A Free Marketeer Leads Shanghai

According to a NYT story:

"The ruling Communist Party appointed Xi Jinping as the top leader of Shanghai...Mr. Xi, 53, was the party boss of neighboring Zhejiang Province and is regarded by political analysts in China as favoring deeper market-oriented reforms."

Read more here. Here is more from WSJ.

What's the likely impact of picking Xi to lead Shangahi?

My take is that, barring a heavy hand extending from Beijing to slow Shanghai's explosive development in order to preserve HK's status as China's financial hub, the appointment of Xi might help speed up the development of market infrastructure in Shanghai. Legal infrastructure and other norms of behaviour which are prerequisites in a market economy are what I have in mind here. Growth rates of Shanghai would inevitably rise as a consquence.

The ironic of all this is that just as we have just picked a Chief Executive here in HK who tries extremely hard to make sure that the development of this ex-colony fits in with China's five-year plan and slow Shanghai's growth in order to protect HK's position China's financial center, Beijing has picked a market reformer to lead Shanghai.

**Picture above shows US Treasury Secretary Henry Paulson and Xi walking together during the former's trip to China last year.

Shanghai Deserves Equal Treatment

Today's SCMP reports:

"The central government aims to take further steps to reinforce Hong Kong's role as an international financial centre, signalling its intention to highlight the city's importance to China's economy ahead of the 10th anniversary of the handover.

Analysts saw Beijing's efforts to promote Hong Kong's role as a setback for Shanghai, whose leadership has been hit by a series of corruption scandals culminating in the sacking of its former party secretary, Chen Liangyu ...

It is expected to announce more favourable policies soon, probably before the July 1 handover anniversary...

"The conclusion to the decade-long debate on the role between the twin cities has become clear now. Hong Kong, with its existing advantages, should serve China internationally, while Shanghai, with its limitations, should focus on serving the domestic market," Professor Zhong said. "

Read more here.

My response is, why shouldn't Shanghai be allowed to compete with HK? If Shanghai's legal framework and other institutions are inadequate to serve as China's international financial centre at this point in time, wouldn't it be more productive to speed up their development rather than condemn it to an insignificant role.

Why HK's is so worry about Shanghai? Afterall, it competes quite successfully with world gaints like London and New York, why it fears to compete with Shanghai?

Actually it is not correct to say HK is competing with Shanghai. As long as China has the ability to grant favorable policies to HK but not to Shanghai, the playing field is tilted even before the game begins.