That’s enough Shanghai FTZ bilge, thanks

No sooner do we toss aside one bit of twaddle about Shanghai’s much-hyped free-trade zone than another appears, this time in the form of a ‘Mary Ma’ editorial in the Standard.

Writers of FTZ claptrap have various agendas. For some Mainlanders, it is grandiosity and triumphalism rooted in insecurity and low self-esteem. Having a homegrown international financial centre is like having an aircraft carrier. No need to ask what its purpose is, or whether it even functions; the symbolism is the thing. ‘Overtaking Hong Kong’ is much the same onanistic fantasy as invading Taiwan.

For others, mainly Beijing officials and loyalists in and around the Big Lychee, the emphasis is on what it could mean for us down here – specifically irrelevance, decline and doom – if the city doesn’t obey instructions to be happy with its Beijing-ordained misgovernance. Shanghai’s FTZ is being used for the time being in the latest round of a long campaign to win local hearts and minds through threats and promises of economic punishment or favours. (Perhaps we are supposed to dwell on what happened to the Pearl of the Orient itself after the revolution: it stagnated under the weight of punitive taxation throughout the 1950s-70s.)

‘Mary Ma’ is peeved that Hongkongers are not wetting themselves sufficiently in fear of the Shanghai FTZ threat. Even Chief Executive CY Leung, the article points out disapprovingly, is refusing to panic. Maybe the United Front spin-doctors have already decided to drop the FTZ as a weapon, and the Sing Tao media group is among the various patriots and shoe-shiners they’ve forgotten to tell.

Anyone glancing at a TV over the weekend saw rows of grinning men in suits cutting ribbons and proudly declaring the FTZ open, complete with a tacky archway over a road – just like the one officials put up when they launched London, New York and Hong Kong as global financial hubs, I bet. The big deal was that Premier Li Keqiang, who, according to mythology, pushes the FTZ by pounding tables with his fists, didn’t turn up. Maybe he just had a migraine or something, but in an environment where everything except politicians’ ranking in the hierarchy is a secret, this no-show could only lend weight to the nagging thought that an exciting, world-changing breakthrough might not be about to happen after all. ‘Mary Ma’ resolutely dismisses the idea with an elegant explanation…

Those harboring [negative] views may not know it’s the central government’s policy that local economic zones are tasks for local governments, so Beijing leaders wouldn’t normally attend. They would do so only after the zones were developed to a certain degree.

It’s right there in the Procedures for Starting Up International Financial Hubs manual.

When Deng Xiaoping launched Special Economic Zones in the late 1970s, he put them right down in the far south, partly because the incoming investment would come from Hong Kong, but mainly because China’s rulers were petrified of foreign influences permeating the heartland or the capital. In theory, they are far more self-confident today. But in many ways they are more fearful than ever.

The easy economic growth from a low base after scrapping idiotic Marxist policies has taken place. Continued development from this point on requires the construction of new systems and institutions rather than just the removal of old ones. But such reforms are simply not compatible with one-party rule or the interests of its beneficiaries. You can’t allow ordinary people to take their savings over to Pudong to earn higher interest rates or invest offshore, because state-owned enterprises – leaders’ friends and kids and other kleptocrats – depend on cheap preferential access to that money. You can’t allow foreigners to come in and compete, because the friends’ and kids’ companies must jealously protect their market. You can’t allow rule of law or a free flow of information, because the Communist Party must have control; it cannot share any power, let alone be subservient to other sources of it.

Semi-independent commentators like Caixin put a brave face on it. But you can’t draw a line around a district and implement any reforms like this inside it without building such high walls to insulate the rest of the country from the zone that it achieves nothing. You let a few ‘bonded banks’ move in next to the bonded warehouses, or Facebook – so what? The other 99.999% of the country carries on as before because nothing has changed. The Shanghai FTZ is a symbol of the great dilemma facing China’s leaders, as if they don’t have enough to worry about with looming environmental and demographic horrors. They probably can’t stay in power without delivering development that requires real institutional reform, but they can’t stay in power with that institutional reform. No wonder they thump the table.

This entry was posted in Blog. Bookmark the permalink.

18 Responses to That’s enough Shanghai FTZ bilge, thanks

  1. Joe Blow says:

    Yadda yadda yadda, and all that.

    Something else: 2 days ago -it was our national day- I ventured into Central to escape the unwashed hordes of mainlanders in Causeway Bay to go shopping at H & M’s flagship store in Queen’s Road Central. Guess what ? They closed down ! Rent increase victim, I guess. If they can’t pay the rent, then who can ? Which jewellery-and-tat emporium can occupy a colossal space like that, and pay the rent, and make a profit ?

    The bigger the bubble, the bigger the bust. You read it here first.

  2. Gumshoe says:

    @joeblow I saw Starbucks shut their doors in East TST, another rent victim?

    Also, if you want any formula in the Yuen Long area it’s all gone, snapped up by mainland shoppers… strike that, tourists. So you will have to tell your six year old still drinking formula kid to suck it up for a while and drink water like a poor person.

