【2010.9.25 华盛顿邮报】Shanghai poised to take on Hong Kong as China's financial hub

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http://www.washingtonpost.com/wp ... R2010092501884.html

SHANGHAI -  Chinese leaders have announced an ambitious new plan to turn this sprawling city on the Yellow River into an international finance and business center, on a par with New York and London, by the year 2020.

The move raises intriguing questions about Hong Kong, which already plays a similar role. Is there room for both? Can Hong Kong keep its edge? Or does Shanghai's outsize ambition threaten to supplant the former British colony down south?

The questions extend beyond the financial sphere, as Shanghai's rise seems to challenge Hong Kong's long standing as China's most cosmopolitan, diverse, worldly and exciting place to live, work and do business. In everything from research and development to Disney theme parks, Shanghai and Hong Kong often seem locked in a game of urban one-upsmanship, a rivalry worthy of New York vs. Washington, or London vs. Paris.

There's a fair amount of hometown chauvinism - and look-down-your-nose snobbery - on each side. Shanghainese are particularly proud of their city, and see it returning to its past glory as Asia's most international center. But many Hong Kongers see Shanghai as part of the still-wild, disorderly and uncouth mainland.

"The problem with Hong Kong is they need to change their infrastructure, especially their soft infrastructure," said economist Xu Mingqi, with the Shanghai Academy of Social Sciences. "They need to attract talent, to develop science and technology."

But a Hong Kong Chinese businessman who travels regularly to Shanghai said the difference is cultural. "Shanghai seems quite 'mainland,' and that's code-speak for not quite civilized," he said.

Like others, the businessman - who asked not to be quoted by name criticizing China because he does business there - voiced the suspicion that as Hong Kong's people clamor for more democracy, Beijing may be hedging its bets. "If Beijing trusted Hong Kong 100 percent, they wouldn't need Shanghai," he said.

At first glance, Hong Kong appears to have a lopsided edge in the competition. It had about a 30-year head start, since China - and Shanghai - were largely isolated from the time of the Communist takeover until the launch of Deng Xiaoping's economic reforms and opening in 1979. During that time, Hong Kong established itself as the main entrepot to the closed-off Chinese mainland.

English-speaking Hong Kong routinely ranks in surveys as one of the best places in the world to do business. Its thriving stock market has 1,273 listed companies. Its civil service is internationally recognized. Its flat tax rate is a low 15 percent, making it an attractive place for expats and their families. And, perhaps most important, its British-inherited legal system is considered one of the fairest in the world.

"People are confident in Hong Kong courts," said Patrick Chovanec, who lived in Hong Kong and now teaches at Tsinghua University's school of economics and management in Beijing. In Shanghai, by contrast, he said, "the idea of an independent judiciary doesn't exist."

But Shanghai is racing fast to catch up.

A far larger city - 19 million people to Hong Kong's 7 million - its stock market, now 20 years old, is growing quickly; it lists 870 companies with a market capitalization of $2.6 billion, and thousands more mainland firms are waiting to be listed.
Shanghai is building infrastructure at breakneck speed, including a new financial center in Pudong, and using tax breaks and other incentives to try to attract foreign firms. It is outspending Hong Kong on research and development, $5 billion to about $1.5 billion, by reliable official estimates.

Perhaps Shanghai's biggest edge is that it is part of the vast market known as the Chinese mainland. "It doesn't have a border," said Murray King, managing director for Greater China for APCO Worldwide, a business and communications consultancy based in Shanghai. "It is the head of the dragon. As long as the dragon is healthy, the head will be very, very healthy."

Already, Shanghainese have some bragging rights. Their World Financial Center is taller than Hong Kong's International Commerce Center by 26 feet. And Shanghai has more Starbucks coffee shops than Hong Kong, 122 to 106 - and Starbucks is only likely to expand in Shanghai.

Of course officials on both sides adamantly deny there is any rivalry at all, and stress that the two are more like loving, if competitive, siblings, with a single benevolent parent - in this case, the Chinese capital, Beijing.

"It's not easy for the parents: We're both intelligent, capable kids," said Patrick Chan Chi-king, director of the Hong Kong economics and trade office in Shanghai. "I think they favor both of us," he said of the central government in Beijing.

The Beijing government has announced its intention to make the Chinese currency, the renminbi, or yuan, an international currency, and Hong Kong now envisions for itself a new role as China's off-shore renminbi center.

"Hong Kong and Shanghai can play complimentary roles, each performing its unique role and contributing to the nation's economic development," Chan said. Some have compared the relationship to New York and Chicago, with New York having Wall Street and Chicago being the center for commodities trading.

Shanghai officials, too, insist that talk of a rivalry is overblown.

"Shanghai and Hong Kong should learn together," said Liu Bo, curator of Shanghai's Urban Planning Museum, which showcases this city's world-class ambitions. "It's like we are holding hands, to develop together."

Nonetheless, Shanghai is pushing forward on many fronts.

"Shanghai is trying to be the Hong Kong of China," said Murray King of APCO. "It's also trying to be the Detroit of China from an automotive perspective. It's trying to be the Seattle of China from an aerospace perspective. And it's trying to be Silicon Valley from an IT perspective."

By contrast, there is a widespread feeling, both on the Yellow River and at Hong Kong harbor, that Hong Kongers paid too much attention to the wealth generated from the city's booming real estate, at the expense of almost everything else.

"Hong Kong is focused on money - it's just a real estate market," said Luo Ying, who moved to Shanghai in 2001 to set up a biotech laboratory after a decade in Silicon Valley.

But that single-minded focus may be Hong Kong's saving.

"Hong Kong's industries are hollowing out," said Xu Mingqi, the economist. "Hong Kong's science and technology base is not that strong."

Then he added: "But Hong Kong companies know how to make money."

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