Make Tianjin a Shenzhen of the north

Winston Mok says its potential could be tapped with a free trade area

PUBLISHED : Thursday, 17 July, 2014, 2:28pm
UPDATED : Friday, 18 July, 2014, 1:44am

For decades, China's economic growth has been powered by the Pearl River and the Yangtze River deltas. And, as they continue to develop, they will soon rival the economic scales of the Greater Tokyo area and the Boston-Washington DC corridor.

Perhaps uncomfortable with this economic centre of gravity south of the Yangtze, Beijing wants to make Greater Beijing - including Tianjin and Hebei - an additional engine of growth. In fact, with significant central government support, Tianjin has been growing faster than the deltas for quite a few years.

McKinsey ranked Beijing and Tianjin as the world's second- and third-most economically dynamic cities of 2025, after Shanghai. The two northern cities can in fact develop more effectively in complement rather than in competition. Such concerted development will also alleviate population and environmental pressures on the capital, and hopefully make Beijing more liveable.

China's national competiveness will be shaped by its top economic regions. Compared to the deltas, Greater Beijing is far less coherent as an economic region. Despite long-standing formal processes to coordinate its development, conflicting agendas and divergent interests have rendered them largely ineffectual so far.

This could change. Xi Jinping has made the integrated development of this area a national strategic priority under his personal charge. It will take the president to bring together the powerful leaders of the two cities, both Politburo members. However, while Xi's personal championing of this will provide great impetus, effective working-level coordination is essential to making an integrated Greater Beijing a reality.

The urban plans for Tokyo and Seoul were effective because they were directed at the national level. Those for Beijing were mainly done by the municipal government, whose agenda may have been more parochial. The central government should consider merging the planning departments of Beijing, Tianjin and Hebei into an integrated authority with a national perspective.

In addition to the strong hand of the state, the invisible hand of the market is just as important. While the economies of Beijing and Tianjin are dominated by the state sector, economic growth of the Yangtze River and Pearl River deltas has been driven by private enterprise. The two deltas have been the economic centres of China for centuries.

Beyond the major cities, the underlying dynamism is rooted in their towns - many of which feature clusters of world-scale industries. Having led Zhejiang and a Hebei county earlier, Xi should know the contrast between the two.

Few towns focused on dynamic industries exist in Greater Beijing. Unlike the people in the coastal south, most in the Greater Beijing region lack the tradition of an enterprising spirit. Even though Tianjin was a pioneer of China's industrialisation, after more than a century, its economy remained powered by state-owned enterprises and foreign companies. So there may be a limit to state-driven growth for Greater Beijing.

The best bet may be to make Tianjin a Shenzhen of the north. Before 1949, it was economically much more important than Beijing. Even after many of its international settlements reverted back to China, Tianjin remained highly cosmopolitan with easy access for foreigners - in a way, similar to Hong Kong.

Making part of Tianjin a free-trade zone could draw talent from all over China, and perhaps globally. Given its close proximity to China's Silicon Valley in Beijing, perhaps the next Huawei or Tencent, or even Facebook, may be born there.

Winston Mok is a private investor, a former private equity investor and McKinsey consultant. An MIT alumnus, he studied under three Nobel laureates in economics