Tianjin's cautious transformation

 
TIANJIN - The port of Tianjin, a thriving gateway for foreign trade at the end of the 19th century, is once again fast becoming a key conduit for the international flow of goods and money. With Shanghai preoccupied with domestic capital markets, the Chinese government wants to transform Tianjin into a hub for direct finance, venture capital and foreign exchange, establishing the area as northern China's foremost financial capital.

After more than a decade of development and construction, Tianjin's Binhai New Area (BNA), which has an area of more than 2,200 square kilometers, is flourishing. The area's gross domestic product has increased from 11.2 billion yuan (US$1.5 billion) in 1993 to 196 billion yuan last year, with an annual average growth rate of 20%. Financial revenue over the same period has risen from 2.36 billion yuan to 38 billion yuan. Tianjin, the third-largest city in China and located on the northeast coast, is one of four province-level municipalities.

Under this groundbreaking move, which marks the biggest reform of China's tightly controlled foreign-exchange systems to date, all Chinese passport holders with adequate funds will be able to open brokerage accounts with a Tianjin branch of the Bank of China, the country's top foreign-exchange bank, to buy and sell Hong Kong shares. These accounts would be free from current rules that restrict Chinese to $50,000 in foreign-exchange transactions per year.

Beijing is hoping that the Tianjin-Hong Kong investment scheme will act as a partial balance for the massive amount of money flowing into China every day as a result of the lopsided balance of trade and strong inward investment. China now has a staggering $1.3 trillion in foreign-exchange reserves, which is severely hampering efforts to put the brakes on the national economy, stoking inflation, and putting upward pressure on the yuan.

While Beijing may have suffered from a sudden case of cold feet over the trial investment scheme, Tianjin is confident it has the backing of the government as outlined in the 11th Five-year Plan. This year the city also applied to set up the country's first national over-the-counter stock exchange as part of its plan to become a regional financial powerhouse, and is awaiting a decision from Beijing.

Beijing is also set to approve as many as 10 domestic venture-capital funds in Tianjin. Led by the Yindao Fund, they will be worth a total of $2.6 billion, and are intended to build up the domestic venture-capital industry as a rival to foreign-owned funds. The project will "allow China's own Samsungs and Motorolas to transform themselves from cats into tigers", commented Ni Xiangyu, vice chairman of the TEDA, in an interview with The Financial Times recently.

Steven Tam, president of the Tianjin American Chamber of Commerce, commented, "Tianjin is a rather conservative city. Some of the leaders are not too forward-thinking. The central government has brought in new blood in the past couple of years to inject proper leadership in the whole bureaucracy. In five to 10 years, Tianjin will be vastly different to how it is today. I think the continued support and encouragement from the central government is essential."

The Tianjin municipality has also recently conferred preferential tax status on its Dongjiang Bonded Harbor Area (DBHA), which is being constructed on a strip of reclaimed land. Together with the adjacent Tianjin port, the area will form the new core of the BNA. More than 75% of key construction projects confirmed by Tianjin this year are taking place in Binhai. As the principal investor in Dongjiang, the Tianjin Port Group will receive all tax revenues from commercial land and sea use at the port until 2020.

TIANJIN - The port of Tianjin, a thriving gateway for foreign trade at the end of the 19th century, is once again fast becoming a key conduit for the international flow of goods and money. With Shanghai preoccupied with domestic capital markets, the Chinese government wants to transform Tianjin into a hub for direct finance, venture capital and foreign exchange, establishing the area as northern China's foremost financial capital.

After more than a decade of development and construction, Tianjin's Binhai New Area (BNA), which has an area of more than 2,200 square kilometers, is flourishing. The area's gross domestic product has increased from 11.2 billion yuan (US$1.5 billion) in 1993 to 196 billion yuan last year, with an annual average growth rate of 20%. Financial revenue over the same period has risen from 2.36 billion yuan to 38 billion yuan. Tianjin, the third-largest city in China and located on the northeast coast, is one of four province-level municipalities.

Under this groundbreaking move, which marks the biggest reform of China's tightly controlled foreign-exchange systems to date, all Chinese passport holders with adequate funds will be able to open brokerage accounts with a Tianjin branch of the Bank of China, the country's top foreign-exchange bank, to buy and sell Hong Kong shares. These accounts would be free from current rules that restrict Chinese to $50,000 in foreign-exchange transactions per year.

Beijing is hoping that the Tianjin-Hong Kong investment scheme will act as a partial balance for the massive amount of money flowing into China every day as a result of the lopsided balance of trade and strong inward investment. China now has a staggering $1.3 trillion in foreign-exchange reserves, which is severely hampering efforts to put the brakes on the national economy, stoking inflation, and putting upward pressure on the yuan.

While Beijing may have suffered from a sudden case of cold feet over the trial investment scheme, Tianjin is confident it has the backing of the government as outlined in the 11th Five-year Plan. This year the city also applied to set up the country's first national over-the-counter stock exchange as part of its plan to become a regional financial powerhouse, and is awaiting a decision from Beijing.

Beijing is also set to approve as many as 10 domestic venture-capital funds in Tianjin. Led by the Yindao Fund, they will be worth a total of $2.6 billion, and are intended to build up the domestic venture-capital industry as a rival to foreign-owned funds. The project will "allow China's own Samsungs and Motorolas to transform themselves from cats into tigers", commented Ni Xiangyu, vice chairman of the TEDA, in an interview with The Financial Times recently.

Steven Tam, president of the Tianjin American Chamber of Commerce, commented, "Tianjin is a rather conservative city. Some of the leaders are not too forward-thinking. The central government has brought in new blood in the past couple of years to inject proper leadership in the whole bureaucracy. In five to 10 years, Tianjin will be vastly different to how it is today. I think the continued support and encouragement from the central government is essential."

The Tianjin municipality has also recently conferred preferential tax status on its Dongjiang Bonded Harbor Area (DBHA), which is being constructed on a strip of reclaimed land. Together with the adjacent Tianjin port, the area will form the new core of the BNA. More than 75% of key construction projects confirmed by Tianjin this year are taking place in Binhai. As the principal investor in Dongjiang, the Tianjin Port Group will receive all tax revenues from commercial land and sea use at the port until 2020.