Visions of grandeur put to the test by wuyunyi



                                                                                                                                                                                                                           Geoff Dyer
                                                                                                                                                                                                                           where the
                                                                                                                                                                                                                           real power lies
                                                                                                                                                                                                                           Page 3

Visions of grandeur put to the test
                                                                                                                                                    Next year, the city                    Olympics: yet another chance for       to mention making this already
                                                                                                                                                                                           China to impress the world (not        western-friendly city easier to
                                                                                                                                                    hosts the world’s                      to mention its own citizens) with      navigate by foreigners, by teach-
                                                                                                                                                    biggest­ever expo. But                 its achievements in science, tech-     ing more taxi drivers to speak
                                                                                                                                                                                           nology and culture.                    English and discouraging foreign
                                                                                                                                                    its ambitions go well                     This vast city of 17m people        pet peeves such as spitting in
                                                                                                                                                    beyond this, writes                    has been turned into a building        public and queue-barging. Shang-
                                                                                                                                                                                           site to prepare for the event: sev-    hai plans to add 20,000 hotel
                                                                                                                                                    Patti Waldmeir                         eral new subway lines are being        rooms by the end of next year – a

                                                                                                                                                             hose who are weary of         added to give the city a 400km         34 per cent inflation in the sup-
                                                                                                                                                             the woes of capitalism        underground railway network,           ply of starred hotel rooms – at a
                                                                                                                                                             should come to Shanghai       one of the longest in the world. A     time when occupancy rates at
                                                                                                                                                             in the spring. In the busi-   new terminal has been built for        five-star hotels have already been
                                                                                                                                                    ness capital of the world’s most       cruise ships, airports are being       savaged by the global financial
                                                                                                                                                    populous economy, visions of           renovated, thousands of the            crisis.
                                                                                                                                                    greatness are in the air, spring-      city’s often foul public toilets are      But long-term ambitions go
                                                                                                                                                    ing up right next to the tulips,       being cleaned up and Expo is           well beyond Expo: last month
                                                                                                                                                    the overpriced boutiques and the       even tackling the local cuisine:       Beijing decreed that the city
                                                                                                                                                    skyscrapers.                           Expo food will minimise offal,         should become an international
                                                                                                                                                      Shanghai’s consumers are             and ban chicken bones, all in aid      financial centre by 2020. That
                                                                                                                                                    spending like there is no finan-       of impressing picky foreigners.        may sound like just a lot of Bei-
                                                                                                                                                    cial crisis, buying swanky cars           Expo will make permanent            jing bravado; but as the west has
                                                                                                                                                    and even swankier handbags,            improvements to the physical           begun to learn, when China’s
                                                                                                                                                    eating in restaurants and doing        infrastructure of Shanghai – not       leaders decree that something
                                                                                                                                                    all those fun things westerners                                               will happen – there is at least a
                                                                                                                                                    dimly remember from the easy                                                  chance that it might.
                                                                                                                                                    credit age. The city’s policymak-                                                Certainly, the international cri-
                                                                                                                                                    ers are laying plans for a future                                             sis has done nothing to shake
                                                                                                                                                    that includes building ever taller      Inside this issue                     Shanghai’s determination to
                                                                                                                                                    office towers and more opulent                                                modernise its financial system,
                                                                                                                                                    hotel rooms, until it takes over                                              with the aim of overtaking Hong
                                                                                                                                                    the world of Asian finance by                                                 Kong, Singapore and even Tokyo.
                                                                                                                                                    2020 as one of the world’s pre-                                                  Outsiders, suffering their own
                                                                                                                                                    mier financial centres.                                                       crisis of confidence in capitalism,
                                                                                                                                                      Shanghai plans to spearhead                                                 might think China is similarly
                                                                                                                                                    China’s transformation from                                                   disillusioned, but not so: “The
                                                                                                                                                    sweatshop to service economy,                                                 impact of the crisis is much less
                                                                                                                                                    attracting not just multinational                                             than outsiders believe,” says Pro-
                                                                                                                                                    corporations that want to make a                                              fessor Wang Jianmao of the
                                                                                                                                                    quick buck off 1.3bn Chinese con-       The legal system Judges are           China Europe International Busi-
                                                                                                                                                    sumers – but innovators eager to        better trained and foreign            ness School (Ceibs). “In China,
                                                                                                                                                    leverage the wisdom and work            investors sometimes win cases         we have our own agenda, we are
                                                                                                                                                    ethic of a new generation of Chi-       against Chinese companies,            very unlikely to speed up or slow
                                                                                                                                                    nese engineers to staff their R&D       writes Michael Skapinker              down because of something that
                                                                                                                                                    centres.                                Page 2                                happened outside the country.”
