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Shenzhen eyed for provincial
status
By Sam Ng
HONG KONG -
In another step that appears to confirm the accelerating
economic integration of the Hong Kong Special
Administrative Region (SAR) into China, a think-tank
connected to the State Council is reportedly advising
Beijing to elevate Shenzhen to a provincial-level
municipality. That would allow the industrial area to
report directly to the central government and
theoretically give it the power to form a free-trade
zone between the Shenzhen Special Economic Zone (SEZ)
and the SAR.
For those who watch the Chinese
government for nuances that seem to indicate progress,
this is important. While integration between Hong Kong
and Shenzhen has been discussed in past years, the fact
that a well-connected think-tank has made such a report
to the government gives it new impetus. The think-tank,
the Comprehensive Development Institute (CDI), recently
submitted a report to Beijing saying that the absence of
close co-operation between Hong Kong and Shenzhen has
resulted in a decline of both economies in the past few
years.
The SEZ-SAR coalition put up by the CDI
aims mainly to create more flexible subregional economic
integration under the framework of the recent free-trade
agreement between the mainland and Hong Kong, called the
Closer Economic Partnership Arrangement (CEPA). The
coalition, the report says, should primarily apply to
economic alliances between inland SEZs and SARs, such as
the Shenzhen-Hong Kong Alliance and the Zhuhai-Macau
Alliance, where a free-trade zone or the like would
liberalize investment and trade as well as the free flow
and exchange of labor, logistics and information, etc.
Moreover, the blueprint would create a precedent
for economic integration within the Greater China
economic circle that includes Hong Kong, Macau and
Taiwan. There have thus been increasing advocates for
Shenzhen to be administered directly by the central
government. The CDI report maintains that promoting
Shenzhen to municipality status would "raise its
political and economic status, paving the way for closer
administrational arrangements with Hong Kong".
Beijing is increasingly concerned about Hong
Kong's economic performance. The former British colony
has been in decline since the Asian financial crisis of
1997 despite massive infrastructure spending.
Unemployment has soared and property values have fallen.
The SAR has endured more than five years of continued
monthly deflation. In recent months, Chinese authorities
have moved to open up the border between the two,
engineering CEPA and easing travel restrictions. As with
Hong Kong, officials are concerned about the performance
of the Shenzhen SEZ, which was China's first major
experiment with capitalism after then paramount leader
Deng Xiaoping's landmark visit to Guangdong province in
1986.
The report identifies two factors as
holding back integration. Primarily, Shenzhen cannot
find the bureaucratic doorknob to open its relations
with Hong Kong. Any liaison must go through the Hong
Kong and Macau Affairs Office of the State Council.
Second, Shenzhen is unable to build any special official
channel for direct communication, negotiation or
discussion with Hong Kong, unless it is granted the
status of provincial ranking.
The aggregate
gross domestic product (GDP) of Hong Kong and Shenzhen
together amounts to HK$1.7 trillion (about US$217
billion), some 17 percent of the entire country's GDP.
There is only one platform, however, for official
communication between Hong Kong and Guangdong. That is
the Hong Kong/Guangdong Cooperation Joint Conference.
Sandwiched inside, Shenzhen finds itself unable to utter
any claim for its own benefit.
Therefore, closer
business ties call for direct communication and
interaction among the governments of Hong Kong,
Guangzhou, and Shenzhen, as well as between the Hong
Kong government and other local governments in the Pearl
River Delta besides Guangzhou and Shenzhen. Hong Kong,
as the Shanghai-based Economic Observer points out, must
be taken into account when repositioning Shenzhen as a
municipality. Neither seemingly is able to solve its own
social and economic problems.
The major problems
of Hong Kong's economy, according to the CDI think-tank,
are high unemployment, high land and property prices and
high labor costs. Unless these problems are solved
through integration, the think-tank theorizes, no
external measures will work. If the blueprint of an
"SEZ-SAR coalition" can be realized between Shenzhen and
Hong Kong to turn them into an integrated economic area
of more than 3,000 square kilometers, doubling Hong
Kong's space, it would not only lower land and labor
costs and create more employment opportunity but would
enhance the SAR's economic competitiveness.
According to the report, since its establishment
as an SEZ, Shenzhen has been directly under central
government supervision in much the way that
municipalities are. Currently, there are four
provincial-level municipalities in China, namely
Beijing, Shanghai, Tianjin and Chongqing. Shenzhen would
become the fifth. In terms of economic gross volume,
Shenzhen has outdone Tianjin and Chongqing. What's more,
the contribution by other municipalities or provinces to
the central financial administration and China's total
import/export trading volume lags far behind that of
Shenzhen.
Yet, hindered by administrative
restrictions, the city's economic development has never
lived up to its potential despite the explosive growth
of its companies. Nor has its role as dynamo for
economic growth in southern China and helping Hong Kong
maintain prosperity and stable development been given
full play.
There are several important
additional indications that Shenzhen has reached a
turning point in its development. Recently, for
instance, Guangdong Executive Deputy Governor Li
Hongzhong assumed the position of acting mayor of
Shenzhen. Last month, China's State Banking Regulatory
Commission made the Shenzhen Banking Regulatory Bureau a
parallel department to Guangdong's Provincial Banking
Regulatory Bureau. These changes further fuel belief
that Shenzhen is one step away from being elevated to a
municipality.
(Copyright 2003 Asia Times Online
Co, Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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