International Finance

Shenzhen economy weighed by trade war; loses investor interest

Despite steep demand, developers are facing issues related to overcapacity with the vacancy rate nearing a 10 year high

Shenzhen, China’s hi-tech metropolis, is exposed to a stream of factors stemming from the US-China trade including slowing commercial property uptake and a mass departure of foreign investors that are affecting economic sentiment. 

The trade war between the world’s two superpowers has lowered Shezhen’s appeal in the eyes of foreign investors, according to South China Morning Post. Overall, the impact of the trade war is starting to show on Shenzhen’s economy. 

The negative side effect of the trade war is slowly influencing the commercial property market among other sectors in the city. Despite steep demand, developers are facing issues related to overcapacity with the vacancy rate nearing a 10 year high, SCMP said. 

This issue has led to a slowdown in Shenzhen’s economy.  Last year, the city’s total GDP stood at $486 billion, second only to Beijing.  It had registered a 6.6 percent year-on-year growth last year, according to official data.

Lan Liu, operations manager of a serviced office firm in Futian district told SCMP, “Taking into account tenants’ budgets and the increase in new supplies of offices, it can be said that there has been growing pressure for office landlords in Shenzhen to cut rents this year.” 

Liu also added that it has been a ‘common’ phenomenon since last year to watch companies downsize office spaces and provide other working facilities such as remote work, or to work from co-working spaces. 

SCMP reported that the reason for this shift in part is because of how the city’s tech firms operate. Startups and established players are moving toward co-working spaces transforming the city into ‘China’s Silicon Valley’.  Shenzhen was rated as China’s most competitive city followed by Hong Kong and Shanghai on the basis of a new report published by the Chinese Academy of Social Sciences. The three cities achieved the same ranking last year as well.  Shenzhen is now home to some of the largest tech companies such as DJI, Huawei and ZTE. 

According to SCMP, retail sales growth in the city slowed to 6.5 percent in the first four months of the year, from 8.8 percent in the previous year. Also, large companies’ output grew 7.1 percent, compared to 9.9 percent for the same period last year. 

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