                                                                                                                                                      From tourism, to investment,                                                   “The financial crisis has not
                                                                                                                                                                                            Finance Shanghai wants
                                                                                                                                                    to innovation, Shanghai has                                                   knocked China off track,” says
                                                                                                                                                                                            to be another Hong Kong
                                                                                                                                                    oversized ambitions. Are the city                                             Fang Xinghai, head of Shanghai’s
                                                                                                                                                                                            or Singapore by 2020.
                                                                                                                                                    leaders dreaming?                       Patti Waldmeir considers              Financial Services Office and an
                                                                                                                                                      Their visions of grandeur will        its chances Page 2                    important architect of Shanghai’s
                                                                                                                                                    face their first big test next year                                           market      modernisation       pro-
                                                                                                                                                    when the city hosts the biggest         Politics The city’s leverage on       gramme. “We have had 30 years
                                                                                                                                                    world Expo in history – an event        national politics is not what it      of unprecedented growth due to
                                                                                                                                                    to rival the great 19th century         was but its influence has not         markets, how could we just
                                                                                                                                                    world’s fairs in London, Paris          disappeared, writes Geoff Dyer        throw that over because the US
                                                                                                                                                    and Chicago, famed for introduc-        Page 3                                is having some problems?”
                                                                                                                                                    ing the world to the Crystal Pal-                                                So the goal is still the same: for
                                                                                                                                                    ace, the Eiffel Tower and the Fer-      1933 cultural centre                  the past decade, Shanghai has
                                                                                                                                                    ris Wheel.                              An old abattoir is being              aimed to open up and modernise
                                                                                                                                                      The Shanghai Expo expects             transformed into a meeting            its financial markets, which
                                                                                                                                                    70m visitors, 5 per cent of them        place for creative folk
                                                                                                                                                    from overseas, and has drawn            Page 4
Up, up and away: construction workers on the site of 2010 Expo, an event set to rival the 19th century fairs in London, Paris and Chicago   Getty   parallels with last year’s Beijing                                                         Continued on Page 3
2                                                                                                    ★                                                                                                                      FINANCIAL TIMES THURSDAY APRIL 30 2009


The importance of friends
LEGAL SERVICES                  improvements. Judges are           property cases, says: “An         cessfully took action when it    a problem in Shanghai in
                                better trained. Foreign inves-     objective observation of the      saw shoes on sale in a           terms of a contract,” he
The system works                tors sometimes win cases           IP situation in Shanghai and      Shanghai department store        says. “Shanghai is the most
better than it did              against Chinese companies
                                that have copied their prod-
                                                                   China is that it has pro-
                                                                   gressed.” She points to sev-
                                                                                                     that had Gucci’s familiar
                                                                                                     double-G interlock pattern.
                                                                                                                                      legalistic city in the country.
                                                                                                                                      Small towns [in China] are
but connections                 ucts, although damages are         eral cases. In one, Diageo, the   The similar-looking shoes        the wild west. In Shanghai,
still matter, says              not huge.
                                  Many investors and diplo-
                                                                   UK drinks company, found in
                                                                   2006 that the packaging and
                                                                                                     were made by Senda, a Chi-
                                                                                                     nese company.
                                                                                                                                      they follow the rules.”
                                                                                                                                        But he too says that con-
Michael Skapinker               mats say that more of this         decoration      on    Polonius       Senda defended its shoes      nections are important. “In
                                progress is vital if Shanghai      whisky was substantially          in the District People’s Court   China, if you’ve got to the
                                is to have any chance of           similar to that on its Johnnie    in Shanghai’s Pudong dis-        point where you have a legal

              hen he first      meeting its goal of becoming       Walker Black Label whisky.        trict, saying its brand was      case, you’ve failed. You have
              began studying    an international financial         Diageo     filed    complaints    well-known in China and, as      to rely on relationships.”
