Shenzhen, the southern city known as China’s Silicon Valley, could be losing its lustre due to a housing affordability crisis.
Led by tech behemoth Huawei, talent, resources and money have been flowing out of Shenzhen to cheaper locations, in particularly Dongguan, which is about an hour’s drive north. Home prices have risen 508% in the last 10 years in Shenzhen, leading it to become the priciest city in China.
The cost of renting a home in Shenzhen climbed 23 per cent last year alone, data from real estate agency Homelink showed, with those in Nanshan district jumping 46.2 per cent year on year to top the list.
Shenzhen made global headlines in 2015 for having the world’s fastest-rising house prices, according to real estate firm Knight Frank. Prices surged almost 50 per cent last year to an average of 31,425 yuan per square metre, which is more than double the average in Guangzhou, another mega city and the capital of Guangdong province. That is despite salaries being only 10% higher in Shenzhen.
If tech companies move out to less expensive cities nearby, this will hurt the corporate banking business that is essential to the city’s finance industry.
Dongguan is now home to 7,638 newly registered hi-tech businesses, almost double the number in 2012 when the local government launched an all-out effort to cultivate high-value-added industry. “The flows of talent and businesses from Shenzhen to Dongguan appear to have speeded up over the past two years and the momentum shows no signs of losing steam,” said Li Lixun, dean of Sun Yat-sen University‘s school of geography and planning. Apart from Huawei, other Shenzhen hi-tech giants moving their R&D offices to Songshan Lake include DJI, the world’s biggest consumer drone maker, motion controller producer Googol Technology and emerging tech conglomerate Kuangchi, which was established in 2010.