Shanghai, Hong Kong Renew Ties

The old links between Shanghai and Hong Kong--for decades the two most developed and westernized cities in East Asia--are gradually beginning to re-emerge.

Throughout the first half of this century, with Shanghai in the lead, these two port cities served as the principal centers of trade between China and the West. Ships and merchants, both Chinese and foreign, traveled regularly back and forth along the East China coast.

But after the Communist victory in the Chinese civil war, the ties were cut. Shanghai business leaders migrated nearly en masse to the British colony of Hong Kong. Shanghai closed its doors to the outside world, while Hong Kong came to depend increasingly on the United States and Western Europe as the principal markets for its exports.

Now, as Hong Kong prepares to transfer to Chinese sovereignity in 1997 and as Shanghai slowly opens up once again, the two cities are beginning to see advantages in working together.

The signs of the renewed relationship are evident throughout Shanghai.

This month, Shanghai officials are expected to sign an agreement with Wing On Co., Hong Kong’s largest department store chain, under which Wing On will help modernize Shanghai’s big state-owned Number 10 Department Store.

The renovation will have considerable symbolic significance for Shanghai. The Number 10 Department Store, located on Nanjing Road in the heart of Shanghai’s main shopping district, was once itself a Wing On store--known in Shanghai by its Mandarin name, Yong An.

The Cantonese family that founded the department store once operated a Shanghai textile mill employing 12,000 people that was nationalized after the Communist takeover.

“Wing On is basically a capitalist organization,” Joel Kwok, executive director of Wing On Co. Ltd., told The Times. “If there is going to be a viable venture in China, we’re interested. This is not altruism or politics. We’re businessmen.”

According to David Kwok, managing director of Wing On Investments (China) Ltd., Wing On also has signed a letter of intent with Shanghai officials to develop a $100-million commercial complex in Shanghai that will include a hotel, offices, apartments and a Wing On store.

Rail System Study

Two weeks ago, Hong Kong’s Mass Transit Railway Corp. announced that it had signed an agreement with Shanghai to conduct a feasibility study for the construction of Shanghai’s first underground rail system.

Hong Kong has become both Shanghai’s most important source of foreign investment and its biggest trading partner.

According to Wang Zixian, an official of Shanghai’s Foreign Economic Relations and Trade Commission, Shanghai has signed 83 agreements permitting foreign businesses to operate in the city, either on their own or as joint ventures with Chinese enterprises.

By far the largest number, about 50, are with Hong Kong companies, Wang said. By comparison, only 15 American companies have invested in Shanghai.

Shanghai now sends about 20% of its exports to Hong Kong. For the first 10 months of 1984, the volume of trade between the two cities was about $1.4 billion, 10% higher than for the same period in the previous year.

For the moment, at least, Shanghai officials are welcoming Hong Kong back with open arms.

“Traditionally speaking, Shanghai has had a close relationship with Hong Kong--particularly during the 1940s,” said Shen Zuyu, a local businessman. “At that time, Shanghai was more advanced and prosperous than Hong Kong. Since then, Hong Kong has advanced more quickly. Now, we need their expertise.”

Shen is one of the leading officials of a new organization called the Shanghai Hong Kong Economic Development Assn., formed in Shanghai three months ago to help Shanghai enterprises find trade partners in Hong Kong. A similar group was founded in Hong Kong in early February to help Hong Kong businessmen obtain information on investment conditions in Shanghai.

The offices of the Shanghai Hong Kong Economic Development Assn. are in a spacious, stately mansion on Hua Shan Road in the district that once housed Shanghai’s wealthiest foreign businessmen.

Over the last four decades, the mansion itself has been caught up in the changes that swept Shanghai.

Group of ‘Old Entrepreneurs’

When it was first built, the mansion was owned and occupied by a member of the same family (whose name is spelled Guo on the mainland) that owns Wing On. During the Cultural Revolution, however, it was taken over and used as a headquarters by Wang Xiuzheng, one of Shanghai’s most important rebel leaders.

Now, the mansion--still owned by Guo Dihuo (David Guo), a member of the Guo family who lives in Canton--has been lent to the Shanghai Federation of Industry and Commerce and the Shanghai Hong Kong Economic Development Assn.

The association is made up in large part of old Shanghai business leaders, the ones who decided to stay in the city four decades ago. “This is a group of the old industrialists, the old entrepreneurs,” said Guo Xiuzhen, the organization’s vice president.

Some of the association’s members in Shanghai have relatives now living and doing business in Hong Kong.

For example, one participant in the Shanghai group, Tang Sunyuan, now 84, is the father of H. C. Tang, a prominent textile executive in Hong Kong. H. C. Tang is serving as the chairman of the Hong Kong organization aimed at promoting ties with Shanghai.

“Fifteen years ago, it would have been considered a crime in Shanghai just to admit having relatives in Hong Kong,” said Shen. “Now, people in China are spiritually more at ease.”