              Chinese   law,    centre by 2020.                    against      the     Blueblood    its shoes were sold from a         Many lawyers and inves-
              Peter   Corne       Mr Corne says that cases         (Shanghai) Wine Company, a        Senda-franchised counter in      tors in Shanghai agree that
concluded that lawyers in       between private companies                                            the department store, there      at some point you will need
China, both domestic and        in China are, today, usually                                         was no danger of customers       government friends too. “In
expatriate, “were perpetrat-    settled fairly. “If you’re deal-   ‘In Chinese history,              confusing them with Gucci’s      Chinese history, legal issues
ing a kind of illusion”. Mr     ing with another private           legal issues are                  products. The court held         are not as significant as
Corne, an Australian-trained    party, you have a reasonable                                         that there was a danger cus-     political connections,” Ms
lawyer who today heads the      expectation of getting a deci-     not as significant                tomers      might      believe   Sun says. It is a point Mr
Shanghai office of Ever-
sheds, the UK firm, says:
                                sion that could be based on
                                an impartial judgment of the
                                                                   as political                      Senda’s shoes had a connec-
                                                                                                     tion with Gucci and ordered
                                                                                                                                      Corne emphasises too. “I
                                                                                                                                      started practising here in
“Western lawyers, like me,      problem.” Cases against the        connections’                      the Chinese company to pay       1995 and have seen a lot of
and Chinese lawyers who         government or state-owned                                            Rmb180,000 in damages.           improvements. The culture
had been to the States and      companies are far harder, he                                            Mr Corne of Eversheds         has evolved to be more
come back were trying to        says.                              dealer and wholesaler of          says the relatively small        accepting of legal ways of
promote a system of law           Lawyers say the largest          Polonius whisky. The Chi-         awards in Chinese cases are      doing things.” He adds: “I
based on western training.”     foreign      investors      are    nese authorities fined Blue-      because courts limit them-       find my work a lot more
China still does not have a     unlikely to experience the         blood in 2006 and in 2007 but     selves to the direct damages     meaningful but I temper my
legal system that matches       worst problems. Catherine          the company continued to          the aggrieved party suffers.     expectations on behalf of my
those of most western coun-     Sun, head of the Shanghai          sell Polonius whisky.             Courts will look at the prof-    clients. I know when I can’t
tries. While many foreign       office of Foley & Lardner, a         Diageo took the case to the     its the plaintiff company        rely on the law any more
lawyers have offices in         US firm, says the authorities      Shanghai No 2 Intermediate        might have made, but will        and beyond that I need to
China, they cannot officially   will ensure that companies         People’s Court, demanding         not award punitive damages.      hobnob.”
practise law in the country     that have invested large           Rmb2m in compensation.               Paul Liu, who is develop-       Is that different from any-
and have to act through         sums are generally well            The court found for Diageo        ing and managing 1933, a         where else? “To an extent
local firms.                    cared for. It is harder for        and ordered Blueblood to          new Shanghai creative cen-       you have to have connections
  But Mr Corne and other        smaller companies.                 pay the UK company                tre, agrees that parts of the    in any country to get things
lawyers based in Shanghai         All the same, Ms Sun, who        Rmb1.25m in damages.              legal system now work rea-       done. Here you have to work
say     there   have   been     specialises in intellectual          In another case, Gucci suc-     sonably well. “I’ve never had    a lot harder,” he says.           Seal of approval: many foreign lawyers have offices in China but they can’t practise       Bloomberg

Market is closed, opaque, undeveloped but ambitious
FINANCE                         financial markets remain           on a limited basis – ironi-       a financial futures exchange     lot of bullets successfully       have our own agenda, and it       and Singapore (which has           trusted to treat foreign and
                                closed, opaque, and underde-       cally, at exactly the moment      nearly three years ago, but it   and that is why there is a        is very unlikely to speed up      long been plotting a coup of       domestic litigants equally, is
Patti Waldmeir on               veloped. From this primitive       that      many       western      has yet to trade a product.      very long gestation period,”      or slow down because of           its own), not to mention           a big obstacle, he says.
Shanghai’s chances              base, can Shanghai possibly
                                transform itself into a global
                                                                   exchanges were halting or
                                                                   restricting short selling. But
                                                                                                     Officials say they expect
                                                                                                     trading to begin later this
                                                                                                                                      for reforms, says Peter Alex-
                                                                                                                                      ander, of Shanghai-based
                                                                                                                                                                        something happening out-
                                                                                                                                                                        side the country.”
                                                                                                                                                                                                          New York and London.
                                                                                                                                                                                                            Convertibility of the cur-
                                                                                                                                                                                                                                               Shanghai officials admit
                                                                                                                                                                                                                                             there is also a serious talent
of becoming                     financial centre by 2020, as       since then nothing has hap-       year – but then, the immi-       investment         consultants       “The messages are very         rency is a gargantuan bar-         gap between the demand
a global centre                 Beijing has decreed?
                                  It is hard to find any finan-
                                                                   pened. It is a common pat-
                                                                   tern: Beijing announces that
                                                                                                     nent launch of Shanghai
                                                                                                     stock index futures trading
                                                                                                                                      Z-Ben Advisors.
