Hong Kong’s Luster Is Gleam in Shanghai’s Eye
Zhou Zhengyi started out 17 years ago as a struggling food shop owner, selling wonton noodles despite objections by family members who feared he was treading a politically dangerous “capitalist road.”
Today, he drives a red Ferrari--when he’s not using one of his Mercedeses. He wears Italian designer shirts, lives in a $1-million home here, often uses the Hong Kong-style name Alex Chou and makes hundreds of thousands of dollars monthly--virtually risk-free--by skillfully exploiting the rules governing Chinese stocks.
Now that Hong Kong is about to be returned to Chinese sovereignty, the reemergence of people like Zhou in Shanghai--which before China’s 1949 Communist Revolution was East Asia’s center of capitalist glory and capitalist sin--reveals much about the likely future of these two great trading ports.
Once there were fears that if the Communists ever got control of Hong Kong, they would shut it down. But unfolding now in Shanghai is a frantic effort to duplicate the longtime British colony’s success.
“These days, some people predict that Shanghai will take over some of Hong Kong’s functions, but I disagree,” said Shanghai Vice Mayor Zhao Qizheng, adding that his hope is for Shanghai to catch up to Hong Kong--but not supplant it--in about 10 years.
The key business cities of the western Pacific--Tokyo, Seoul, Shanghai, Taipei, Hong Kong, Bangkok, Kuala Lumpur and Singapore--are “like street lamps along the road,” Zhao added. “Having the light of both Shanghai and Hong Kong will be brighter than just one light. Two lamps shining are better than one.”
During its first three decades under communism, Shanghai underwent a great leveling that sent many of its richest families scrambling to safety in Hong Kong. Under orders from Chairman Mao Tse-tung, Shanghai’s resources were drained to support development in China’s vast interior. As Shanghai stagnated, Hong Kong boomed.
But the past never quite disappeared. Generations of Shanghai children grew up seeing the grand old European-style buildings of the riverfront Bund, ghostly reminders of the power this city once enjoyed. That helped preserve what is still called “Shanghai style.”
Shanghai people tend to be “open-minded, very smart, fashionable . . . and kind of selfish,” explained Weng Yilun, an MBA student at Jiaotong University who came here from Beijing.
Qian Ji, a Shanghai-born classmate of Weng’s, agreed with her and added: “I think Shanghai people work so hard and they are eager to learn new things. They want to be outstanding, and sometimes they are aggressive.”
Add to these traits the new situation in which people like Zhou, 37, are not only allowed to acquire wealth but respected for it--and the result is that Shanghai once again pulsates with dynamism.
The Chinese government has poured $3 billion into building the infrastructure of a new world-class financial and business district in the city’s undeveloped Pudong area, just across the Huangpu River from the old downtown. Chinese and foreign investors have put in another $13 billion.
And Pudong’s era is just beginning. To be completed in the next few years are a railway terminal, a subway and an international airport.
“I think one has to accept that at some time in the future, there is very definitely the possibility that Shanghai will become a more important financial center than Hong Kong,” said John Strickland, chairman of the Hongkong & Shanghai Banking Corp.
Shanghai was targeted for renewed greatness partly because of its location at the mouth of the Yangtze River: Its assigned mission is to be “the dragon’s head” leading development along the river’s entire length. The city also benefits, many say, because Chinese President Jiang Zemin and several other key national leaders once worked here.
Shanghai as a whole has added 1,100 new buildings of at least nine stories since 1990, and it now has 20,000 construction sites using 17% of all the cranes in the world, Zhao said. In Pudong alone, 250 buildings of at least 20 stories are already up or under construction, with the new district consuming 120,000 tons of construction materials every 24 hours, he said.
The city also has an ornately decorated new City Hall and a new art museum, and it is building a $120-million Grand Theater.
All this is in a metropolis that now has 13 million people with full resident’s rights plus a floating population of 3 million, including many construction workers who lack permission to live here permanently.
Yet this explosion of growth has not come without costs. Among the most serious: relocation of 1 million people from convenient downtown areas, where most have lived for decades, to unfamiliar suburban apartment blocks. Nothing has provoked more citizen anger.
