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Tianjin to emerge as the 'Wall Street' of Beijing
SYDNEY - China's third largest city, Tianjin, has been annointed to spearhead China's development of tertiary industries notably logistics, shipping and financial services. As one of only four cities with a direct reporting channel to the Beijing leadership, Tianjin has been chosen as the third growth hub for China, says Zong-Sheng Chen, Tianjin's Vice Secretary-General, who points out that the Bohai Rim region accounts for onethird of China's GDP, and is home to one-third of its population.
Chen says Beijing considered other regions before deciding on Tianjin - because of its location - to service the north of China Tianjin has the only deepwater port to the north, and sits on the estuary of the Haihe River on Bohai Bay.
"In the 1980s, the Central Goverment selected Shenzhen and the Pearl River Delta to become an economic development zone. In the 1990s it focussed on Shanghai and the Yangtze River Delta," Chen told ATI during a visit to Sydney and Melbourne in July.
Now, in the 21st century, he says the leadership has selected Tianjin and the Bohai Rim as China's next economic development zone.
Shanghai was able to harness its connections through the so-called Shanghai faction (through the patronage of former President, Jiang Zemin) to win Beijing support for its development. Central to Shanghai's expansion was the creation of Pudong, now the financial services hub for China's commercial capital.
Tianjin has benefited from the imprimateur of key figures like the former Governor of the People's Bank of China (central bank), He Xiang Long. Dai was Vice Secretary-General and then Mayor of Tianjin (from 2004 to 2007) Dai has since gone on to head the National Council of Social Security Funds, which is responsible for managing 740 billion yuan in Chinese pensions. Dai's vision is to use Tianjin to launch comprehensive reform of China's financial services sector, and to bring the country into line with its international peers.
Investors in Tianjin already have greater freedom to buy and sell currencies as part of moves towards a fully-convertible yuan. China's State Administration of Foreign Exchange in 2006 approved a plan for limited convertibility in the Binhai economic area (China ended the peg to the dollar in 2005)
It was during Dai's tenure, says Chen, that the idea of Tianjin reviving its heritage as China's financial services centre was hatched. "I was one of two people who worked with him on a plan for Tianjin," says the Yale-educated technocrat.
"We have a small Wall Street (Jiefang North Road) in Tianjin," he says It is where China's first stock exchange flourished in the 1920s, servicing a then-burgeoning industrial economy that was the backbone of the city.
While the historic street has now been restored, Chen says a new site has been select-ed to become China's Manhattan, It is an almost horseshoe-shaped block of land wedged between the bends of the Haihe River. It will be some 40 km from downtown Tianjin, and three km from Tianjin port. Chen says the financial centre will take shape within three to five years, when it is expected to house some of China's leading banking and financial companies and their global counterparts.
"The development cost is likely to be at least 500 billion renminibi, and it will be bigger than Pudong," he says. "It will sit on four sq km, compared with Pudong's three sq km." In fact, the entire Bohai Rim covers an area that is twice that of Hong Kong, six times that of the Shenzhen economic zone (300 sq km) and five times the size of Pudong (500 sq km)," Chen told ATI.
He says the municipal government is offering incentives - such as allocation of land and tax breaks - to attract foreign companies to establish in the planned financial centre. Sydney-based company, AIMS Securities Holdings, which has signed an agreement to set up financial services operations in Tianjin, has been given a site where AIMS will build its Asian head office.
Already, 150 of the Fortune 500 companies have a presence in Tianjin, but mostly in manufacturing services. Chen says plans are well advanced to set up a series of exchanges - including a commodity exchange, a climate exchange for trading greenhouse gases, and a private equity exchange.
"We have already set up Tianjin Climate Exchange, the first of its type in China. The Chicago Climate Exchange is a shareholder with China National Petroleum Corp," Chen says The Chicago exchange has a 25 per cent stake; China Petroleum 53 per cent; and the Government agency, Tianjin Property Rights Exchange, 22 per cent.
Chen has held discussions with the London Metals Exchange and the Chicago Commodity Exchange on the establishment of a commodity exchange which will trade in a wide range of commodities, including steel and cotton. "The planning process is over, and we have started to recruit staff for the exchange. We want to speed up establishment, and hope to have it up and running by the end of this year or early next year," he says.
Tianjin is also looking at a private equity exchange to provide a market for trade of private equity interests among Chinese investors. So far, Chen says, 280 limited and general partnership private equity firms have registered since the Government broadened laws to allow small-to medium-sized companies to participate in this type of business.
Chen says their collective capital will be around 700 million renminbi, and they have been registered to take investment from all over China. "We now have two large private equity funds set up. These are the first in China," he says, referring to the Bohai industrial Investment Fund and the Tianjin Ship Industry Fund.
Each of these funds has a capital base of 20 billion renminbi (AUD3.59 billion). Together with the fund management company, CDH Investments Management, Bohai Industrial Investment Fund Management Company recently acquired a 20 per cent stake in Chary Automobile Company Limited for two billion yuan. Chen says the objective of the shipping fund is to turn Tianjin into a shipbuilding and shipping logistics centre. He says the aim is to both encourage shipbuilding and to create a support base for a shipping industry.
Chen says the region is well-resourced when it comes to human resources as it can draw talent from Bejing, which is less than 30 minutes journey by train. More crucially, he says, it can draw on some 400 tertiary institutions in the region for graduates. We want a vibrant research and development sector to produce innovative products and new industries, "says Chen.
    Tianjin to emerge as the 'Wall Street' of Beijing