                                                                                                                                         Fang Xinghai, head of the
                                                                                                                                                                        consistent and have been for
                                                                                                                                                                        five years,” says Richard
                                                                                                                                                                                                          rier. Officials say the goal is
                                                                                                                                                                                                          to make the renminbi “more
                                                                                                                                                                                                                                             and supply of experienced
                                                                                                                                                                                                                                             financial professionals.
                                cial professional in Shanghai      it is ready to introduce one      has been predicted before,       Shanghai Financial Services       Yorke, CEO of HSBC in             convertible” – but they              The      government       of
The Shanghai stock market       who is willing to bet on it.       financial    innovation     or    and failed to materialise.       Office, argues that caution       China. “And since China is        admit that there is little         Pudong, the heart of finan-
has been, for most of this      “You can’t even short the          another – and then nothing          Of course, officials can be    has paid off: “China has          likely to recover from this       appetite for such a goal in        cial Shanghai, is building
year, the best-performing       market,” says one exasper-         happens.                          forgiven for thinking that       been very good at control-        slowdown quicker than any         government circles, where          low-cost serviced apartments
stock market in the world.      ated analyst for a foreign            Financial futures are the      what once was condemned          ling risks when it comes to                                         officials are still congratulat-   to try to attract financial
But foreigners have very lit-   investment bank. Beijing           clearest example of an inno-      as an excessively timorous       innovating in the financial                                         ing themselves over having         professionals, and the city is
tle access to it, and local     announced late last year           vation that, though much          pace of reform has since         services     sector   because     China needs more                  avoided the pitfalls of too        working hard to recruit
investors have very little      that it would introduce short      trumpeted, so far has not         begun to sound sagely cau-       every innovation has to go        robust corporate                  much financial openness.           overseas, to take advantage
alternative to it: China’s      selling and margin trading         happened: Shanghai created        tious: “China has dodged a       through a process of regula-                                          The legal system is also a       of the rout in the US.
                                                                                                                                      tory     deliberations     and    governance                        big barrier. Experts say a           But China’s punitive 45
                                                                                                                                      approvals, often involving
                                                                                                                                      several regulators.” He does
                                                                                                                                                                        and far more                      rudimentary legal system
                                                                                                                                                                                                          may be adequate for the
                                                                                                                                                                                                                                             per cent income tax, and
                                                                                                                                                                                                                                             deficiencies in its healthcare
                                                                                                                                      not need to point out that        transparency                      early stages of economic           and education, may make it
                                                                                                                                      western financial officials                                         development, but a sophisti-       difficult to recruit experi-
                                                                                                                                      can claim no such success.                                          cated financial services           enced professionals.
                                                                                                                                         So have the tribulations of    other major economy….the          industry requires a much             Intangible challenges will
                                                                                                                                      recent months delayed the         importance of both China          more transparent, predicta-        be even harder to surmount.
                                                                                                                                      opening and modernisation         and Shanghai as a financial       ble and fair system. “Being a      China needs a more robust
                                                                                                                                      of China’s financial market       centre will probably be           global     financial     centre    system of corporate govern-
                                                                                                                                      even more? Officials and          increased.”                       means your neighbour puts          ance and far more transpar-
                                                                                                                                      analysts delicately point out       But whatever comparative        money in your pocket. At           ency.
                                                                                                                                      that it is arrogant to suggest    advantage China may reap          the moment, the confidence           The deadline of becoming
                                                                                                                                      so: “In China, we have plans      from the global crisis, no one    is not there for that,” says       a global financial centre by
                                                                                                                                      [as in, five-year plans],” says   underestimates the scale of       one Chinese analyst for a          2020 may seem distant now:
                                                                                                                                      Wang Jianmao of China             the challenge of turning          foreign investment house.          but it is a short one for all
                                                                                                                                      Europe International Busi-        Shanghai into a financial         An unpredictable legal sys-        that the city must accom-
                                                                                                                                      ness School (CEIBS). “We          centre to rival Hong Kong         tem, which cannot be               plish beforehand.

                                                                                                                                      Tough task of turning
                                                                                                                                      recruits into innovators
                                                                                                                                      RESEARCH & DEVELOPMENT            some of them have got to be       are not used to packaging          cessful enough for export
                                                                                                                                                                        smart,” he says.                  their thoughts in a way that       markets too, and has been
                                                                                                                                      Michael Skapinker                   Many foreign companies          you can sell them within a         sold in the rest of Asia and
                                                                                                                                      on the trouble                    feel the same way. There are
                                                                                                                                                                        estimated to be more than
                                                                                                                                                                                                          company like GE”, Mr Chen
                                                                                                                                                                                                                                             Latin America.
