Changes in China

From: Grant Callaghan (
Date: Fri 13 Dec 2002 - 03:47:01 GMT

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    From the South China Morning Post

    Friday, December 13, 2002

    Economic ministries ready for a reshuffle

    REUTERS in Beijing After a generational change in the Communist Party leadership last month, China is laying the groundwork for a sweeping reshuffle of government ministers, including key economic posts.

    The new line-up will be formally unveiled at the annual meeting of the National People's Congress in March, but most changes have already been decided.

    "Given the generational change at the congress, we should see a lot of the older guys moving off the state council and the new guard taking over," one Western diplomat said.

    "They are stressing continuity, but personnel changes will inevitably affect policy in some way over the long term."

    Analysts are looking especially closely at the key economic bodies, the Ministry of Foreign Trade, Central Bank, Ministry of Finance and the two super-ministries overseeing the economy - the State Development and Planning Commission and State Economic and Trade Commission.

    Foreign Trade Minister Shi Guangsheng, 63, is likely to be replaced by his deputy, Lu Fuyuan, 57, ministry sources said.

    A physicist by training, Mr Lu is an all-rounder who spent two years studying in Canada in the 1980s and has been vice-minister of machinery and vice-minister of education.

    The competition for the Central Bank appears to have been narrowed down to Zhou Xiaochuan, now head of the securities industry watchdog, and Liu Minkang, head of the Bank of China, banking sources say.

    If Mr Zhou takes over the Central Bank, Mr Liu is a leading candidate to replace him as head of the China Securities Regulatory Commission, some securities brokers say.

    Finance Minister Xiang Huaicheng, 64, kept his seat on the Central Committee and is likely to become a state councillor or a vice-chairman of the NPC.

    Mr Xiang's replacement is not yet clear, but a source said it was unlikely to be his deputy, Lou Jiwei. Li Rongrong, head of the State Economic and Trade Commission, which oversees state sector reform, trade and environmental protection, is due to replace Zeng Peiyan as head of the State Development and Planning Commission.

    The commission covers fiscal policy, foreign investment and social development.

    Mr Zeng, a key ally of President Jiang Zemin, is likely to become a vice-premier.

    Mr Li is expected to be replaced by commission vice-minister Xie Xuren.

    Mr Xie is a former president of the Agricultural Development Bank, who in 2000 became a deputy head of the party's Central Financial Working Committee, the top party body overseeing financial reform.

    Thursday, December 12, 2002

    Why you shouldn't bet against the Pearl River Delta region

    MICHAEL ENRIGHT and EDITH SCOTT As interest in closer economic interaction between Hong Kong and the Pearl River Delta grows, it is becoming fashionable to compare the Pearl River area with the Yangtze River Delta. While the discussion has been useful, there is a tendency to make inappropriate comparisons, to miss the important features of competition between the two, or to fail to even specify the regions being compared in the first place.

    Many observers include Shanghai plus all of Jiangsu and Zhejiang provinces in the Yangtze River Delta despite the Chinese Statistical Bureau definition, which includes only parts of southern Jiangsu and northern Zhejiang. They then tend to compare this overly large region with a Pearl River Delta economic zone that excludes Hong Kong, Macau and parts of Guangdong.

    This means most comparisons fail to capture the overall impact of the two regions. As the table shows, the greater Pearl River Delta region, including the delta's economic zone, Hong Kong, and Macau had a gross domestic product roughly 25 per cent higher than the Yangtze River Delta economic zone last year.

    The Pearl River Delta economic zone by itself out-exported the Yangtze River Delta economic zone and obtained nearly as much foreign capital. When Hong Kong is added in, the balance is shifted substantially.

    However, if the greater Pearl River Delta region is treated as a single entity, the trade and investment within the region should be eliminated.
    (The export figure of the greater Pearl River Delta region in the table has had Hong Kong imports from the mainland subtracted to avoid double counting of Hong Kong's re-exports, but includes Hong Kong's exports to the Pearl River Delta region. Utilised foreign capital in the greater Pearl River Delta region includes Hong Kong investment in the Pearl River Delta economic zone and Pearl River Delta investment in Hong Kong).