  3. maugrim says:

    An excellent article. The reason that they are peeved that Hongkongers are not wetting themselves sufficiently in fear of the Shanghai FTZ threat is because the threat doesn’t work, particularly as we have seen first hand what happens to us when we do partake in obtaining so called economic goodies from the Mainland in the form of its unwashed hordes. I wonder what the ‘other, other plan’ will be?

  4. Henry says:

    True, yadda, yadda, yadda.

    I mistakenly ventured down to Stanley on Tuesday. 1st time in a couple of years perhaps. I was horrified. It looks like the worst of Causeway Bay and TST has moved down there, with truckloads of tourists and the crummiest entertainment for the masses, laid on, I think by the Southern District Council, consisting of It’s a Knockout style races with beer trays, ear splitting music from low quality speakers and MC’s making farmyard noises. I wept.

  5. Real Scot Player says:

    China in the last couple of centuries has only proven adept at taxing slavery (foreign devils employing their own minions). It’s a long leap to setting up zones of the country that DON’T tax the foreign muck.

  6. maugrim says:

    Henry, worse was when they had some sort of dog olympics/contest. You couldn’t park a car there for weeks. It attracted the usual sorts, BWW X5 drivers with some small, spolit, fluffy thing in the back and a similarly pampered fur kid.

  7. PropertyDeveloper says:

    Thanks for a scintillating piece — and for the link to the equally incisive and insightful Bronte Capital.

    Mary Ma quoting CY as saying our advantage is the rule of law — I never thought I’d see the day.

    As you say, at best the FTZ is a brave attempt to let the devil foreigners back onto a few square kilometers of the sacred heavenly ground; at worst a sickeningly hypocritical attempt to Canute-style stay the financial tsunamis licking at the glorious feet of the most generous, polite and cosmopolitan nation on earth.

  8. Karen Eliot says:

    Karen Eliot approves of Link Wray’s Rumble.

  9. Jeff says:

    Last two paragraphs should be essential reading for all american gaga over china business journos.

    I trudge up there now and then with a lot of other sad old white guys to make the money I can while the party is on, but I kid myself not that the party will last…only the Party will last.

  10. Jon says:

    Joe Blow >> Zara is moving out of IFC and taking over H&M’s space. At a vastly higher rent of course.

  11. Alfred Bester says:

    It’s curious the actual tax incentive regs for operating in the SHFTZ are not yet issued and are not expected until early next year, according to the “Overall Plan” doc. Until these regs are issued only fools and horses will actually set up there, and the few loyal-to-motherland HKers will find it hard to even pretend wet themselves. In fact, opening the zone ahead of these regs smacks of desperation and BLSHTZ.

  12. Real Scot Player says:

    @ Alfred. Exactly. It’s just not party DNA to let the foreigners get away with no tax.

  13. I wonder if Mary Ma realises that her explanation for Premier Li’s absence is tantamount to saying that the zone barely exists yet, therefore there is nothing Hong Kong need feel threatened by.

  14. Stanley Gibbons says:

    Those of us sane people who live in Stanley, leave on public holidays and doggy days.

  15. Joe Blow says:


    Zara can afford it. It’s a mega narco-dollar laundry operation.

  16. The real Stanley Gibbons says:

    Oi! Fake Stanley, kindly desist from using my monicker on this site!

  17. Andrew W says:

    Hmmmm. Too late to the party to get a Big Lychee skewering on this one. The perils of being a fortnightly publication.

    BL spot on that these places aren’t going to be free enough. All light, not much heat. Too bad.



  18. Jeff Plungermaster says:

    I like healthy cynicism, but you guys are going a bit too far. Listen to yourselves moaning on about unwashed masses, idiotic Marxist policies, spoilt brats. You’re as bad as bloggers from Anhui writing flamers about the Japanese. I agree that Hong Kong doesn’t need to “wet itself” about the establishment of the FTZ. But that doesn’t mean the FTZ isn’t going to work. It is the most important policy shift since Deng’s tour of the south in 1992, and possibly as important as the first SEZ establishments in the 80s. And it’s a change for the better, in my view. Now, back to what it means for Hong Kong. It’s not going to be a rival, as it’s not going to be an international finance centre in the sense that it will take business away from Hong Kong. It will make the region a more attractive place for foreign investment, and if it works, it will be gradually rolled out into other parts of Shanghai. Hong Kong doesn’t thrive on mainland China doing badly, it thrives on us doing well. The fact that this FTZ got the go ahead is a sign. It was opposed by many in the Party, probably for the very reasons the furious-sounding author of the article above gave. But the opponents lost out. That’s a very good thing. By the way this post is coming from someone who has worked in the financial sector in China since the 90s, and who is usually considered a China bear by his peers. If I think it’s good, then it is! (You can ignore that last line if you like as it’s not my best argument).

Comments are closed.