                                                                                                                                                                                                                                               Theresa Kotanchek, an
                                                                                                                                      with limits on                    200 research and develop-           It is a complaint voiced in      American who heads the
                                                                                                                                      indepedent thought                ment facilities in the Shang-
                                                                                                                                                                        hai region. Most arrive with
                                                                                                                                                                                                          other R&D facilities in
                                                                                                                                                                                                          Shanghai: the education sys-
                                                                                                                                                                                                                                             technology effort in China of
                                                                                                                                                                                                                                             Dow Chemical of the US,
                                                                                                                                                                        a fairly simple mission: to       tem does not encourage             reports some successes too.
                                                                                                                                      It is a typical 3M story: an      customise existing products       independent thought. Nor           Dow’s        newly-completed
                                                                                                                                      employee comes up with an         for the Chinese market. But       does it prepare students for       Shanghai R&D facility is a
                                                                                                                                      idea that, through a series of    some have moved on to             the teamwork that R&D              vast complex, complete with
                                                                                                                                      accidents, then turns into a      more serious R&D work –           requires.                          employee gym.
                                                                                                                                      product. While trying to          inventing new products for          How do research compa-             The Dow centre was
                                                                                                                                      develop a new kind of rub-        the Chinese, and occasion-        nies in Shanghai deal with         designed to look beyond
                                                                                                                                      ber for aircraft fuel lines,      ally world, markets.              this? At GE, they give staff       China from the start. It is
                                                                                                                                      someone at 3M once spilt            Attracting R&D to Shang-        mentors to teach them how          the company’s R&D hub for
                                                                                                                                      some of the latex on a shoe       hai is a central part of the      to develop research propos-        the    entire     Asia-Pacific
                                                                                                                                      and discovered it was water       city’s ambition to turn itself    als. At first, those mentors       region. It is one of only four
                                                                                                                                      resistant. The company            into a world-class services                                          such hubs. Two of the others
                                                                                                                                      turned it into Scotchgard.        centre. There have been                                              are in the US and one is in
                                                                                                                                         A churchgoing employee         notable successes. Several        Attracting R&D                     Switzerland.
                                                                                                                                      of 3M, the diversified tech-      large R&D facilities in           is a central part of                 “Multiple factors drove us
                                                                                                                                      nology company, watching          Shanghai are staffed almost                                          here,” Ms Kotanchek says.
                                                                                                                                      the bookmarks falling out of      entirely by Chinese nation-       the city’s ambition                One was access to talent:
                                                                                                                                      his hymn book, secured
                                                                                                                                      them with a glue the com-
                                                                                                                                                                        als. General Electric has
                                                                                                                                                                        2,000 research workers in
                                                                                                                                                                                                          to turn itself into                Dow was finding it increas-
                                                                                                                                                                                                                                             ingly difficult to recruit Chi-
                                                                                                                                      pany had developed that did       China, 1,400 of them at its       a world­class                      nese researchers to work in
                                                                                                                                      not lose its stickiness. The      facility in the Zhangjiang                                           the US because of the tight-
                                                                                                                                      result was Post-it notes.         technology park in Shang-
                                                                                                                                                                                                          services centre                    ening of visa restrictions
                                                                                                                                         Here is another 3M story:      hai’s Pudong district. Of the                                        that followed the September
                                                                                                                                      some employees developed a        2,000, only 10 are expatriates.   had to be in the US. Now           11 attacks of 2001. Education
                                                                                                                                      product that kept road signs      Exclude Chinese-Americans         that some of the Chinese           in China has improved, Ms
                                                                                                                                      clean. It worked, but wore        and the figure drops to two       staff have experience of GE        Kotanchek says, and the
                                                                                                                                      off in a few days. Unde-          or three.                         and its ways the company           result was “the top talent
                                                                                                                                      terred, they pondered who           But turning technically         has moved on to local men-         was staying in China”.