    The Yangtze River Delta region is generally seen as having several advantages over the Pearl River Delta region, including size of population and economy, geographic location, workforce capabilities, government support, business tradition and unified development. The large population and gross domestic product of the Yangtze River Delta region are seen to be attractive to firms looking to sell into the China market.

    The Yangtze River Delta is viewed as being in the heart of the mainland and therefore as providing easy access to the Yangtze basin's 360 million people and China's 1.3 billion population. The Pearl River Delta is viewed as peripheral by comparison. Many believe that Shanghai and the Yangtze River Delta region will reassert their historical roles as centres for business, industry and commerce.

    The Yangtze River Delta region is seen as having a commercially savvy workforce bolstered by the presence of several of China's leading universities. Shanghai is viewed as a ''first-tier'' location, where mobile professionals want to live. Guangzhou and Shenzhen are viewed as ''second tier''.

    The Yangtze River Delta region has benefited from substantial backing from the central government. Billions of dollars of investments and government support programmes have attracted thousands of foreign firms. The prevailing sentiment is that the Pearl River Delta region receives far less central government support.

    Travelling around the Yangtze Delta region does not require immigration or Customs checks, as is the case for going from Hong Kong into its neighbouring areas. A final advantage often cited for the Yangtze River Delta region has been unified development, in comparison with the fragmented development in the Pearl delta.

    While some of these advantages hold, others suffer under closer inspection. The gross domestic product of the Yangtze River Delta exceeds that of the Pearl River Delta region only when Hong Kong is excluded. The lack of a single national market and transportation difficulties limit the markets that can be reached from the Yangtze delta. Central China is as easily reached from the Pearl River Delta.

    Guangzhou and Shenzhen might not be ''first-tier'' cities yet, but Hong Kong undoubtedly is. Central government support might help the Yangtze Delta, but government involvement in China has always been a double-edged sword. The Yangtze River Delta region has had sizeable infrastructure investments, but the Pearl River Delta region could eventually match them. As for unified development, the locations of Shanghai's new port (on land obtained from Zhejiang province) and the new airport (being to the east of Shanghai) can hardly be viewed as in the interest of the rest of the Yangtze Delta region.

    The Pearl River Delta region benefits from links with Hong Kong, its international orientation, its history of reform, its flexibility and decentralised development, its ability to attract skills and resources, and its clusters of internationally successful industries. Hong Kong has been a source of investment, technology, information, management and knowledge of markets. Through its links with Hong Kong, the Pearl River Delta region has superior access to the global economy.

    As China develops, the Pearl River Delta's share of trade and investment will go down, but the absolute magnitude should continue to grow. Anecdotal evidence suggests that a higher proportion of foreign investments in the Pearl River Delta region actually make more money than those elsewhere in China.

    Early opening has made the Pearl River Delta region more oriented towards markets and private-sector development. The region has been forced to compete in international markets without large state subsidies.

    Pragmatic leadership and a willingness to grow off-plan have allowed the region to find new niches, to adjust quickly to the market and to attract factory workers, scientists and engineers from around China.

    When combined with Hong Kong, which is still ahead of Shanghai as a financial centre and, according to our own research, has 10 times the number of multinational Asia or Asia-Pacific headquarters of either Shanghai or Beijing, the Pearl delta looks well-positioned.

    There are several forces that might shift the balance. These include entry into the World Trade Organisation, greater market orientation, the emergence of private enterprise and the development of national markets. It is difficult to predict the relative impact of these forces. Greater openness might benefit regions that were closed in the past and large population centres, like the Yangtze delta.

    Better access to international markets will expand opportunities in the export-oriented industries of the Pearl River Delta. Most foreign investors will eventually want a presence in both deltas. There will be competition between the two regions, but dynamism in one should help rather than hinder the other.

