Jake's View

Qianhai as the 'Connecticut' of the PRD

Great expanses of mud prevail as promised edifices of steel and glass have not yet taken the place of swathes of tasteful brown landscape

PUBLISHED : Thursday, 24 January, 2013, 12:00am
UPDATED : Thursday, 24 January, 2013, 4:58am

An association of Hong Kong stockbrokers has agreed to co-operate with the authority administering Qianhai - a 15-square kilometre special zone west of Shenzhen - to help develop the area into the "Manhattan of the Pearl River Delta".

SCMP, January 23

I have news for the Qianhai authorities. People I know in the investment business in New York either congratulate themselves on having long moved out of Manhattan or are grousing at being stuck there.

Why not make it the "Connecticut" of the Pearl River Delta?

This Qianhai project has now hung fire for so many years that I can't even remember when it was first mooted. All I know is that it resulted from disappointment on the part of some Shenzhen city fathers that a special zone they had carved out of Hong Kong, the Lok Ma Chau Loop, would probably not go ahead.

The idea with Qianhai is that it will get special consideration from Beijing to become a new financial centre. The architects' fantasies certainly leave you in no doubt of this assured future.

Their drawings turned a section of swamp land on the Shenzhen shoreline into a glittering city of modern office towers and marinas, magically clearing up all the air pollution at the same time. It's so easily done.

Development began quickly on some crucial sites, even before these sites were acquired. This left the pre-acquisition owners with the prospect of magnificent compensation profits for tearing down brand new buildings to make way for the architects' dreams.

Perhaps the Qianhai authorities should have foreseen that this would happen. Perhaps they did.

The initial burst of enthusiasm appears to have slowed down a little now. The promised sparkle of glass and polished metal has not yet taken the place of a tasteful shade of landscape brown. Great expanses of mud prevail.

The Qianhai authorities know they must look ahead, however. Having decided that they will call a new financial centre into being, the Manhattan of the PRD, no less, they have begun to tackle the problem of who will occupy this gleaming new city and what these people will actually do to make their livings.

Hmmm …

Well …

Yes …

Indeed …

Got it! What Qianhai will do is bring in Hong Kong stockbrokers to sell Hong Kong stocks to Qianhai residents. What a blessing that an association of Hong stockbrokers was called in to offer advice and co-operation.

It didn't take long for Christopher Cheung Wah-fung, our financial services legislator, to come up with this idea.

What genius.

There is just one slight niggling detail to circumvent. China maintains a closed capital account, and while Beijing is happy to see this wall breached by foreigners who wish to hold yuan, it frowns on Chinese citizens breaching it to hold foreign currencies.

Let Hong Kong stocks be made available to Qianhai residents, and several hundred million mainlanders will become Qianhai residents overnight. This will be a matchless channel for squirrelling money abroad.

It has, in fact, been proposed before. Our former monetary chief, Joseph Yam Chi-kwong, believed in 2007 that he had permission from Beijing to open just such a channel from Tianjin. His joyous reporting of this news at home sent the Hang Seng Index rocketing to an all-time peak of almost 32,000.

And then someone in Beijing realised just what it would mean. The door was instantly slammed shut with such a bang that the reverberations toppled Joe from his job.

They talk a great deal these days of a progressive opening of the capital account, but it remains a one-way opening only.

The idea of letting the man on the street in Chengdu invest his money where he will is revolutionary. It would free the proletariat. It would empower the people. We can't have that in a country ruled by the Communist Party.

But here is the real solution for the Qianhai authorities.

Dive for the bottom, fellows. What you must do is ban regulatory oversight, abandon all listing requirements, encourage large-scale money laundering and promote yourself to every thief in a thousand miles.

For as long as it works, it will work magnificently. Just get your exit strategy ready.