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by: Bernard Teo

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Copyright © 2003-2012
Bernard Teo
Some Rights Reserved.

Sat 28 Nov 2009

"If you have land, how can you not have money?"

Category : Commentary/PresentAtTheCreation.txt

I've been reading "Prisoner of the State: The Secret Journal of Premier Zhao Ziyang". I think it's a very important book - essential reading for anyone who's fascinated by China's rapid development. There's a "present at the creation" quality to all these pages.

For example, if you've ever been to Shanghai you'd invariably hear about how the east bank of the river Pu, across from the Bund, had all been farmland just a few years back. Now it's full of skyscrapers. How did it all happen? How were the seeds laid from which this growth occurred.

'During the early days of reform, the first problem in attracting foreigners to open factories and businesses was that our infrastructure was not good enough. ... We had no funds to build roads for cities or to bring in water and electricity. A lot of land was lying idle.

It was perhaps 1985 or 1986 when I talked to Huo Yingdong [a Hong Kong tycoon better known as Henry Fok] and mentioned that we didn't have funds for urban development. He asked me, "If you have land, how can you not have money?"

I thought this was a strange comment. Having land was one issue; a lack of funds was another. What did the two have to do with one another? He said, "If municipalities have land, they should get permission to lease some of it, bring in some income, and let other people develop the land."

Indeed, I had noticed how in Hong Kong buildings and streets were constructed quickly. A place could be quickly transformed. But for us, it was difficult. ... We had land but no funds, while the Hong Kong government auctioned off a piece of land every year, not only bringing in income for the government, but also allowing the area to develop quickly.

I thought about this later when visiting Shanghai. The Pudong area was right across the river from Shanghai's city center. In order to develop Shanghai, building up this area would require less investment and be more efficient. It was an extremely good location. However, in order to develop this area, we needed a huge amount of funds to build infrastructure and then attract foreign businesses.

It was around 1987 when Shanghai referred a Chinese American, Lin Tung-Yen [the founder of T. Y. Lin International], to speak with me in Beijing. He asked whether it was possible to rent Pudong. The term of the lease had to be long enough: thirty to fifty years. After leasing the land, he would need to have transfer rights. Investors would then get mortgage loans from the banks. I asked him if foreigners would be willing to invest after such a land transfer and what else was needed. He said it was easy and that the conditions of the SEZs [Special Economic Zones] were not needed; the conditions for Shanghai's Minhang economic zone were sufficient. I had thought that the conditions offered could be even more preferential than Minghang's, approaching those of the SEZs, so I was indeed interested.

Because this was Shanghai, the move was sure to attract everyone's attention...'

And so it did, with predictable results, and the development of Shanghai was delayed much longer than it should, until 1992, when Deng Xiaoping, worried that the Tiananmen incident had forever tarnished his legacy, took his famous tour of the southern regions to revive reform.

But Shanghai eventually did develop, and at such frightening pace, probably because it was filled with people "skilled and familiar with capitalist behaviour", as anti-reform hardliner [party elder] Chen Yun had feared.

Posted at 2:34PM UTC | permalink

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