neck rate. For many rural migrants trying to improve their lot, the city has been one of their top destinations. But as reforms lift living standards in the countryside and prosperity spreads inland from the coastal region, more peasants are staying closer to home and those still flocking to the cities have a wider choice of destinations other than Shenzhen.
Despite the development, it is intriguing to see the Shenzhen government taking the lead to raise the minimum wage. One would have imagined that if businesses were desperately short of workers, they would have tried to recruit them by paying more and improving working conditions. That they have apparently not done so suggests the shortage is either not really serious or there are restrictions against the free movement of workers. In a country still dotted by pockets of poverty, it cannot be true that no workers are willing to come to work in Shenzhen. After all, the city's current monthly minimum wage of 690 yuan is still higher than average earnings in many parts of the country.
Whatever the case may be, it is good to see Shenzhen workers getting a better deal. The city government should also be taking steps to protect workers' rights. It must realise that Shenzhen cannot grow on the back of an unlimited supply of cheap labour forever. As the city becomes more prosperous and less cost-competitive, its continuing growth can only depend on climbing the value ladder. For that to happen, a flexible labour market that pays high regard for workers' welfare and is conducive to a healthy flow of talent is critical.
Indeed, raising the minimum wage is part of Shenzhen's bid to upgrade its industrial structure. The focus of the city's current five-year plan is to further develop its high-technology manufacturing, logistics and financial services industries. To achieve part of this strategy, Mayor Xu Zongheng was in Hong Kong this week to promote a package of incentives aimed at luring financial institutions to set up in Shenzhen's 'financial city'.
All the while, Mr Xu tried to allay Hong Kong's concerns that it might be marginalised by Shenzhen's rapid development. He stressed the complementary growth of the two cities, and noted the big gap that still existed between them. Mr Xu's reassuring words might have come as cold comfort for those who had lost or are about to lose their jobs to rival operations in his city. For example, Shenzhen is fast catching up as a logistics hub, and its container port in Yantian is close to eclipsing ours at Kwai Chung.
But it would be wrong for Hong Kong to see Shenzhen's growth as a threat, especially as Shenzhen is also anxious about losing out to other mainland rivals. In fact, Hong Kong, Shenzhen and the Pearl River Delta and beyond are all engulfed by the same globalisation trend in an era of free trade. For all the participating economies, globalisation is a constant process of staying ahead of the competition. As one becomes the victim of one's own success - by becoming more affluent and less cost-competitive - one has no choice but be forward looking, by relinquishing lower value-added industries and embracing more productive ones.
In that sense, Hong Kong and Shenzhen suffer the same plight of being constantly marginalised, as rival economies learn to do - at lower costs - what they once excelled in doing. But both will fare better in the competitiveness game by trying to complement one another's growth strategy, even if there is fierce competition between them.
