• Mon
  • Sep 22, 2014
  • Updated: 2:35pm
Mr. Shangkong
PUBLISHED : Monday, 26 May, 2014, 5:06am
UPDATED : Saturday, 31 May, 2014, 6:17pm

Xi Jinping's visit to Shanghai zone gives new hope to economic reform

Free-trade zone welcomes its most prominent supporter, leading to speculation the visit could create momentum for more such experiments

BIO

George Chen is the financial editor and columnist at the South China Morning Post. George has covered China's financial industry and economic reforms since 2002. George is the author of Foreign Banks in China. He muses about the interplay between Shanghai and Hong Kong in Mr. Shangkong columns every Monday in print and online. Follow George on Twitter: @george_chen
 

The Shanghai free-trade zone, which has so far received mixed feedback from foreign investors since it was launched last October, finally won its biggest supporter last Friday - a surprise first-time visit by President Xi Jinping.

Some may say Xi's visit to the zone, the first of its kind on the mainland and modelled on Hong Kong's free port and market system, may only be symbolic, but such symbolic visits have often significantly changed the path of mainland economic development.

For example, late paramount leader Deng Xiaoping's visit to southern China in 1992 eventually led to a wider opening-up of the mainland market to foreign investors.

Xi claimed to be a big fan of the free-trade zone and what had been done since its opening

Xi didn't say too much about the Shanghai project when it was launched last October. It was widely considered the baby of Xi's subordinate, Premier Li Keqiang.

Indeed, Li fought hard against internal party opposition to economic and market liberalisation and regarded the zone as his first attempt to make a mark for himself as a different kind of premier compared with his predecessor Wen Jiabao, who was considered too political and conservative.

For reasons that are not clear, Li surprised everybody by not showing up for the free-trade zone's opening ceremony.

Instead, he sent some ministerial-level officials in his place. This fuelled speculation over how committed China's top leadership was in supporting the project, and economic reform in general.

External speculation is of course not helpful to any new economic experiment. When you try to do a new thing, especially at the very beginning, people's trust is more important than real money.

The Shanghai government was also concerned about such speculation so it organised many tours and briefings for foreign businesspeople and media. But the biggest question was always there: what's the view of the top leadership, like Xi and Li, on the free-trade zone?

Shanghai is just a city on the mainland, and for every significant step it takes it must follow the central government's orders. So Xi's view on the trade zone was the last question that top officials in Shanghai, including local party chief Han Zheng, who is believed to have good personal ties with Xi, wanted to answer until last Friday when Xi showed up, smiling in front of the cameras and shaking hands with the local staff.

Xi claimed to be a big fan of the free-trade zone and what had been done within the short period of time since its opening, according to a source who accompanied Xi and other senior officials during the visit.

Sources said Premier Li is most likely to visit the zone in October - its first anniversary - where he would likely give a clearer picture of what the top leaders want it to become. Or perhaps there will be more cities and provinces to follow the so-called "Shanghai model".

What's next? Guangdong? Tianjin? One thing for sure is that the free-trade zone story will definitely continue, not only because top officials want to push economic reforms forward, but also because they have to find new elements to keep the attractive China investment story developing.

 

George Chen is the financial editor and a columnist at the Post. Mr. Shangkong appears every Monday in print and online. Follow @george_chen on Twitter or visit facebook.com/mrshangkong

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