Economy

Living on a diet of dim sums

Li Keqiang arrives with goodies to boost Hong Kong as renminbi hub

Thanks a billion: Vice Premier Li and Hong Kong Chief Executive Tsang

Holiday season is in full swing, even for the Chinese leadership. And according to Hong Kong’s Apple Daily, all of the Politburo Standing Committee members – nine of them, currently – spent a few days together recently in the famous northeast coastal resort of Beidaihe.

In fact, the leadership convenes together for a short summer break most years, even though golf and trips to the spa probably aren’t high on the agenda. This year the rendezvous has been a particularly secretive one, Apple Daily speculates, because of the leadership power shuffle that will begin in earnest next year.

The transition at the top also had bearing on a trip this week by the State Council’s vice-premier Li Keqiang to Hong Kong, says Willy Lam, a professor of China studies at Akita International University, Japan. Li, who is widely expected to take over from Premier Wen Jiabao spent three days in the city.

Writing in the Wall Street Journal, Lam describes how protocol requires that only senior members of the Politburo (president, premier or vice president) make official visits to Hong Kong. That suggests that Li’s excursion looks like confirmation that he will be taking the reins from Wen in 2013.

Lam also suggests that the visitor will have proved something of a hit, with his fluent English and solid grasp of Western political theory. Apparently, a few of Li’s translations of British textbooks are still in circulation at Chinese law schools.

He might also be ready with a soothing word or two, following comments at the end of July (to a group of Hong Kong students) from Wang Guangya, Beijing’s top diplomat in the territory.

Wang’s gripe? That as a result of former British rule, the local bureaucrats “don’t know how to be their own bosses and masters”.

“Hong Kong was made and marred by Britain,” Wang suggested. Local newspapers took that to mean that their bureaucrats were poor long-term planners, who couldn’t take decisions, preferring to follow instructions.

Wang’s criticism wasn’t totally off the mark, in WiC’s view. One example: the planned West Kowloon Cultural District, where a decision on what to build has now been on hold for six years or so. No doubt Shanghai would have built, demolished and rebuilt its civic equivalent in a similar timeframe…

But the comments were still unusual ones: the Asia Times notes that, in 13 years in the same job, Wang’s predecessor hadn’t offered a single public opinion.

Hong Kong’s Donald Tsang, a former bureaucrat now in his final year as the territory’s leader, didn’t take the criticism lightly. The Chief Executive bristled (almost) that the city’s civil service was one of the finest in the world. Various civil service types then appeared from behind the filing cabinets to propose that Wang’s remarks were directed more at top-level officials hired under the political accountability system and not at civil servants in general.

So, as the vice-premier arrived in Hong Kong, the spat (such as it was) had largely died down. Fortunately, Li also came bearing gifts, most of them related to further changes to the rules on how China’s currency moves across the border between Hong Kong and the mainland itself.

In one of the key announcements, Hong Kong enterprises heard that they will get first access to a more flexible channel for investments into China conducted in renminbi. Currently, investment is approved on a case-by-case basis, and can be a lengthy process.

In another new initiative, Li announced that non-financial mainland companies are to be permitted to issue renminbi-denominated bonds (colloquially known as dim sums) in Hong Kong. Previously only Chinese financial institutions and overseas companies had been granted the same right.

Both steps are intended to fosterwider take-up of the Chinese currency outside its own borders, and will open up further flow between the Chinese mainland and Hong Kong, the leading offshore destination for renminbi.

Officials in Beijing regard Hong Kong as the best place for cautious experiment in this sphere, rather as Shenzhen was once the crucible for China’s early encounters with the market economy more than a generation ago. Hong Kong is happy enough to serve as the policy Petri dish, of course, and especially so if it promises to be a profitable experience. And so far, that seems to have been the case, with the city now established as the dominant location for renminbi investment outside China.

Li’s giveaway was a not-so-subtle reminder of the benefits of patriotic bonds with the mother country. And, in a smaller concession to Hong Kong’s sensitivities, diplomat Wang also took a humbler line, confiding to the local press that he has only been in office for 10 months and is still learning his role…


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