SCMP has a long and winding report today comparing Shanghai and Shenzhen, posing the question of which will lead the country in the next stage of its growth, as both have been given new briefs recently to accelerate reforms. To our minds, such analysis misses a key point – that China is a big country. Two cities so far apart are likely to have very little overlap: Shanghai will drive the Yangtze River Delta (which still hasn’t come up with a sexier name like the Greater Bay Area), while Shenzhen will drive the Pearl River Delta.
The other major difference between the two is that Shenzhen has a better support team: Hong Kong to provide capital flows, Guangzhou to provide administrative drive, Dongguan to take overflowing high-tech manufacturing capacity, and the entire west bank to provide lebensraumfor the city’s expansion (see today’s high-speed railway story). Shanghai has cities like Nanjing, Ningbo, Hangzhou and Suzhou, for sure, but little of the integration work that has already gone into tying them together like has happened in the GBA.
Shanghai has some way to catch up as an engine of growth for its own part of China without having to worry about competing with Shenzhen.
Moreover, whatever one might say about Shanghainese entrepreneurial spirit, it doesn’t have two things: Cantonese cultural ties with its neighbors, and, perhaps more importantly the bestowal of permission by Beijing to ramp up convertibility of the Renminbi (see our D-RMB story from yesterday).
Ask any Shenzhenrenabout competition from Shanghai and they will likely look at you incredulously. Guangzhou is the city they plan to stay ahead of, and Hong Kong is the city they plan to overtake. All in good time.
SCMP has an interesting story today about a survey that shows little expectation among traders that the Renminbi might become a challenger to the US dollar in international trade.
As the article says, China’s effort to promote the RMB as a global currency has made only marginal progress in the last three years. According to an international survey conducted by the Bank for International Settlements, the RMB is only the eighth most-traded currency, with a daily average turnover of US$284 billion, up from US$202 billion three years ago. Its share of all currency trades rose to 4.3 per cent from the 4.0 per cent in the 2016 survey.
By comparison, the US dollar was on one side of 88 per cent of all currency trades, little changed from three years ago. It was also the second currency in 95 per cent of all RMB-denominated transactions.
However, far more interesting is the commentary coming out of the mainland about the digital Renminbi, which appears increasingly likely to launch soon. Now that Shenzhen has been tapped with its further development, the question seems to be how soon it will start being deployed among the city’s smartphone-carrying population.
Continue reading Get ready, here comes the D-RMB
“For the sake of public interest, and for the sake of people’s livelihoods, it is time developers show their utmost sincerity instead of minding their own business, hoarding land for profit and earning the last penny.”
So reads a “commentary” in the official People’s Daily newspaper, as reported by SCMP, calling on the Hong Kong government to take back land parcels that have been lying dormant in the city while developers force people into ever-smaller apartments at the world’s most expensive prices.
Gosh, whatever could this mean?
Is there a madman out there who has randomly been allowed to vent on the opinion pages of the Party’s official mouthpiece, in the never-ending quest for diversity of views that the leadership encourages? Or is it possible that a well-thought-out plan is under way to break the oligarchy that has dominated this city’s economy for decades?
Our money is on the latter. Here is the “nutgraf,” as they call it in the media business:
“What is being responsible to Hong Kong’s future? What is showing humanity and providing a way out to the young people? This is the way.”
Take that, Superman.
SCMP has the details on this, as well as Carrie Lam’s much less-aggressive plan to tax vacant plots. Our money is on the more-aggressive plan becoming reality. Soon.
Dongguan has had enough of being just another fast-growing Chinese metropolis. By the end of the Greater Bay Area masterplan, it wants to be a Mega City.
This might sound like something from a computer game, but a Mega City is an official designation given by the central government to a city with a population above 10 million. Dongguan, being the GBA’s third-biggest city with 8.37 million registered residents, plans to leap into that category by 2030, and will peak at 10.8 million in 2035, according to city planners.
It’s not about quantity, however, but quality. In 2016-2018, the total number of “talents” in the city jumped from 1.46 million to 1.953 million; “high-level talents” (post-grad degrees) rose even faster, from 84,800 to 126,000. As the city government explains it: “The population structure is continuously optimized.”
Dongguan is doing its bit to ensure these people live in a more comfortable environment, naturally. With a focus on Songshan Lake and the Binhai Bay districts, the city plans to grow sustainably and produce a high-quality living environment.
