Chinese president Xi Jinping led a phalanx of senior Communist Party officials to China’s southern Guangdong province this week to commemorate the 40th anniversary of China’s opening to trade with the West, and preside over the launch of a spectacular 34-mile bridge connecting the former European colonies of Hong Kong and Macau with the mainland city of Zhuhai.
Xi’s visit was an homage to former Chinese leader Deng Xiaoping’s 1992 “Southern Tour,” in which Deng visited Guangdong’s Hong Kong-invested factories to underscore his determination to end China’s isolation from the West following Beijing’s 1989 crackdown on protesters in Tiananmen Square. But Xi dashed hopes that he might use his visit to unveil a new wave of economic reforms, loosening restrictions on foreign investment and scaling back government involvement in China’s private sector. Instead, China’s “core leader” reaffirmed Beijing’s support for state-owned enterprises, and renewed his call for “self-reliance” on homegrown technologies.
Xi opened the bridge to great fanfare in a ceremony in Zhuhai Tuesday. The structure, which spans the Pearl River delta and is the world’s longest sea crossing, is an astonishing feat of engineering. It took nine years to build and cost more than $20 billion. Designed to withstand typhoons and earthquakes, the bridge required 400,000 tons of steel—enough to build 60 Eiffel Towers. To allow the passage of cargo ships, the connection ducks into an undersea tunnel that runs for four miles between two artificial islands. All told, it cuts travel time between Hong Kong and Zhuhai from four hours to 30 minutes.
The bridge’s opening inspired impassioned discussion in mainland media about “The Greater Bay Area,” the Xi administration’s grand plan for stitching Hong Kong and Macau together with nine other mainland cities to create a single urban cluster rivaling the dynamism and innovative power of urban centers like the San Francisco Bay area, greater New York, and Tokyo.
But there was far less enthusiasm for the bridge in Hong Kong, where many wondered why their city had to foot more than half of the bill for a project for which few residents saw a compelling need. It’s unclear how many drivers will actually use the bridge given that, to do so, they must obtain three separate permits from Hong Kong, Macau, and mainland Chinese governments; buy special car insurance for the mainland and Macau; and register with authorities in Zhuhai. Beyond the bureaucratic hassles, many Hong Kongers are fed up with mainland meddling in the city’s affairs and the rising onslaught of mainland tourists. A recent study by Hong Kong’s Lingnan University and Guangzhou’s Sun Yat-sen University found that in the past year fewer than half of Hong Kong’s residents have set foot in “Bay Area” cities outside their home city or Macau.
My worry about the “Greater Bay Area” rhetoric is that it glosses over fundamental differences between southern China’s major cities. Hong Kong is mainly a financial giant, but a tech pygmy. Macau is the world’s most lucrative gambling destination—but from an economic vantage has little else to offer. Shenzhen and Guangzhou, while both tech powerhouses, are culturally distinct: the vast majority of Guangzhou’s population speaks Cantonese, while Shenzhen is a migrant melting pot populated mostly by factory workers from other regions who speak Mandarin inflected by their hometown dialects. It will take a lot more than a fancy bridge to unite this far-flung region.
