AN INTERVIEW WITH KEVIN SINCLAIR OF THE STANDARD (HONG KONG)
JUNE 29, 1988
KS: Mayor Zhu, could you please talk about the current and future relationship between Hong Kong and Shanghai? You were recently quoted in newspapers as saying that foreign investment in Shanghai has already reached US$2 billion. How much of this do you estimate came from Hong Kong? How high will this reach in the future?
ZRJ: Hong Kong has invested US$500 million in 149 projects in Shanghai, which is second only to the United States in foreign investments. I feel there is a great future for cooperation between Shanghai and Hong Kong because of Shanghai’s strengths in technology and Hong Kong’s in finance and information. Both Shanghai and Hong Kong are fairly large cities in Asia and there should be further cooperation between them.
Currently, because of geographical proximity, Hong Kong has somewhat more cooperative projects in Guangdong. Geographical proximity is more advantageous for labor-intensive cooperating, but there are also advantages to cooperating with Shanghai, which features technology- and knowledge-intensive enterprises. In the past, cooperation between Shanghai and Hong Kong did not develop rapidly. This wasn’t only due to geographical reasons—there were also certain problems with Shanghai’s investment environment. I will very frankly admit that the investment environment in Guangdong is better than that in Shanghai and the awareness of a commodity economy is stronger there than in Shanghai, but we’re already doing solid work to improve the investment environment in Shanghai. Henceforth the pace of technical cooperation between Shanghai and Hong Kong will speed up.
I recently noticed that some Hong Kong papers have been reporting more about the negative aspects of Shanghai, such as its declining fiscal revenues, poor morale, backward urban construction, and so on. Although there is some basis for these reports, I feel they should also see the positive elements in Shanghai. Shanghai has a large number of talented people with high cultural and technological standards; it has the most comprehensive array of industries in the country and is very strong in related capacities. In this sense, Shanghai has the best investment environment in the country.
Because of the rapid population increase, Shanghai’s infrastructure construction isn’t keeping up, but problems in this area aren’t hard to solve. Take telephones, for instance. At liberation, Shanghai had 72,000 phones, more than Hong Kong. Over the past several decades, Shanghai added only 70,000 or so phones, reaching 142,000 phones by 1978. By contrast, Hong Kong now has over 10 times as many phone lines as Shanghai. In the past few years, we’ve adopted some preferential measures to develop digital telephones, which have nearly doubled in number. For the past seven or eight years, Shanghai has added 20,000 phones annually and will add 70,000 this year. By 1990 we can reach 500,000 to 600,000. At this rate, it won’t be very hard for our telephone facilities to catch up with Hong Kong’s.
That’s why Hong Kong should see the positive side of Shanghai. Particularly since Shanghai implemented fiscal contracting this year, it has acquired greater autonomy and greater fiscal resources. Shanghai has the authority to directly utilize foreign investment—at present, it is the only such city in China. During the period of the Seventh Five-Year Plan, we will utilize US$3.2 billion in loans, while at the same time preparing to absorb large quantities of foreign direct investment (FDI).
I hope that after you return, you’ll report more on the positive side of Shanghai. The current image of Shanghai in Hong Kong newspapers is a “gray” one. I hope Hong Kong’s confidence in Shanghai will be restored. I’m very optimistic about this: I see the positive side of Shanghai’s people, and they’re gradually acquiring a new dynamism.
Recently, a Sino-American symposium on industry, trade, and economic development was held in Beijing. Americans sent 1,000 participants and the Chinese sent delegations from over 20 provinces and cities. The Shanghai delegation attracted the most attention there—it was the most popular participant with the Americans, and it conducted negotiations on the largest number of projects. That’s why someone at the workshop said that Shanghai is now “launching an offensive.”
In terms of this year’s production, the industrial growth rates in Shanghai for May and June both exceeded 8% and agricultural production increased by over 10%.
Shanghai is filled with confidence about the prospects for further reforms of prices and wages because its economic performance still leads the nation. After the last several years of large-scale technical upgrading, its industries have sustainable strength in production. That’s why after you return, you can absolutely tell Hong Kong’s entrepreneurs to invest in Shanghai. They will not be disappointed if they engage in economic and technical cooperation in Shanghai.
Of course it isn’t possible to bring about major improvements in the investment environment all at once, but it is really being improved a little at a time. Our goal is to ensure that foreign-invested enterprises in Shanghai can produce and operate in accordance with international practices. For instance, we recently waived many fees that had been levied on foreign-invested enterprises because they were not in line with international practices. Even though Shanghai suffered significant losses as a result, we don’t begrudge those.
