Shenzhen's journey from industrial boom to growing tech hub

Shenzhen was China's first special economic zone, and the city's growth since the 1980s has been spectacular. Our datasets on the city allow us to take a granular look at how the economy has changed.

The "industry" category still accounts for the greatest share of GDP in Shenzhen. This sector ranges from the traditional local strength in shipbuilding to BYD, the electric-vehicle powerhouse.

Comparing 2014 to 2024, however, we can see that the share of industry is in retreat on a relative basis as services sectors grow. "Technical services," which includes information technology and scientific research, accounts for about 15% of Shenzhen's economy, up from about 8% a decade earlier.

Our second chart aims to compare the Shenzhen tech cluster to its US and Japanese counterparts. Shenzhen's "late-mover advantage" can be seen: technical services as a share of GDP has more than tripled from 2005 levels (4.5%). Tokyo and California have larger tech sectors in GDP terms, and tech has also become a more important share of their economies over time, but the increase has been less rapid than that seen in Shenzhen.

We can also measure research and development spending for China as a whole in an international context. For now, US and Japanese R&D spending as a proportion of GDP is higher, but China is catching up fast.

Comparing the structure of Shenzhen's economy to Silicon Valley and Tokyo reveals that the Californian and Japanese tech clusters remain roughly twice as large relative to their economies. Meanwhile, Shenzhen's financial sector (which includes a major stock exchange) also stands out, accounting for a much greater share of the economy than that of its US and Japanese counterparts.

It's also interesting to compare government spending on infrastructure and R&D. Shenzhen's infrastructure spending growth rate (which had usually been higher than the national average) was interrupted by the pandemic, falling below the national average -- though it could also be the case that after the decades-long building boom, the city had fulfilled more of its infrastructure needs than other Chinese centers. This spending metric did pick up in 2024, however.

Meanwhile, the local government's budget for scientific research has stayed relatively steady.