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.
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
The central government has decided to widen a pilot project for Renminbi inward convertibility from the Qianhai special zone to the rest of Shenzhen. On its own, this development is not earth-shattering, as any bank in the city with a Qianhai branch has been able to easily convert foreign currencies to RMB for more than a year now. But the reason given for the change ought to make Hong Kong bankers nervous. It is for the country to “advance liberalization of the capital account”.
Pilot firms will not need to provide documentation about each foreign exchange transaction regarding their capital accounts and, instead, banks may do random inspections, the State Administration of Foreign Exchange announced on its website. Capital account items in this context could, for example, involve funds secured by going public overseas or debt.
Continue reading Shenzhen nibbles at Hong Kong’s lunch
This is not really a GBA item, but it’s so important for anyone with an interest in any part of China that we thought it’s best to include it today. The European Chamber of Commerce “dropped the mic”, in the words of those clever chaps at Trivium, by releasing a report yesterday that looks – hard – at the country’s Social Credit System.
Foreign companies doing business in China – including those not necessarily based inside China – need to get up to speed with the SCS, because it will inevitably have a major impact on their businesses, the chamber says.
Continue reading Social Credit System: Get with it, says EU
We have been tracking news related to the liberalization of the elderly-care market in Guangdong for some time. Now, the provincial government has issued some guidelines that look promising for investors, although the emphasis is clearly on non-profit organizations first.
Continue reading Guangdong to boost retirement communities