Also, I’m afraid that people in Hong Kong think that people in Shanghai are more difficult to negotiate with than those in Guangdong. This situation is currently changing because we have proposed a slogan: no matter how much money foreign businessmen make in Shanghai, no matter how large their profits, we will not be envious. We mustn’t keep focusing on how much money goes into other pockets: we must see that through cooperation, we, too, can make money. I understand that recently a succession of delegations from fairly large foreign companies have been coming to Shanghai for negotiations. Yesterday, Philips N.V. signed a contract with Shanghai for a large integrated circuit project. Negotiations for many similar projects are now under way. I believe that the pace at which Shanghai absorbs and utilizes foreign investment this year will be much faster. In the past, Shanghai and Hong Kong had very close ties, and I hope that in the future, these ties will continue to develop.
KS: Mayor Zhu, your words and deeds in fighting bureaucratism are very highly regarded in Hong Kong. For example, something that a foreign businessman had to get 126 chops to accomplish now only needs 1 chop. Many Hong Kong businessmen are very pleased about and approving of this. I even wrote an article for The Bulletin of Australia saying that Shanghai now has joint ventures with Australia. Does Shanghai hope to attract more investment from Australia?
ZRJ: We would very much like to develop cooperative relations with Australia. There’s a complementarity between the industries of Shanghai and Australia. Shanghai needs Australian wool, iron ore, and certain hi-tech industries, while Australia needs many textile products from Shanghai. We’re very willing to establish long-term cooperative relations with Australia. In this regard, Shanghai did not do enough in the past. Jiangsu, first instance, has established a wool production base in Australia but Shanghai has not—we must establish one in the future. Vice Mayor Huang Ju has already visited Australia this year. We hope leading members of the Australian government will come to Shanghai and further develop our bilateral relations in economic and technical cooperation.
The “one chop” you just mentioned is the Shanghai Foreign Investment Commission. It has already been formally established, has started operating, and has achieved great results within a short period of time. For example, the Shanghai Institute of Technical Physics of the Chinese Academy of Sciences had been negotiating with the Sino-Japanese joint venture Shanghai Nicera Sensor Company Ltd. for over a year without a resolution. The Foreign Investment Commission took this over, held one meeting and resolved it.
It was reported in the papers a few days ago that a cooperative Shanghai-U.S. project to produce bearings was approved after 70 days—it was also handled by this agency. We say that there will still be bureaucratism, but the situation keeps getting better and better.
KS: Mayor Zhu, you said in April that Shanghai has implemented fiscal contracting. May I ask what the fixed base figure for contracting is?
ZRJ: RMB 10.5 billion.
KS: How much increase is there in the portion to be retained by Shanghai?
ZRJ: Shanghai originally retained 23%, and now this will be upward of 30%.
KS: Does Shanghai have the authority to use this part of the money for urban construction?
ZRJ: Yes, it’s entirely at Shanghai’s disposal.
KS: In using this money, what projects will you consider giving priority to?
ZRJ: We will first be using this part of the money to support and develop production in Shanghai, optimize the industrial structure, and increase production. The construction of urban facilities will mainly be done by using foreign investment.
KS: Mayor Zhu, you’ve said several times that traffic is one of Shanghai’s greatest problems. How do you view this? How do you plan to solve it? Right now, tourists from abroad, particularly those coming to Shanghai via Hong Kong, find that air transportation is very inconvenient.
ZRJ: Air transportation is intercity transportation. Relatively speaking, intracity transportation is harder to solve. Right now there are over 7 million people in our urban area; add to that a transient population of 2 million and you have 10 million people living in an area covering 370 square kilometers. One-tenth of China’s industries are also on this land. To fundamentally resolve this problem, the industries in the old urban area must be dispersed to Pudong and a “New Shanghai” built there. We are now building the Huangpu River Bridge and a tunnel under the river in preparation for developing Pudong and for building the “New Shanghai.” For the next few years, we’ll still have to use the old facilities and improve intracity transportation through stronger management. In addition to building a subway, we will also build an elevated highway, widen some roads, and establish separate lanes for bicycles and motorized vehicles. We’ve already drawn up a plan to improve intracity transportation within five years and are in their process of organizing experts to discuss it. In a month’s time, this plan will be made public to all residents of the city. Implementation of this plan will require support from all the people.
You mentioned civil aviation just now. The Civil Aviation Administration is in charge of this, and it does need a lot of improvement. We also have a Shanghai airline company that leases aircraft from the Boeing Company of the United States. Through the efforts of the Civil Aviation Administration and of Shanghai Airlines, we will improve Shanghai’s air transportation.