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.