Hong Kong-based Pacific World Asset Management is barely known in the financial world. Yet it has spent almost a year and more than US$1 million to register itself in the Qianhai economic zone.
That's unusual. Despite all the hype, Hong Kong businesses have put little money into the future "Manhattan of southern China".
In the past 12 months, the number of firms registered in the zone has increased from 700 to 1,679. They have poured in 192 billion yuan (HK$242 billion) as capital, an average of 120 million yuan each. However, less than 5 per cent are Hong Kong entities, according to regulatory sources.
Last month, no Hong Kong developer took part in the zone's third land auction. Firms pointed to a requirement that the winning bidder commit to setting up a regional headquarters there within a year. China Resources secured the site with 10.4 billion yuan.
What does Pacific World see in the zone that the big boys in Hong Kong don't? Your columnist asked its controlling shareholder and legal representative Simon Cheung.
"There is no clear policy. The cost of setting up is high. There is no immediate profit. These are all genuine concerns," Cheung said. "Yet experience has shown us that by the time the policy is clear to most people, the door will be shut."
The naysayers have a point. Qianhai has billed itself as a testing ground for the internationalisation of the yuan. For example, a leasing firm registered there can theoretically borrow yuan from a Hong Kong bank at 1 per cent interest and lend the money out at 20 per cent to a factory in Dalian.
There is, however, no policy on how the money can go from Qianhai to Dalian. It isn't surprising that credit lines in the zone have only grown from 50 billion yuan to 80 billion yuan this year, most of it sitting idle.
Meanwhile, getting registered there isn't cheap. Burned by the Tianjin experiment, in which lax regulation resulted in many hit-and-run funds cropping up and creating a host of angry investors, Beijing has kept a tight grip on Qianhai.
Cheung paid the US$1 million all in one go to fulfil the capital requirement. Banks and securities houses need US$10 million to start with. Cheung had to go through rounds of interviews even though he has five years' experience in the mainland financial market and a shareholder list that includes two prominent private enterprises. His Qianhai firm must be operational; no shells are allowed. Cheung's firm gained its licence in July.
Many Hongkongers would rather buy a flat with that kind of money for a quick return. After all, it is not easy for Hongkongers to fully appreciate the significance of the yuan's internationalisation when they have been transferring money to and from the mainland via street corner exchanges or in suitcases, or simply bidding for A shares using a mainland cousin's name.
But to Cheung, there's a blue sky out there. Think of the opportunities that will arise when it no longer takes the world six months to a year but one to two days to send money to and from China for investment, he says.
"Do I know how to get from A to B? Honestly, I don't … Yet, that's the stage, and Qianhai is the place where you can have the maximum input and be protected by the banner of 'innovation' should anything go wrong."
This same mood prevails among the Qianhai authorities, among whom there are no political heavyweights, just young civil servants eager to make it work.
They are lobbying banks and firms to "push your loan proposal through the procedures" no matter how small, in order to figure out how it should be vetted and who should be doing the vetting.
Yet won't Shanghai's soon-to-be launched free-trade zone be a better choice than Qianhai in terms of political clout and sophistication?
"No outsider will stand a chance in Shanghai," Cheung said. He is not referring to just the aggressiveness of Shanghai's businesspeople versus Hong Kong's but also to the closed circle of power there.
For those princelings and businessmen who have not made it to Shanghai's corridors of power, Qianhai will be the only place to get a share of the yuan internationalisation pie.
They will lobby for Qianhai for whatever policies Shanghai has got as long as they can prove themselves to be innovative.
"This is where Hong Kong can help and share," Cheung said.
Does this make him smart or dumb? Time will tell. He does have, however, the very much missed pioneering spirit now rarely seen among Hong Kong businessmen. In the meantime, some Russians and mainlanders have been calling Cheung up for possible co-operation with his Qianhai platform.