                                                                                                                                      might need to keep some-          competent recruits into inno-     tors.                                It is not that Ms
                                                                                                                                      thing clean for a shorter         vators has not been easy.           Is it working? Are there         Kotanchek does not recog-
                                                                                                                                      time before reapplying it –       Xiangli Chen, president of        other local innovations to         nise the problems that many
                                                                                                                                      and decided to use the prod-      GE’s China Technology Cen-        add to 3M’s miners’ masks          Chinese recruits have with
                                                                                                                                      uct in miners’ masks.             tre, says the US company          product? GE in China has           innovation. It is just that her
                                                                                                                                         The difference with that       has no difficulty recruiting.     developed a low-energy med-        company looks for both high
                                                                                                                                      last 3M story is that it took     “We take the cream at the         ical scanner. The scanner          technical skills and an inno-
                                                                                                                                      place in China – a country        top. We really don’t have         was developed for the Chi-         vative outlook when it
                                                                                                                                      famous for its low-cost man-      much trouble getting the          nese market. Fewer people          recruits. Like GE, Dow says
                                                                                                                                      ufacturing but not, in its        best.” Many are skilled.          are obese in China than in         it can aim for the best
                                                                                                                                      recent history anyway, for        About two-thirds have mas-        the west and the scanner           researchers. It receives 3,500
                                                                                                                                      its inventiveness.                ters or doctoral degrees. But     tunnel that patients pass          applications for every 100
                                                                                                                                         Kenneth Yu, managing           they still have difficulty        through could consequently         positions. Those who suc-
                                                                                                                                      director of 3M in China, does     putting their ideas forward.      be smaller. The scanner also       ceed still need training in
                                                                                                                                      not buy the idea that Chi-        What they lack is “the soft       had to be robust enough to         innovation.
                                                                                                                                      nese employees cannot inno-       skills, especially in an Amer-    endure high usage levels.            But Ms Kotanchek insists
                                                                                                                                      vate. “With 1.3bn people,         ican corporate culture. They      The scanner has been suc-          these efforts are paying off.
FINANCIAL TIMES THURSDAY APRIL 30 2009                                                                ★                                                                                                                                                                 3


Gang’s political inf luence takes a hammering
POLITICS                              Beijing mayor Chen Xitong was             Mr Chen already had a reputa-       within elite Chinese politics since   tics. It also reflected a broader     industry.” His detenion, there-       direct challenges to Mr Hu’s
                                      jailed in 1995.                        tion for corruption, which meant       Hu Jintao succeeded Mr Jiang in       effort to reduce the power of         fore, helped Mr Wen assert            influence and the CYL group
The former local party                  Ever since he was first              that some of the allegations           2002. President Hu’s political        regional barons within the party      greater control.                      now has more influence, he still
boss may have been                    detained by Communist party
                                      officials in 2006, Mr Chen’s down-
                                                                             against him came as no surprise.
                                                                             However, few analysts believe
                                                                                                                    base within the party is the Com-
                                                                                                                    munist Youth League (CYL) and
                                                                                                                                                          and to assert greater control over
                                                                                                                                                          economic policy.
                                                                                                                                                                                                   Looking at this power struggle
                                                                                                                                                                                                from Shanghai, both interpreta-
                                                                                                                                                                                                                                      has to work within the limits of
                                                                                                                                                                                                                                      the party’s different factions,
jailed but the city still             fall has prompted intense specu-       that graft was the main reason         he has been positioning to place         Since at least 2004, Mr Hu and     tions look to be bad news for the     including the Shanghai gang.
has allies at the top,                lation about whether it signalled
                                      the marginalisation of the city in
                                                                             for his ouster.
                                                                                One explanation is that it was
                                                                                                                    allies in important positions,
                                                                                                                    often at the expense of Mr
                                                                                                                                                          Premier Wen Jiabao have been
                                                                                                                                                          battling to try to prevent the Chi-
                                                                                                                                                                                                city – either its leaders have been
                                                                                                                                                                                                personally marginalised or its
                                                                                                                                                                                                                                      The downfall of Mr Chen has not
                                                                                                                                                                                                                                      given him a free hand. For
writes Geoff Dyer                     national politics and the end of       the culmination of a factional         Jiang’s erstwhile allies. The         nese economy from overheating         voice in economic decisions has       instance, he appears to have been
                                      the so-called “Shanghai gang”.         fight that had been taking place       detention of Mr Chen came as          and that involved picking fights      weakened.                             unable to install ally Li Keqiang
                                        The Shanghai gang took root                                                 the party was readying itself for     with important regions such as           However, analysts caution that     as his likely successor.