See our recent features on Songshan Lake and our Dongguan overview.
Read more on its population plans (in Chinese).
is opening its legal system to input from the business community. Sort of.
city’s Bureau of Justice held a symposium last week, together with the
Municipal Development and Reform Commission, focused on drafting new
legislation that would improve – “optimize” is the official, beloved word – Shenzhen’s
business environment. Corporate leaders from fields as diverse as finance,
foreign trade, science and technology, security, power supply, gas, and consulting
attended. The Chamber of Commerce was there.
Continue reading Shenzhen seeks business input on laws
A much-anticipated plan to launch more cross-border trading of insurance products has been put on hold because of the Hong Kong protests, it seems. In an announcement that makes no apparent commercial sense, Hong Kong Insurance Authority chairman, Moses Cheng Mo-chi, said yesterday that economic conditions were not favorable and discussions between Hong Kong industry representatives and their mainland counterparts had been put on hold. As quoted by SCMP:
“The talks about setting up an insurance connect scheme will definitely be delayed as a result of the challenges of international business operating environment as a result of the ongoing US-China trade war. It would be hard to launch a new connect scheme under the current economic situation.”
Continue reading ‘Insurance Connect’ scheme on hold
Yesterday the Shenzhen Evening News had a long article extolling the virtues of the Futian district as the city’s financial heart. The main thrust of the piece is preceded by accounts of what the political leadership has been up to recently, including that Party Secretary Wang Weizhong met on August 29 with Yi Gang, head of the central bank, in Shenzhen. They discussed what any two cadres with their fingers on the pulse of international finance would: Internationalization of the renminbi, digital currency research, green finance, etc. They decided to, first and foremost, continue to deepen financial reform and opening up, realize the high-quality development of Shenzhen’s financial industry, and fully promote the implementation of the major decision-making arrangements of the Party Central Committee.
Continue reading Coming up: Shenzhen’s new fintech trick
The American Chamber of Commerce has released a thoughtful, in-depth position paper on the situation in Hong Kong, which it has presented for CE Carrie Lam’s consideration, ahead of her Policy Speech, scheduled for next month.
At 16 pages, in small type, it’s not a quick read. Nevertheless, its detail is impressive, with concrete, specific recommendations across many sectors of the economy and society.
Continue reading Amcham weighs in on Hong Kong
Guangdong Governor Ma Xingrui has a thoughtful piece in the China Daily HK edition. He says, in the style expected of a governor, that the Greater Bay Area is Guangdong’s future and, therefore, it is his No. 1 priority. He will spare some time to help with the Belt and Road Initiative, but GBA is his daily devotion, it seems.
Interestingly, he explicitly ties the GBA to the province’s Reform and Opening agenda. “In the new era, construction of the Greater Bay Area is the guiding principle for Guangdong’s further reform and opening-up,” he was quoted as saying. So it’s not just about unity and harmony and providing jobs to restless Hong Kong youths, it seems. Good to know.
Moreover, he lays out some specifics of what he is working on in terms of expediting cross-border integration with Hong Kong: “… integration of rules in education, trade, flow of talent, logistics, financing and information.” We will have to see what the schoolkids of Hong Kong have to say about that.
The article goes on to quote some really interesting stats to show what a region of boffins this is: “The State Council Information Office said R&D expenditure in Guangdong exceeded 250 billion yuan last year, ranking first in China and accounting for 2.65 percent of the country’s GDP. Guangdong ranked first in regional innovation capability in both 2017 and last year. The number of patent applications and grants reached 793,800 and 478,400 respectively.”
Shenzhen has decided to raise its basic monthly living allowance, from RMB1,070 to RMB1,160. This will put the city on par with Shanghai, and is retroactive to the start of this year.
To be clear, this is not a minimum wage. While the hipsters of Silicon Valley continue to push the idea of a Universal Basic Income stipend, and at least one US presidential candidate (Andrew Yang) has built his campaign on it, China has been doing it for many years already. It is known as a “minimum living guarantee” (our translation). It is different from the “social assistance standard” for “low-income residents”, which was raised to RMB1,740, and is far less than the “basic living allowance” for “people in extreme poverty”, which was raised to RMB1,856.
This is a concept whose time has not yet come in the West. But one has to wonder, as the central government considers Chinese-style solutions to problems in its Chinese-Western city of Hong Kong, whether a “minimum living guarantee” is on the table for discussion.
Read more in Chinese.