Chinese tech hub Shenzhen becomes key trade war battleground as US strikes Huawei

In the restaurants and coffee shops at the heart of southern China’s high-tech powerhouse, the main topics of conversation have shifted from industry gossip such as IPOs, mergers, and innovations to the trade war with the US and Washington’s campaign against Huawei.

Luohu, Shenzhen / Photo credit: zhudifeng / 123RF

So all-consuming has the topic become in Yuehai – the western district of Shenzhen that houses social media giant Tencent, telecoms maker ZTE and drone maker DJI – that locals joke that it seems more like a trade war between the US and the city, or even the district, itself.

Over the past 40 years, Shenzhen has been transformed from a sleepy fishing village just across the border from Hong Kong to a city of more than 12 million people where the high-tech sector accounts for just over a third of its gross domestic product.

Given the importance of the sector, many are now waking up to the possible impact the trade war will have on its future.

One tech firm employee, who only gave his surname Lin, said: “The trade war will have a lasting impact, including on sales and the entire market.”

Another resident, who works at an internet company, said he was starting to be concerned about whether his company’s products or sales strategy would be affected.

Beijing has grand plans for the city and has designated it as the key center for innovation and creativity in its Greater Bay Area plan. The project is designed to create an economic powerhouse to rival the San Francisco and Tokyo Bay areas by linking the cities of southern Guangdong with Hong Kong and Macau.

But faced with rising tariffs on exports to the United States and the ongoing onslaught against Huawei – the key to China’s 5G network – government agencies, official think tanks, and tech firms alike are now pondering an uncertain future.

“The key is Huawei,” said a policy researcher with the Shenzhen government who spoke on condition of anonymity.

“Huawei is the single most important company at the top of the value chain, the leader and center of the industry. It is our dragon’s head.”

According to a rare report released by the Shenzhen’s statistics bureau in 2016, Huawei was the biggest single contributor to the city’s GDP, accounting for 7% of the total or 143 billion yuan (US$20.6 billion).

The sum was roughly the same as the rest of the top 20 contributors to the city’s GDP, which included such major players as ZTE, Tencent, chipmaker Foxconn and vehicle maker BYD Auto.

Although no figures have been published since 2016 due to their sensitivity, many believe in Huawei’s importance to the city’s economy has increased and that it now contributes well over 10% of GDP.