In April last year, Chen Liangyu,     in 1989 when Jiang Zemin, the                                                 the 17th Congress in October 2007     Shanghai, which did not want          while Shanghai does not have            Finally, Shanghai still has
the former party boss in Shang-       then party boss in the city, was                                              when a lot of personnel changes       Beijing to slow the pace of expan-    the same leverage in national         plenty of allies in the top leader-
hai, was sentenced to 18 years in     elevated to general-secretary of                                              were made.                            sion. Mr Chen reportedly had          politics that it once enjoyed, the    ship. In addition to a series of
prison for his role in the biggest    the Communist party in the                                                      “Since dumping former Shang-        strong arguments with Mr Wen          city’s political influence has not    officials in financial circles, Wu
corruption scandal in China in        aftermath of the Tiananmen mas-                                               hai    party   secretary     Chen     over the direction of economic        disappeared. Most observers           Bangguo, the number two figure
more than a decade.                   sacre. By the mid-1990s, Prime                                                Liangyu in late 2006, President       policy in 2004.                       believe that Mr Hu would not          in the party hierarchy, spent
  The court heard a long list of      Minister Zhu Rongji and a host of                                             Hu has tightened his control over        “No one challenged Hu and          have moved against as senior a        much of his career as an official
misdeeds that Mr Chen was             other senior leaders were former                                              the east China metropolis as well     Wen more vehemently, more fre-        figure as Mr Chen without squar-      in Shanghai, while the likely
alleged to have committed. He         Shanghai officials and the city                                               as the so-called Shanghai fac-        quently, or more directly than        ing it with other senior figures in   next president of China, Xi Jin-
had personally taken bribes of        received pride of place in the cen-                                           tion,” says Willy Lam, the vet-       Chen Liangyu,” says Cheng Li, a       the Shanghai gang, especially Mr      ping, was briefly the party boss
more than Rmb2.39m and had            tral government’s economic                                                    eran China-watcher. One result        Chinese politics expert at the        Jiang and then vice president         in Shanghai. Although the
allowed the Shanghai city public      plans – symbolised by the con-                                                of the detention of Mr Chen was       Brookings Institution.                Zeng Qinghong. The fact that a        emphasis on government policy
pension fund to have more than        struction boom in Pudong. Even                                                “the resolution of the longstand-        “Using statistics to illustrate    national campaign was launched        has shifted to boosting inland
Rmb3bn in assets siphoned off         when Mr Jiang stepped down                                                    ing slugfest between the two          his points, Mr Chen had report-       to publicise Mr Jiang’s memoirs       regions and to expanding the
for illegal use.                      from his party posts in 2002,                                                 major party cliques”, he says.        edly argued that the Hu-Wen           shortly before the detention gave     social safety network, Shanghai’s
  As the party secretary in           there were still plenty of mem-                                                 However,      many      analysts    administration’s macroeconomic        the perception that some sort of      development as a financial, trade
Shanghai, Mr Chen was the most        bers of the gang in senior posi-                                              believe that Mr Hu’s drive to clip    control policies would hamper         deal had been reached between         and services centre remains an
senior Chinese leader to be           tions, such as Huang Ju, then                                                 the wings of the Shanghai gang        the country’s economic growth,        the two sides.                        important priority that overrides
accused of graft since the then       vice premier.                          Chen Liangyu: 18­year jail term        was more than just factional poli-    especially its booming real estate       Even though there are no           factional rivalries.

A city’s appearance
can be deceptive
SHANGHAI V BEIJING                can be very seductive. On         Those looking to build a Chi-     is Beijing that is home to the
                                  the Bund, Shanghai’s old          nese retail business, such as     country’s most vibrant art
Geoff Dyer on why                 colonial waterfront, there is     HSBC and Citigroup, are in        scene – even if the financial
you should not be                 a place called the Glamour
                                  Bar whose ceiling-high win-
                                                                    Shanghai. But the list of
                                                                    investment and commercial
                                                                                                      crisis has knocked the stuff-
                                                                                                      ing out of the exorbitant
seduced by a                      dows look on to the Pudong        banks with their base in Bei-     prices artists were able to
gleaming skyline                  skyline. On two separate
                                  occasions, complete stran-
                                                                    jing is equally impressive,
                                                                    from Morgan Stanley to JP
                                                                                                      charge. Beijing is also home
                                                                                                      to China’s most interesting
                                  gers on their first visit to      Morgan to UBS. While              music scene, dominated by a

        hanghai     likes    to   Shanghai have approached          Shanghai offers closeness to      sort of grunge rock with a
        think of itself as New    this correspondent to ask for     the market and a deeper           refreshing degree of irrever-
        York to Beijing’s         advice on how to get a job in     base of middle-management         ence.
