Hong Kong need not fret too much, for now, about northern pretender
With delays to Shanghai's free-trade plans, not to mention high jinks by judges, city's legal and media strengths shore up its role as a financial hub
When Beijing announced last month its landmark plan to create a Hong Kong-like free-trade zone in Shanghai, many people, including myself, naturally felt Hong Kong's position as one of the world's leading financial centres could be further weakened.
I might be wrong. I might be too optimistic about the future of Shanghai after the free-trade zone plan, the first one approved by the central government for a mainland city. First of all, I'm surprised to see how slowly the plan is being put into effect. My government sources told me Beijing was forced to delay the announcement of new rules for the zone as government lawyers attempted to close some potential legal loopholes.
The central government had planned to unveil the rules late last month, but policymakers put the lawyers back to work out of concern the legal framework needed tightening, to reduce the risk of legal disputes involving foreign investors, the sources said. Some of my sources felt such so-called "legal loopholes" could be just excuses for some of the regulators to delay the plan by other means. After all, they had disagreed with Premier Li Keqiang on the plan to open the financial services sector wider to foreigners.
Does this sound familiar? Remember the so-called "through train" scheme to allow mainland individuals to invest in Hong Kong's stock market? That was in August 2007, when then-premier Wen Jiabao announced the landmark plan for his hometown Tianjin, which he was keen to turn into a financial capital for northern China.
Just a few months later, Wen backed off. He cited regulatory issues as reasons why the Tianjin "through train" plan could not be launched quickly. Hong Kong stock investors were hugely disappointed, but they quickly forgot. No one was blamed for the plan being announced in such a hurry and then being suspended in such a hurry.
If the slow progress with Shanghai's free-trade zone fuels your doubts about the city's future development, then the video disclosure of five high-ranking officials from the Shanghai Higher People's Court patronising prostitutes together last week is the last thing I believe the city's government wants to see. How can foreign investors place confidence in Shanghai's legal system, when some judges can apparently be bribed with money and sex.
Even if the yuan becomes fully convertible by 2020, when Shanghai should be built up into one of the world's three top financial centres - on a par with New York and London, as Beijing pledges - Shanghai can't compete with Hong Kong on at least one thing: a law-abiding community and judicial independence. These are key planks of Hong Kong's core values and how this city distinguishes itself from the rest of China.
Oh, and of course, how can I forget to mention the other key element of Hong Kong's core values? Freedom of the press. When the online video with the prostitutes went viral, the Shanghai government was forced to come out and confirm the names of court officials who appeared in the video. The government promised to investigate, but in the meantime, it told local media to shut up.
No news is good news for Shanghai? Not necessarily.
George Chen is the Post's financial services editor. Mr. Shangkong appears every Monday in the print version of the SCMP. Like it? Visit facebook.com/mrshangkong