Beijing is now pushing the balance in favor of Shenzhen, with a new blueprint to turn the city into a world-class hub for finance, trade and other sectors that have long been Hong Kong's remit.
It is, in effect, doubling down on its domestic economic experiment, while leaving the prospects uncertain for the other one across the river, the former British colony that continues to resist Beijing's rule.
In a speech Wednesday, Chinese President Xi Jinping announced plans to build Shenzhen into a "model city" of innovative industries and rule of law, while touting closer integration of Hong Kong into the mainland economy. In the audience was Hong Kong Chief Executive Carrie Lam, who had delayed her annual policy address to attend.
"We are forming a new development pattern with the domestic economy cycle playing a leading role," Xi said.
The top-level support for Shenzhen was meant to be a message for Hong Kong, said Victor Gao, a professor at China's Soochow University and a former Foreign Ministry official.
"If you do not have stability, if you are caught up in revolution, or great turmoil, or anarchy, then you will lose out on whatever advantages and resources you may have previously had," Gao said. "Then your economic development will reverse course."
Since last year, Hong Kong has been rocked by sometimes violent protests against Beijing's tightening grip on the city. The ensuing crackdown led to thousands of arrests and China's imposition of a national security law that sharply curtails political freedoms and has spurred doubts among international businesses about Hong Kong's viability as a base for their operations.
On Wednesday, Xi gave the speech in Shenzhen to mark the 40th anniversary of the city’s designation as a special economic zone, or SEZ. That event helped turn China into an economic powerhouse. The country’s leader at the time, Deng Xiaoping, designated the then fishing village as a test bed for international trade and market overhauls.
Shenzhen holds personal importance for Xi, as his father played a central role in setting up the city’s SEZ and others in Guangdong province 40 years ago, said Joseph Torigian, an assistant professor of political science at American University in Washington. Xi has touted his plan as a continuation of the older generation’s work, although the situation now is far changed.
“The SEZs were founded when China’s relations with the outside world were rapidly improving,” Torigian said. “They were predicated on the idea of a more peaceful, permissive environment.”
In his remarks Wednesday, Xi authorized Shenzhen's officials to act with greater autonomy in trying out new economic models. He said drawing international talent would be a priority.
The new Shenzhen five-year economic plan includes developing a fairer and more open market environment, which would be a draw to foreign companies, but it also includes contradictory calls for a "socialist pilot zone," said James Zimmerman, a Beijing-based lawyer and former chairman of the American Chamber of Commerce in China.
"Clearly, efforts to enhance the business environment in Shenzhen will help the region continue to move up the value chain and thus be a destination for business," Zimmerman said. "But this plan, on its own, won't impact a decision to be in Shenzhen versus Hong Kong, since the plan is still a work in progress."
In his speech, Xi also pledged Beijing’s continued support for an initiative known as the Greater Bay Area, a plan to integrate several southern metropolises, including Hong Kong, to form a regional growth engine to rival Silicon Valley.
This plan has met with pushback in Hong Kong. Pro-democracy activists view the Greater Bay Area as a way of eroding the city’s distinct culture, way of life and economic value to China, neutralizing its international advantages.
“Some people may think it indicates a directive to integrate Hong Kong into Shenzhen,” said Charles Mok, a pro-democracy lawmaker who represents the technology sector in Hong Kong. “But I see it more as Shenzhen first, Hong Kong second.”
He added: “Under a difficult environment for global connections and trade, they can only take from Hong Kong.”
Hong Kong was supposed to enjoy a high degree of autonomy within China until 2047. But its status as an international financial center has been eroded as Beijing has exerted greater influence over its policies. In May, Secretary of State Mike Pompeo told Congress that Washington would no longer treat Hong Kong as autonomous from mainland China.
In August, the United States placed sanctions on Hong Kong officials, including Lam and the current police chief, for allegedly undermining the city’s autonomy. Hong Kong-made goods exported to the United States must now be labeled “made in China.”
Mahtani reported from Hong Kong.