Shanghai takes over from Hong Kong, part 9,481

Bloomberg report that the GDP of Shanghai has overtaken that of the Big Lychee for the first time “in at least three decades.”  What they mean is that they can’t find any pre-1980 data for the mainland metropolis.  The last time it surpassed the then-British colony was probably back in the 1930s, when Shanghai had the factories, department stores, night life, film studios and money, and Hong Kong was a sleepy trading backwater.

As Bloomberg point out, mainland GDP figures are still not especially reliable; local government officials have an interest in exaggerating results and exceeding targets – though some, notably in the south, are rumoured to under-report in order to pay less tax to the centre.

The Shanghai of this story, however accurate, comprises the city with the ugly skyscrapers we all know and love, plus a large rural hinterland.  It adds up to 2,500 square miles in size, versus the Big Lychee’s humble 425, and its population is 19 million to Hong Kong’s 7 million.  So people there are still significantly less productive, creating barely a third the amount of wealth per person than Hongkongers.  It was only two years ago that Shanghai proudly announced to the world that its farmers’ annual disposable income had exceeded the grand sum of US$1,400.

The ‘Shanghai faction’ who graduated from running the municipality to the nation in the 1990s under Jiang Zemin lavished their favourite city with resources.  This led to heavy subsidies for foreign investment, generous land and other aid for favoured local companies and a more state-planned economy than in many other parts of China.  As a result, it is less accomplished than it likes to think in comparison with other regions, with low levels of rural entrepreneurship, self-employment and patent applications, and low average size of private-sector companies.

But it works hard on its image. During a visit in the mid-90s, I saw a checklist of grand vanity projects, described as ‘pearls’ if I remember rightly.  They included the grotesque TV tower, which had just opened (you had to wade through mud to get to it), the impressive museum with galleries named for Hong Kong tycoons, and the yet-to-be-built opera house.  Some schemes, like many of the skyscrapers and the maglev train from the new airport to a suburb, were plain tacky.  Like Singapore, Shanghai seems to believe its own PR.

(Beijing’s decision a year ago that Shanghai will be the PRC’s official, number-one, oh-so-important international financial and (for some reason) shipping hub by 2020 looks like a pat on the head for Jiang’s old clique in retreat. One particularly desperate policy would be to subsidize private equity managers’ salaries if they set up shop in Pudong – why didn’t Lee Kwan Yew think of it first?)

The Shanghai-will-take-over-from-Hong Kong idea took off after the Big Lychee’s handover to China in 1997.  So traumatic was Hong Kong’s shock after the city’s bubble burst – five years’ deflation interspersed with suicides and SARS – that some impressionable local folk saw it as a deliberate policy of Beijing’s.  Jiang Zemin, the theory went, had ordered chief executive Tung Chee-hwa to wreck Hong Kong in order to create the space for their Yangtze Delta homeland to rise in its place. (Maybe a few even pondered Shanghai’s fate after the communists took power in 1949 and downgraded its economic role to cleanse it of capitalist, foreign decadence.)

If there was a plot to undermine the Big Lychee it was opportunistic and aimed at local morale and self-confidence. Official reassurances that Shanghai was a partner and not a rival and talk of the need for integration grew more insistent, as if to sow the seeds of doubt – especially combined with Shanghai’s leering hubris as it became the world’s top container port and won silly prizes like the Expo.  Then came the Great 2006 Marginalization Scare kicked off by chief secretary Rafael Hui and picked up with glee by pro-Beijing ranters eager to frighten disloyal fellow Hongkongers into toeing the line.  Horseshit about how grateful pitiful Hong Kong should be for the mainland’s supposedly generous support is now swallowed without question (as yesterday by the South China Morning Post’s Alice Wu, on the right).

The Big Lychee’s leaders remain patriotically silent about Shanghai’s numerous shortcomings and inadequacies as even a junior international financial hub.  Even when reminding the world that Hong Kong has no capital controls, an independent judiciary and a free press, they will never add “unlike Shanghai, which has corruption, protectionism, covered-up scandals, IP rip-offs, investor rip-offs, not to mention thugs that smash up migrant labourers’ kids’ schools, hospitals that dump the poor in the street to die and a government obsessed with the banning of pajamas in public.”

One last thing: when did anyone last see a Hong Kong hooker in Shanghai?