“If you’re not willing to move, you will be forced to leave,” complained a man named Wang, owner of a tiny shop in an area of old homes due for demolition near the famous Yu Garden, a major tourist attraction.
While aware of the anger of residents who don’t want to move, city officials are plowing ahead. The breakneck pace of change is supported by a Shanghai slogan attributed to China’s late “paramount leader,” Deng Xiaoping, who urged in 1992 that the city achieve “a new look every year, a complete change every three years.”
National and local leaders may also feel they have only a limited period of time before increasingly prosperous residents would no longer endure forced relocation. Housing protests have been only briefly tolerated, with police then firmly shutting them down.
“It’s hard to make 100% of the people happy, but I believe 90% are happy,” Zhao said, defending the city’s relocation methods. “We have many ways to encourage them to move. One is that the new houses are bigger and nicer. The schools in the new areas are better. . . . There are more green areas.”
The vice mayor added that it is “understandable” that shopkeepers are unhappy, because they may have fewer opportunities in their new locations. But he said the city sometimes helps people find jobs or offers business loans.
Job creation these days also comes from people like Zhou, the former wonton noodle seller turned multimillionaire. He saved enough money from his noodle shop to go to Japan in 1983, ostensibly as a language student but really to work. He took a factory job and washed dishes in Tokyo, living cheaply and saving about $20,000 in two years.
“I thought: ‘Money is very important. If I don’t have money I’ll lead a terrible life,’ ” Zhou recalled.
Back in China, Zhou started an interior design company, first in the Shenzhen special economic zone, just across the border from Hong Kong, then in Shanghai, where he did some of the city’s fanciest buildings. He later branched out into a restaurant and other businesses.
Now, Zhou said, he employs more than 700 people.
*
Cheng Hao, 34, owner of the Shanghai Hui Jia Fashion Co. and several other firms, has a far less flashy personal style than Zhou--but he too is reshaping this city’s business culture.
A 1983 graduate of one of China’s best universities, Cheng worked in the 1980s for a Japanese firm in Shanghai, learning Japanese along the way. He started his own trading firm in 1990, exporting locally made traditional Japanese items such as kimonos and the straw coverings used on the surface of tatami floor mats. He now aims to start importing used construction equipment to take advantage of Shanghai’s building boom.
Both Zhou and Cheng, along with many other less wealthy Shanghai residents, like to play the city’s rapidly growing stock market.
The Shanghai Stock Exchange now has 343 listed companies, with total market capitalization of about $100 billion, nearly 25% that of Hong Kong’s exchange.
“The ambition of the Shanghai Stock Exchange is to be one of the major international stock exchanges of the world,” spokeswoman Li Qian said. But for at least the next 10 years, she added, Hong Kong’s exchange will be China’s main “window to all the world,” while the Shanghai exchange will “play a very important role to help state-owned enterprises change from a planned system to a market system.”
A key economic trend in China today, Li explained, is “corporatization” of state-owned enterprises. Rather than privatize existing state assets, firms issue new shares to acquire funds for expansion, which also has the effect of gradually diluting the percentage of government ownership.
Nearly everyone believes new shares will rise in value once they are listed on the Shanghai or Shenzhen exchanges. Since demand is high, a lottery is often used to determine who can buy shares. Potential investors deposit money with the share-issuing authority, and then, after the lottery, winners buy shares and losers get their money back.
Playing this still-immature system is Zhou’s main business. He travels around China buying up shares just before firms are publicly listed, then sells them at a much higher price soon after trading begins. He does this by putting down huge sums to enter lotteries many times, guaranteeing that he will win some share-purchase rights, he said.
A few weeks ago, Zhou deposited $18.3 million in the lottery to buy shares in Xinjiang Light Industry, a firm located in China’s Far West, and won the right to buy 1.23 million shares at 73 cents each, he said. The firm was listed in mid-June on the Shanghai exchange and immediately rose to about $1.34 a share, leaving Zhou to pick the right moment to reap about $750,000 in instant profits.
