1 Talking Point 5 Week in 60 Seconds 6 Aviation Week in China 7 Banking and Finance 8 Energy and Resources 9 Economy 11 Environment 19 July 2013 13 Society and Culture Issue 202 16 And Finally www.weekinchina.com 17 The Back Page Shanghai’s surprise! m o c . n i e t s p e a t i n e b . w w w Premier Li Keqiang announces a new free trade zone in China’s commercial capital. Should Hong Kong be worried? Brought to you by Week in China Talking Point 19 July 2013 In the zone Li Keqiang makes bold push to create a free trade area in Shanghai My word is my Bund: Premier Li bulldozed his way through bureaucratic opposition to the free trade zone hen Deng Xiaoping began the he had been repulsed by the behav - to opening Pandora’s box; and Wlong process of reforming iour of Shanghainese capitalists and probably worse if you added over - China’s broken economy after three their ‘foreign imperialist’ friends in seas money to the mix. decades of Maoist policies, his bold - the quasi-colonial concession areas. In the wranglings over the new est idea was to create a special eco - Born in poverty – and later self-edu - zone’s location, Chen took an any - nomic zone. The goal? To lure cated – Chen saw the bustling hub as where-but-Shanghai stand, and as foreign firms and to foster an envi - a hotbed of inequality. When British Ezra Vogel notes, his political capi - ronment in which free market busi - police fired on a crowd of workers in tal was sufficient to swing the de - ness practices could be tested. May 1925 – killing several protesters cision. Given Shanghai’s pre-eminence – the 20 year-old joined the Commu - “Chen worried that the ‘com - in the 1920s – when it was China’s nist Party. Chen would rise through prador mentality’ of bending to the commercial capital and home to the ranks to become the ‘father of will of foreigners remained alive 300,000 foreigners – the city was Chinese economic planning’ (see and well in Shanghai; he opposed mooted as a possible site for the WiC189), and the standard bearer for making Shanghai an experimental zone. But its chances were shot leftist economics. area and his view carried the day,” down by Chen Yun, who in the late Nearly six decades later, Chen writes the Harvard historian. 1970s was effectively Deng’s num - retained an instinctive distrust for So a small fishing village called P h o t o ber two. his hometown and the moneymak - Shenzhen was given the privilege S o u r Chen was actually a native of ing DNA of its citizens. Give the instead. c e : R e Shanghai but that turned out to dis - Shanghainese a sniff of capitalism, However, 35 years later Shanghai u t e r s advantage its bid. Growing up there Chen thought, and it would be akin is finally getting its chance, courtesy 1 Week in China Talking Point 19 July 2013 of China’s new prime minister, Li Keqiang. Against some internal op - position, he has given Shanghai a free trade zone (FTZ). Why is it significant? At a symbolic level the announce - ment reinforces the sense that eco - nomic reform is back at the top of the agenda. After all, the move trig - gers memories of the 1980s, a trans - formational period in which a series of special economic zones were cre - ated. Their success set China’s econ - omy on a new course, leading to a wave of privatisations in the 1990s, as well as further policies designed to encourage entrepreneurial activity. Bright prospects: Shanghai’s new free trade zone should boost growth Market reformers have had a less happy time over the past decade, government functions, redefine What will it encompass? with state-led capitalism appearing and rationalise the relations be - In a free trade zone, goods can be im - to be in the ascendant during the tween the government and the ported, manufactured and re-ex - Hu Jintao administration. market and society.” ported without intervention from This was epitomised by the trend Li’s first domestic trip as prime customs authorities. This one will known as guojinmintui – a term minister, says Century Weekly, was span 28 square kilometres in Pudong that translates ‘the state advances as deliberately made to Shanghai. The and be the first of its kind in main - the private sector recedes’. It was an city had tabled a proposal to create land China. era in which state-owned enter - a free trade zone in 2005 but the According to the Shanghai Daily, prises and politically-connected in - idea had failed to gain traction. But the city’s Party Secretary Han Zheng terest groups did particularly well. in March Li reportedly told Shang - said of the move: “The central gov - The first indications that the re - hai officials to pursue the idea once ernment has allowed Shanghai to formers were making a comeback more, saying it would help China to run this pilot programme, making came in January last year when build “an upgraded economy”. He the city a pioneer in the govern - newspaper editorials began trum - asked them to come up with a list of ment’s efforts at reform. Shanghai peting the anniversary of Deng Xi - policy changes that would be re - should continue to be a role model aoping’s 1992 Southern Tour (see quired to make it a success. By May in accelerating reforms, and this WiC136). This historic event was a he had received 21 suggested initia - programme will be among the most deliberate gesture on Deng’s part, tives, reports the South China important missions for the city in throwing his political clout behind Morning Post. the second half of this year.” market reforms at a time in which Immediately, there was opposi - He added: “The top priority right conservative factions were seeking tion to the idea. now is to design a set of laws and to oppose them. According to the Hong Kong rules to regulate the zone when it Today it looks like Li Keqiang is newspaper, both the securities reg - starts to operate.” picking up the reform mantle from ulator (the CSRC) and the banking Clearly, policies need to be ap - Deng. As we pointed out in WiC186, regulator (the CBRC) pushed back proved in a number of areas. For Li is the first premier to have against a number of the policies the example: the matter of the cur - trained as an economist. At his first Shanghai officials were floating. But rency. As is well known, China im - press conference as premier he told Li appears to have shown little pa - poses capital controls which P h o reporters: “Reform is about curb - tience for the delaying tactics, ap - prevent renminbi from flowing t o S o u ing government power. As a self- parently rebutting each objection, freely in and out of the country. In r c e : S imposed revolution, it will require and then approving the new zone – its first phase it is not thought that h u t t e r real sacrifice and will be painful. quite possibly in record time – at a Shanghai’s free trade zone will s t o c k The core of the plan is to transform State Council meeting on July 3. evade these restrictions. 2 Week in China Talking Point 19 July 2013 In the short term what could be more significant is the way in which Planet China foreign banks will be able to set up Strange but true stories from the new China subsidiaries in the zone. The official proposal also says explicitly that in - terest rates in the zone will be liber - MAKE BELIEVE. The late Robert Ripley, founder of the ‘Ripley’s Believe It alised, with market forces to or Not!’ franchise, was so drawn to Chinese culture that he once signed his determine the cost of capital. name “Rip Li”. Now a museum in China is challenging his brand of What else? Red tape for foreign odditorium. The Jibaozhai Museum in Hebei’s Jizhou City opened in 2010 companies setting up in the zone after a Rmb50 million ($8.8 million) investment. The four-storey treasure will be reduced. And foreign firms house claims to contain over 40,000 ancient relics and the collection gets will also be able to operate in indus - the Jibaozhai triple-A rating from tourism authorities. State enterprises and tries previously subject to restric - local schools saw it as a popular spot for educational tours. That was until a tions. For example, news has blog post last week by popular writer Ma Boyong revealed that much of the museum’s content is bogus. emerged that video games console Ma visited Jibaozhai’s collection following rave reviews from a movie makers like Nintendo, Sony and Mi - producer, who revealed on his weibo how he had been stunned by the rich crosoft will be able to sell their de - heritage on display. But once there, Ma soon realised that the large vices in China, provided they are collection of “national treasures” were clumsy forgeries. One ceramic vase made in the zone. For the last 13 claiming to date back to the Qing Dynasty depicted a modern cartoon. years these consoles have been Some of the chinaware showed scenes from novels that weren’t written at banned by the authorities in Beijing the time of the pottery’s alleged production. (although they could be obtained Ma’s acerbic verdict: “Between me and this bullshit museum, surely one on the black market).