MCLC: China's New Manhattan

[Denton, Kirk]

MCLC LIST
From: kirk (denton.2 at osu.edu)
Subject: China's New Manhattan
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Source: NYT (11/19/12):
http://www.nytimes.com/2012/11/20/world/asia/the-new-manhattan-of-china-has
-local-support.html

Powerful Backer for China’s New Manhattan
By KEITH BRADSHER

TIANJIN, China — China is full of big bets that the country’s breakneck
economic growth will continue apace, but few are bigger than the vast
Yujiapu financial district here.

Nicknamed China’s new Manhattan, the district comprises at least 47
skyscrapers being built on desolate coastal salt flats 100 miles southeast
of Beijing. Financed by huge loans from state-owned banks, the district is
an immense public works project, and is closely associated with Zhang
Gaoli, the little-known Communist Party secretary of Tianjin who joined
the new seven-member Politburo Standing Committee last week at the end of
the 18th Party Congress.

Mr. Zhang has emerged as the man expected, after approval by the National
People’s Congress in March, to handle day-to-day management of the Chinese
economy. He won out over Wang Qishan, who has a much deeper background in
economic and financial policy making and was seen as likely to clash with
and perhaps even overshadow the incoming prime minister, Li Keqiang.
Chinese leaders have not forgotten how Zhu Rongji, with a similarly deep
background, managed to dominate economic policy making from his position
as executive vice premier in the mid-1990s.

As the Yujiapu project makes clear, Mr. Zhang has been a defender of huge
government-guided investments, an approach that very much fits the mold of
ambitious party officials eager to get ahead within the existing power
structure. At the same time, say experts and people who know him, he has
cultivated an image as a stern bureaucratic taskmaster, a politician who
can get things done by working with powerful business interests rather
than challenging them.

“He’s a very strong guy,” said Jean-Luc Charles, the general manager of
Airbus’s assembly plant here for the A320 jetliner, who had nothing but
praise for Mr. Zhang. “He sets a target and people run.”

But Mr. Zhang also has some surprising characteristics. In Tianjin, he has
pushed to expand retailing and other services as a way to create jobs
beyond construction and manufacturing. He also is an advocate for firm
environmental and labor standards aimed at improving the lives of ordinary
Chinese.

After a series of increases during Mr. Zhang’s tenure, the city’s minimum
wage is now 4 percent higher than Beijing’s — even though Tianjin is
considerably poorer over all. And while Tianjin cracked down on labor
protests in the summer of 2010, the municipal authorities have since set
up a trade union for migrant workers, who usually have few legal
protections.

The migrant workers’ union “negotiated a reasonable deal for sanitation
workers in the city,” said Geoffrey Crothall, the spokesman for China
Labor Bulletin <http://www.clb.org.hk/en/>, a nonprofit group in Hong Kong
that favors the establishment of independent unions in China.

Tianjin residents described two street protests here in April, one against
a $1.7 billion expansion project at a chemical plant and the other against
a real estate developer who was accused of absconding with apartment
buyers’ deposits. The authorities were quick to negotiate compromises in
both cases, suspending construction at the chemical plant, even though it
was being built by Sinopec, one of the largest state-owned enterprises,
while tracking down the developer and requiring restitution. They did not
resort to calling riot police to disperse the protesters, as municipal
leaders have sometimes done elsewhere in China, residents said.

Tianjin has adopted many Western pollution regulations and in some cases
tightened them further. Air and water emissions from the Airbus factory
here are monitored by pollution equipment that is connected around the
clock to government monitoring computers.
It is not clear, though, whether these policies reflect a personal
commitment by Mr. Zhang to progressive social policies or his penchant for
setting rules and making sure people follow them. Perhaps both.

“Zhang is very strong with all the regulations — do it in accordance with
the regulations and no joke,” Mr. Charles said.
Mayor Huang Xingguo of Tianjin, the second-ranking official in this city
of 13 million after Mr. Zhang, cited the city’s many parks and its air
quality — though by some estimates it is only marginally better than
Beijing’s — at a news conference in Beijing late last week during the
party congress.

At the same time, he added a commercial note that captures the tone of the
city’s administration: “We hope you come to Tianjin to buy houses.”

Selling real estate is crucial to the deeply indebted city. Total credit
issued in Tianjin grew faster than anywhere else in China during the
economic stimulus program in 2009 that led the country quickly out of the
global financial crisis. Now the question is whether city-owned
enterprises can sell or lease enough of the buildings they are erecting to
avoid a fiscal disaster.

Jones Lang LaSalle 
<http://www.us.am.joneslanglasalle.com/unitedstates/en-us/Pages/Home.aspx>,
 a global real estate services firm, estimates that available commercial
real estate in central Tianjin will double in the next four years. In the
new financial district 30 miles from downtown Tianjin, the first dozen
office buildings will have the combined floor space of four Empire State
Buildings. Many Hong Kong developers with investments here are worried
about a glut of office space.

Another worry here is that most of the construction is on coastal salt
flats that are scarcely above sea level, and could be vulnerable if
climate change leads to increases in sea level or typhoons with large
storm surges. After deluges last spring, “you had to roll up your pants
and take off your shoes to walk across the street,” a local resident said.

But such concerns are taking a back seat to the more pressing task of
filling empty buildings in the district. The local operations of big
state-owned enterprises, like the Agricultural Bank of China, may be
pushed by the municipal government into leasing lots of space, said
Michael Hart, the managing director of the Tianjin office of Jones Lang
LaSalle.

The new financial district is not quite the unoccupied desert that it
appears. Mr. Zhang personally ordered two little-known tax breaks that
have led as many as half of the country’s private equity funds to transfer
legal residency and some offices to Tianjin, either to the nascent
financial district or areas nearby, finance experts said. Mr. Zhang
reduced business taxes for private equity funds based in Tianjin and
nearly halved the income tax rate for limited partners in those funds.

The tax breaks have not only lured private equity funds to Tianjin but
also may have yielded valuable political advantages. Princelings, the sons
and daughters of current and former senior Chinese officials, have flocked
to the private equity industry, using their formidable connections to
secure valuable government contracts and low-rate loans from state-owned
banks for their investments.

Princelings have emerged as an increasingly powerful political force.
Three of the seven members of the new Politburo Standing Committee are the
sons of former Chinese senior leaders. A fourth member is married to a
princeling and a fifth has a son married to a princeling. The princelings
are close to former President Jiang Zemin, who played a powerful role in
selecting members of the new Standing Committee.

Mr. Zhang and Mr. Li, the incoming prime minister, are the only two
members of the new Standing Committee who are not directly linked to
princeling families through parentage or marriage. (Mr. Zhang’s daughter
married the son of a Hong Kong glass manufacturing tycoon with factories
all over China, including in Tianjin.) But Mr. Zhang, who earned his
bachelor’s degree in statistics and started his career in the oil
industry, has succeeded in assiduously building close personal ties to Mr.
Jiang, according to a Chinese business leader with extensive top-level
contacts in the Communist Party. He insisted on anonymity because of the
political sensitivity of discussing top officials.

When Mr. Jiang visited Shandong Province soon after Mr. Zhang was made the
governor there in November 2001, Mr. Zhang decorated the sites of each of
his stops with large banners carrying quotations from Mr. Jiang, even
covering signs honoring previous Chinese leaders.

This maneuver generated considerable discussion at the time among senior
cadres over whether the banners were an astute political move or a sign of
excessive obsequiousness, the business leader said. Mr. Jiang’s subsequent
support for Mr. Zhang’s political career indicated that the banners had
been a shrewd decision.