Economy and Trade
Act now, talk later. The U.S. is refusing to resume trade negotiations with China until Beijing delivers a clear plan for tackling issues raised by Washington, such as China’s policy of forcing technology transfers and demanding user data be stored within China. The impasse could threaten a proposed meeting between President Trump and Xi Jinping, due to take place on the sidelines of the G20 summit next month. The Wall Street Journal
Heavily indebted. China’s central bank plans to provide $1.4 billion to China Bond Insurance Co, to provide credit support for private enterprises looking to sell debt. The move is the latest in a series of measures to return investor confidence in the market. Bloomberg
Bubbling stock. Chinese stocks had their best performing day in three years Monday with the CSI 300 index, which covers both Shanghai and Shenzhen, closing 4.6% up. The rally came after Vice Premier Liu He attempted to enthuse investors last week, claiming damage from the Trade War is more psychological than actual. But China has been enduring its worst rout in four years, which has wiped $130 billion off the fortunes of China’s wealthiest tycoons. Financial Times
Changing course. Two funds linked to the Chinese government liquidated over $4 billion of assets combined this week, with no explanation. The two funds were established in 2015 to help soothe the turbulent stock market. The surprise sell-off could indicate a change in strategy for China’s ‘National Team’ of state-backed investors, tasked with stabilizing the market. Bloomberg
Assets assessed. China’s State Council issued a report on the condition of State-Owned Assets (SOAs) for the first time. SOAs in non-financial enterprises amounted to $26.4 trillion in 2017 while those in financial enterprises were at $35 trillion. China Daily
Take it to the bridge. On Tuesday, the Hong Kong-Zhuhai-Macau bridge officially opened, connecting the three cities with 24 miles of highway stretching over the sea. The bridge is part of a policy to integrate Hong Kong, Macau and Guangdong province into an economic powerhouse, called the Greater Bay Area. After years of delay, the opening was announced suddenly, leaving tour bus operators scrambling to establish routes across the bridge. South China Morning Post
Innovation and Tech
Tik Tok stock. Bytedance, the company behind short-video app Tik Tok and news aggregator Toutiao, has reportedly cinched a $75 billion valuation in its latest pre-IPO funding round. The company was embroiled in a series of controversies earlier this year, but that seemingly hasn’t turned investor appetite. Bytedance’s IPO is rumored to come next year. TechNode
Chips to share. Control of Tsinghua Unigroup, the world’s third largest smartphone chip maker, has been taken over by the Shenzhen government. China’s prestigious Tsinghua University, the originator of the chip firm, is transferring a 63% share in the company to Shenzhen Investment Holdings, retaining just 15% for itself. The transfer is part of a government plan to downsize university assets. South China Morning Post
Secure line. Foreign Ministry spokeswoman Hua Chunying ridiculed a New York Times report which claimed Chinese agents were eavesdropping on President Trump’s phone calls, deriding the story as “fake news”. The report alleges spies are able to listen in on conversation’s President Trump makes using his iPhone. Hua wryly suggested the President use a Huawei phone instead. Two Huawei executives joined the banter online, suggesting Trump try a model from their latest Mate 20 series. The U.S. government is prohibited from using Huawei products due to security concerns. New York Times
Blocking blockchain. The Cyberspace Administration of China (CAC) has submitted draft proposals for new rules on blockchain, including requiring real name registration, eliminating one of blockchain’s key tents: anonymity. The rules also require blockchain providers to censor content and store user data, which could then be handed over to the government. Critics argue that blockchain innovation will be stifled if the rules pass, while supporters claim a solid regulatory framework will allow developers to operate with confidence. TechNode
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Politics and Policy
New day dawning. Shinzo Abe has become the first sitting Japanese prime minister to visit China in seven years, arriving in Beijing yesterday to meet with Xi Jinping. Relations between the two countries, always terse, soured owing to territorial disputes over islands in the East China Sea. But tensions have eased recently. While in Beijing, Abe described Sino-Japanese relations as being at an “historic turning point” and signed a range of agreements including a $30 billion currency swap pact. The strengthening of ties comes as China and the U.S. continue to fallout over trade. The Economist
Collaborate and listen. In a marked change of tone, a top British cyber intelligence chief has urged Western countries to engage with China on cyber security. “The reality is they will own a huge chunk of internet structure going forward,” he warned. China has been influential in the creation of 5G standards and smartphone maker Huawei holds patents on some of the hardware required for its implementation. Australia and the U.S. have both blocked Huawei from domestic communications projects, and the U.K. has previously warned that Huawei poses a security threat. Financial Times
Xi on tour. Xi Jinping embarked on a multi-city tour of Guangdong province, one of China’s primary manufacturing hubs, in what observers believe is an echo of Deng Xiaoping’s famous Southern Tour. Deng’s tour in 1992 reaffirmed China’s commitment to Reform and Opening Up, which began 40 years ago, transforming China into an economic powerhouse. But Xi’s trip was kept peculiarly secret. Officials didn’t announce an itinerary, so it was anyone’s guess where Xi would appear next. Reuters