Premier looks to the south for economic inspiration

THIS WEEK’S Asia Briefing comes from Shenzhen, the southern cradle of China’s economic renaissance and its export centre, and our visit came hard on the heels of a trip by Premier Wen Jiabao.

The premier was travelling in the south to try and give the national economy a boost by reminding everyone of how the whole Chinese economic success story started, here in a little fishing village.

Shenzhen’s wellbeing is a useful barometer of China’s overall economic health. Media coverage of the premier’s visit to Guangdong highlighted how exports from the major coastal provinces have slowed considerably since July. And the premier acknowledged that the latest export orders showed China’s exports would face greater uncertainty in the third quarter.

Mr Wen said his trip to Shenzhen, and an earlier trip to coastal Zhejiang province, were aimed at boosting confidence in the economy. He made similar trips in 2009 during the immediate aftermath of the global financial crisis. At that time, his confidence-boosting mission was backed by four trillion yuan worth of stimulus money. These days, China doesn’t have that kind of cash at its disposal.

Visiting Shenzhen puts one in mind of the southern tour that Deng Xiaoping made here in 1992 when he made a speech that underlined the government’s commitment to economic reform.

It gave a boost to Shenzhen, which had been designated in 1980 as a “special economic zone”, a testing ground for capitalism in China. Part of the model for the zone was Shannon’s free trade area.

Shenzhen was transformed from a town of 30,000 fishermen into a great metropolis of 10 million, though some reckon there is anything up to 14 million people living here.

The next major stage in Shenzhen’s ascent will be Qianhai, part of the Shenzhen economic zone, or to give it its official title, the Qianhai Shenzhen-Hong Kong Modern Service Industry Co-operation Zone.

In the government’s 12th Five-Year Plan, Qianhai was one of three special economic development zones listed as having strategic, national importance. As reported before in these pages, it will offer low corporate taxes, tax-free working, and a strong legal regime with Hong Kong playing a key role in its success. In July, China’s national development and reform commission said Qianhai, which lies at the threshold between Hong Kong and Shenzhen, would be a testing ground for freer yuan usage and capital account convertibility.

The 15sq km site looks vast. And yet, driving through the Qianhai development it seems quiet, as if construction has ceased, although there are a lot of cranes and the workers’ housing looked occupied.

The building of Qianhai has been a bit stop-start. Last month, Ping An Bank announced that it would offer a 20 billion yuan (€2.5 billion) credit line to finance construction in the Qianhai zone. Part of the money will be put toward a road project in the area.

Zheng Hongjie, the director general of the Qianhai authority, said that all the infrastructure projects in the zone were underway. “It will take nearly 100 billion yuan to finish the infrastructure projects in the zone,” Mr Zheng said.

The Qianhai site is brilliantly located within easy distance of the port facilities, near a train hub and within easy reach of Shenzhen’s international airport, where a vast new terminal is being built.

The growing closeness with Hong Kong, and the rest of the big centres in the Pearl River Delta, such as Guangzhou, Macau and Zhuhai, seems unstoppable.

While technically mainland Chinese have to jump through various bureaucratic hoops to get into Hong Kong and Macau, it’s getting a lot easier, and this should keep capital flowing around the area.

Last weekend, the visa scheme for mainland residents seeking to enter Hong Kong was expanded to allow four million non-permanent residents of Shenzhen to enter Hong Kong with multiple-entry visas, without having to go through the bureaucratic hassle of applying through their hometowns.

Non-local residents in Beijing, Tianjin, Chongqing, Shanghai and Guangzhou may also apply for single-visit permits to Hong Kong without being required to make application from their home towns.

With the borders coming down so rapidly within the Pearl River Delta, China’s leaders are banking on southern China remaining the engine of economic reform for some time to come.