    Michael Enright is the Sun Hung Kai professor at the School of Business, University of Hong Kong. Edith Scott is a consultant and lawyer. This article is based on research sponsored by the Project 2022 Foundation on the economic interaction of Hong Kong and the Pearl River Delta region.

    Friday, December 13, 2002


    ANTHONY LAWRANCE The problem with elections, Josef Stalin once observed, is that you never know who is going to win them. The Soviet dictator's one-time student, the late Chiang Ching-kuo, must have had those words on his mind when he launched Taiwan's drive towards democracy in 1987 by lifting martial law. His fears would certainly have been realised had he lived to see his party, the Kuomintang, driven from the presidential office in 2000 and lose its legislative majority last year.

    This year, those same words could be coming back to haunt Chiang's successor: Taiwan's ''Mr Democracy'', former president Lee Teng-hui.

    Sure enough, Taiwan has been given what its people expected of Mr Lee when he took over from Chiang: free and fair elections. They just have not produced quite the result he must have been hoping for.

    What they have produced is tough to judge, as democracy is still relatively new to Taiwan. But the results do seem to be falling short of expectations.

    Although roughly 80 per cent of the country's 23 million citizens calling themselves benshengren (provincials) are happy to be no longer ruled by the other 20 per cent they call waishengren (mainlanders), they do not seem to be united in their views of how exactly they should be ruled.

    This has become evident from the latest round of elections held at the weekend in the municipalities of Taipei and Kaohsiung. Despite claims that the polls were a show of anger against the administration of President Chen Shui-bian, what they really showed was that Taiwan's political battle lines are becoming increasingly etched in stone.

    Personalities of the mayoral races aside, look at the statistics. In Taipei, Mr Chen's party, the Democratic Progressive Party, took 28.5 per cent of the vote for the city council. This is nearly the same as the 29.8 per cent it received in 1994 when Mr Chen won the race for mayor, and only slightly less than the 30.3 per cent it took in Ma Ying-jeou's 1998 defeat of Mr Chen. When you combine it with what its partner in the so-called ''pan-green'' alliance, Mr Lee's Taiwan Solidarity Union, pulled in, it is 32.2 per cent. The number rises only slightly for representatives to the national legislature from Taipei.

    To save readers having to wade through any more figures, suffice to say that in the opposite ''pan-blue'' corner, it has become even clearer that the percentages are just being shared among different characters.

    What was once a large Kuomintang block now consists of the Kuomintang, the People's First Party and the New Party. All pursue basically the same agenda against the Democratic Progressive Party and Taiwan Solidarity Union. You can bet this is not how Mr Lee thought it would pan out when he introduced direct elections at every level of government in Taiwan during his tenure as president. And especially not when you consider his overwhelming victory in the 1996 presidential elections.

    From 1996 to 2000, it became obvious that Mr Lee's primary aim with the establishment of elections was to empower the majority of Taiwanese to throw off the half-century-old yoke of the Kuomintang, the party he was leading at the time.

    What happened along the way, however, was that the aspirations of the masses matured. Once the old guard of waishengren were deposed from within the Kuomintang, elections came to be seen as something more than a revolutionary weapon. People naturally started to ask more critical questions of their revolutionary heroes such as: how do we get direct links with China? And, perhaps more importantly: why can't you all be as handsome and well-mannered as the nice Mr Ma?

    Such ingratitude must surely rile Mr Lee. He did not likely envisage struggling so hard for the establishment of elections in Taiwan, only to see his ideological camp end up with just one-third of the electorate's support. None of this is a bad thing, of course. Democracy has brought stability to Taiwan society - just not the kind of stability desired by all of its ambitious politicians. It would be intriguing, however, to know what the leaders in Zhongnanhai really think of democracy in Taiwan.

    A year ago, I asked Andrew Nathan, a professor of political science at Columbia University in New York, what he thought the Communist Party could learn from elections in Taiwan. His answer: ''That if they hold them, they might lose them.'' Mr Lee would surely concur.

    Anthony Lawrance is the Post's managing editor.


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