China Boomtown Alert -- First Shenzhen, Then Pudong, Now Tianjin
Twice in the last month I have done posts on how Tianjin is booming, but none of that can compare to this week's announcement by China's State Council that Tianjin's Binhai New Area (BNA) has been "designated an experimental zone for comprehensive reforms and will be built into a third economic powerhouse after Shenzhen and Pudong of Shanghai."
Those who are familiar with Shenzhen and Pudong can truly grasp what this is likely to mean, though the word is that relatively less government money will go to Tianjin than went to Shenzhen and Pudong.
Specific plans for Tianjin include the following:
The statement said that the area, covering 2,270 square kilometers, will become the gateway to North China, a modern manufacturing and research base and an international shipping and logistics center.
The new coastal area, dubbed "Pudong of North China", will launch a series of reform initiatives including financial reforms, land administration methods, a bonded area and preferential tax policies.
Binhai will open more of its financial institutions to foreign investors and adopt pilot reforms in sectors related to financial services and the capital market.
It will also launch experimental schemes in the venture capital market, foreign exchange administration and offshore banking.
The high-tech enterprises in the area will get a 15 percent tax cut, while the central government also decides to earmark funds to aid the construction of the area.
Tianjin Dongjiang Bonded Area, covering an area of ten square kilometers, will be set up in the new area with focuses on international distribution, global procurement and export processing.
Clearly, China has ambitions to turn Tianjin into a financial (including venture capital) and high tech center. I find it intriguing that the People's Daily article quoted above refers to "a series of reform initiatives including ... land administration methods." I am very curious as to what this will mean. Private ownership of land? Greater property rights for foreigners?
For more on Tianjin as China's next boom town, check out this post, entitled, "Tianjin, China -- Second Tier City With A Bright Future" and this follow-up post, entitled, "Tianjin, China -- Flying High."
Comments (2)
Read through and enter the discussion by using the form at the endtheravada - June 9, 2006 2:54 PM
I really doubt that Tianjin could possibly reclaim its status as the financial hub of northern China. The major factors behind its historical rise (achieved circa this time of the past century) were a) being a treaty port with concessions (shielded from political turmoils in Beijing); b) the relative independence of the Tianjin regional government from the Qing imperial court (Tianjin was the capital of Zhi-li and was under the jurisdiction of the Minister of North Sea), and c) the unwillingness of imperial court to allow large presence of foreign institutions within the capital though it had to resort to borrowing foreign funds for financing its war-related deficit.
By comparison, today's foreign financial institutions play a much lesser role in china's domestic market, mostly due to governmental restrictions on lending. Furthermore, most of the banks, domestic or foreign, would prefer to remain in Beijing, where central government is no longer afraid of their presence. Beijing is where all the policy institutions are located, and BJ city government loves to attract any business at the expense of its neighbors. I bet any institution in Tianjin would soon tries to relocate when it discovers its location being disadvantageous.
Despite all these hypes, there does not appear to be any coherent strategy on how Tianjin would develop amongst the party bosses, contrasting to the conseus of building a showcase at Shanghai in the early-mid 90s. Dai Xianglong got the mayor post mostly because the higher-ups wanted someone else to take over central bank (he had few backers after Premier Zhu stepped down). Developing Tianjin was more a grand excuse that attempted to make the whole thing sound good.
I might be wrong but let's wait and see.
China Law Blog - June 9, 2006 4:21 PM
Theravada --
Thanks for checking in.
I agree with you to the extent you are saying that you don't see Tianjin supplanting Beijing or Shanghai as a center, particularly for foreign financial institutions. I agree because as a capitalist, I think money and business usually goes where it wants to go, not where a government wants it to go.
However, if the Chinese government crafts enough incentives to encourage Tianjin investment, it will happen. Tianjin has its pluses, including the most obvious ones like its port and its cost structure. Airbus's building a facility there will, at minimum, make other businesses stand up and take notice.
Overall, though, the sense I have is that the central government is going to push Tianjin, but nowhere near like it pushed Shenzhen and Pudong, neither of which had the same sort of competition Tianjin has today.