The Tale of Two Cities: Institutional Evolution and Economic Upgrading in Shenzhen and Dongguan

Abstract

This paper adds to the contribution by existing scholarly works about divergence in institutional evolution and its impact on economic and industrial upgrading in Shenzhen and Dongguan. The two cities, located in the Pearl River Delta (PRD) region, have long been known as both ‘workshop of the world’ and Hong Kong’s ‘back-door factory’. However, the divergence in terms of the two cities’ development trajectory has become very considerable. In this paper, instead of analyzing only a sector-specific case, this paper analyzes the performance trajectories of the two cities from a macroeconomic perspective. Using statistical data from China Data Online, I found that although gaps between the two cities remain large, Dongguan has begun to outperform Shenzhen in terms of its growth rate, particularly in research and development (R&D), high-technology industries, as well as advanced manufacturing. The findings support the argument by Fu et al. (2012, 2013) that Shenzhen’s development has been primarily driven by combined top-down and bottom-up initiatives, while that of Dongguan has largely relied only on bottom-up initiatives alone. Moreover, the leadership factor is similarly pivotal in determining the trajectories of the two cities.