Tag Archives: Policy

Bracing for a drop in Hong Kong

It’s hard to see where Hong Kong is headed, now that the government has decided to invoke emergency powers to ban the use of face masks at protests. There are at least two evident certainties: that protesters will be energized, leading to a rise in violence levels; and that arrest numbers will climb. Beyond that, however, it remains to be seen whether the announcement will hasten a decision in Washington to restrict financial flows through Hong Kong or result in any other damage to the city’s economy caused by a loss of investor confidence.

Key to monitor is whether the decision can be effective in quelling the protests. This, too, is hard to guess at the moment. It will likely embolden the more radical protesters, and radicalize others who had previously been hesitant to commit acts of violence. Yet it will also likely result in violent protesters being taken out of action quicker, blunting the protests as their more charismatic leadership is neutralized. Whether this turns out to be net positive or negative will take time to ascertain.

In the meantime, and apologies if this sounds Cyclopian, but the Greater Bay Area is not likely to be able to chug along as normal and pretend that what’s happening in Hong Kong won’t affect the rest. Putting aside the damage inflicted on the region by plunging international tourism – especially business tourism – it is important to be realistic about the effects of the Hong Kong crisis on the pace and scope of reforms being implemented in the GBA.

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Hong Kong gets reform agenda rolling

American scholar Andrew Nathan has an interesting piece in Foreign Affairs summarizing what “insiders” say is Beijing’s approach to the crisis in Hong Kong. Though the presentation of this analysis fits too neatly into a US-centric worldview, it helps explain why the Hong Kong government is moving quickly to address the city’s dire shortage of housing: Because the central government believes the protests are being driven primarily by intolerable socio-economic conditions. Fix those, and the rest will take care of itself.

The logic has appeal. While Nathan’s sources are almost certainly wrong to suggest that the country’s senior leadership isn’t worried about addressing the political dimension of the protests, it makes sense to train attention and resources on fixing first what can be fixed easiest. Any capable government would be taking this approach.

This doesn’t necessarily mean that Beijing misunderstands where the protesters’ rage is coming from. The country’s leadership probably knows all too well that the crisis is not going to be fixed with bread alone. But it also likely understands that without a commitment to deep socio-economic reform, no other grievances can be addressed in a sustainable way. Fixing the land issue is about much more than bringing down the cost of living. It’s about changing the way people live.

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Shanghai as Shenzhen’s chief competitor?

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.

Shenzhen to be China’s ‘international city’

Mainland media are flush with news, analysis and commentary today about the State Council’s latest big plan for Shenzhen. Released over the weekend, the 4,000-character document is being spoken of in reverential terms, with some calling it an outline of Shenzhen’s mission to “complete” the so-called “China Model” or “Beijing Consensus” of economic and social development. 

At first glance, the document does indeed carry some guidance that suggests Shenzhen has been chosen to lead the entire country in the next stage of its development. The reforms it has been tasked with are unique, and once implemented successfully, will be replicated across the rest of China. Chief of these is the exploration of “political change”. 

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Guangzhou unveils 3-year 5G plan

Guangzhou has released a three-year action plan to accelerate the development of 5G, which is faster than even Shenzhen’s. By the end of the year, the provincial capital will have 20,000 base stations working, covering most of the city’s key business hubs. That compares to Shenzhen’s planned 8,500 base stations by the end of this year. Moreover, Guangzhou has set a three-year target of 65,000 base stations, compared to 45,000 in Shenzhen. 

The differences are largely due to their respective geographic size – Shenzhen squeezes its 13 million residents into a smaller space than Guangzhou does with its 14 million. Both will ensure “comprehensive coverage” across their urban areas by 2021.

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Guangzhou focuses on nightlife

Workaholics in the provincial capital who can never find enough time to shop, or dine, or drink as much as their friends do are about to run out of excuses. The city’s Commerce Bureau has released a “Guangzhou nighttime economy map” that lists 15 commercial clusters as landmarks of “Guangzhou by Night”. This, it says, is a blueprint for the city’s plans to “enrich and expand nighttime consumption options” and develop Guangzhou into a “sleepless city” in the Greater Bay Area.

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Qianhai takes another bold step in forex reform

The hits keep coming from Qianhai, the special economic zone in Shenzhen that appears to be the spearhead of the next stage of major reform for the country.

The Shenzhen Foreign Exchange Bureau has issued detailed implementation guidelines for pilot reforms of foreign exchange in the zone, located in the Shekou district. These put forward a batch of initial trial policies that include allowing the use of forex earnings in domestic equity investment, a type of cross-border financing for local enterprises.

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HK tightens rules on backdoor listings

Hong Kong’s securities regulator and stock exchange have announced changes to how they will combat backdoor listings, a tactic used by companies that might not otherwise qualify to list. The new rules will go into effect on October 1 and target changes in de facto control of listed companies or large-scale issuance of shares that result in such changes. 

The amendments will expand the listings regime’s test for control and de facto control to include both changes in an issuer’s controlling shareholder as well as changes in the single largest shareholder able to exercise effective control. 

The changes to Hong Kong’s listings rules come as HKEX seeks to shore up its reputation in the wake of a listings scandal and ongoing investigation into a top former employee for suspected corruption and misconduct in public office “in relation to the vetting of listing applications” of two listed companies. Read more on SCMP

Beijing taps Shenzhen, again

The ninth meeting of the Central Committee for Comprehensively Deepening Reform (CCCDR) was held on Wednesday. Established as part of the massive party-state restructuring launched in March 2018, Trivium China calls it “the most important policymaking body in the land.” That’s right, more important than even the Politburo Standing Committee.

The meeting has approved 11 documents, most of which you would need a Western-Chinese political dictionary to understand. The one that stood out for us was No. 10: “Supporting Shenzhen to become a pilot demonstration area for socialism with Chinese characteristics.”

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GBA to establish ‘financial dispute mediation cooperation mechanism’

On Thursday, Zhuhai’s Hengqin hosted the GBA Financial Dispute Mediation Cooperation Forum. In attendance were representatives from regulatory authorities and financial dispute mediation centers from Hong Kong, Macau and GuangdongThe parties have also signed a cooperation framework on cross-border financial dispute mediation.  

Is this the beginning of long-awaited “integration” across the GBA’s three jurisdictions in the area of law enforcement? It might be a long way off, but this does appear to be some kind of tentative start. 

Earlier this month, Guangdong released a directive in which it highlighted the importance to push forward financial interconnectivity among the three regions in order to “build an international financial hub”.  

“Because the Greater Bay Area is built on one country, two systems and three jurisdictions, it has great differences in legal framework and economic systems,” said Bai Hexiang, president of the People’s Bank of ChinaGuangzhou Branch. “To solve financial disputes in the three regions through traditional litigation will face the challenges of judicial differences, which will become a time-consuming and costly process. 

It is of great significance to establish a financial dispute mediation cooperation mechanism between Guangdong, Hong Kong and Macau, Bai said. He suggested to learn from the more mature financial dispute resolution system that Hong Kong, Macau and other developed economies have adopted and to establish a jointly recognized cooperation mechanism among the regions to protect the rights and interests of the consumers and enhance the quality of financial servicein the Greater Bay Area.  

The World Trade Center Macau Arbitration Center, the Guangzhou Financial Consumption Dispute Resolution Center, The Shenzhen Consumer Rights Protection and representatives from the financial dispute centers in Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing signed the framework agreement. The cooperation will involve the establishment of a liaison mechanism, a financial dispute mediation cooperation mechanism and a joint research mechanism.