        Washington DC. Bei-       the city. Something about         expertise, Beijing offers eas-       Some of Beijing’s cultural
jing is the buttoned-down,        the view made them want to        ier access to clients and deci-   pulling power comes from its
bureaucratic centre of gov-       change their lives.               sion-makers. For better or        position as the capital. As a
ernment, so Shanghaiese tell         Yet despite the powerful       for worse, Goldman Sachs          result of its status, the main
themselves, while Shanghai        hold that Shanghai exerts on      has come to symbolise New         media organisations are in
is the financial, fashion and     some imaginations, Beijing        York finance, but the bank        Beijing and so are a large
cultural hub, as well as the      cannot be dismissed as just a     has its China base in Bei-        number of the intellectuals
nation’s arbiter of taste.        government town. Indeed,          jing.                             and non-government groups          Pudong view: Shanghai likes to think of itself as New York to buttoned­down, bureaucratic Beijing’s Washington              Getty
  Foreigners arriving in          Beijing’s attractions, talents       Shanghai is also making a      that want to try to influence
China for the first time often    and influence are much            big push to attract research      policy. The political system
come away with the very           deeper that first meets the       and development activities        and level of censorship are
same view. With the gleam-        eye.                              to the city and it has had        no different between the two
ing skyscrapers in Pudong            Whether it is business or      considerable success. In the      cities, but the elite-level con-
and its conveyor belt of new      culture, Shanghai often                                             versation about the future of
restaurants from all over the     plays second fiddle to Bei-                                         the country is much deeper
world, Shanghai has an air        jing. Take finance. Shang-        Beijing’s                         in Beijing.
of easy cosmopolitanism           hai’s aim to become China’s       attractions, talents                 The quirks of Communist
that makes Beijing seem the       financial capital is often spo-                                     party control also sometimes
provincial city.                  ken of as a struggle for dom-     and influence                     help Beijing. To get the nec-
  Those first impressions         inance with Hong Kong to
                                  see which market will
                                                                    are much deeper                   essary approval for an artis-
                                                                                                      tic project in Shanghai, the
 Contributors                     emerge as the main venue          than first meets                  only route is to go through
                                  for financing Chinese compa-                                        the city’s culture bureau.
 Patti Waldmeir                   nies.
                                                                    the eye                           But in Beijing, there are
 Shanghai Correspondent              Hong Kong’s market has                                           competing centres of power
                                  prospered over the past dec-      pharmaceuticals        sector     at local and central govern-
 Michael Skapinker                ade by lisiting Chinese com-      alone, Roche, Novartis and        ment level that savvy artists
 Editor, Special Reports
                                  panies that wanted access to      GlaxoSmithKline have all          can sometimes play off
 Geoff Dyer                       a deeper and more stable          established laboratories in       against each other to obtain
 Beijing Bureau Chief             market, a trend that Shang-       Shanghai.                         the necessary stamps.
                                  hai was starting to reverse         But, again, Shanghai faces         Yet for all that, Shanghai
 Stephanie Gray                   before the global financial       stiff competition from Bei-       is in lots of ways a more
 Commissioning Editor             crisis.                           jing. The capital has the         liveable city. For more than
                                     But the real financial capi-   country’s two most famous         a decade, it has had a vigor-
 Steven Bird                      tal is Beijing. Commercial        universities – Beijing Uni-       ous conservation movement.
                                  banks account for about 80        versity and Tsinghua – and        And while large swathes of
 Andy Mears                       per cent of all financing in      the city has used such            the city’s traditional areas
 Picture Editor                   China and the main banks          resources to attract substan-     have been knocked down,
                                  are all based in Beijing.         tial    R&D     investments.      the conservationists have
 For advertising details,         Moreover, not only does Bei-      China’s contribution to the       forced it to think a lot more
 contact:                         jing host the offices of the      human genome project was          about the value of retaining
 Olivia Hu on:                    financial regulators, it is       run out of Beijing, while         older neighbourhoods and
 +8621 63759222:                  also home to most of the          multinationals which have         trying to restore the build-                 country’s biggest companies.      chosen the city as their          ings rather than raze them
 or your usual                    The state in its many forms       research hubs include Micro-      in favour of more endless
 representative                   still plays an emormous role      soft and IBM.                     high-rises.
                                  in the Chinese economy              For all Shanghai’s glam-           It is a lesson that Beijing,
 More reports can be found        which puts Beijing is at the      our and glitz, Beijing also       which has just been through
 online at:                       centre of business affairs.       offers a broader cultural life.   a whirlwind of construction                  Beijing’s dominance in         Abstract art has become one       and modernisation in prepa-
                                  finance is reflected in the       of the main cultural signa-       ration for the Olympics,
                                  decisions of foreign banks.       tures of modern China and it      could take more notice of.

Visions of grandeur put to the test
Continued from Page 1             especially compared with          its political weight behind       ent thinking; a health sys-
                                  their western counterparts.       the plan. “But the king does      tem that provides world
today offer a relatively prim-    They foresaw the emergence        not crown himself,” says          quality medical care; a more
itive choice to domestic          of a property bubble and          Jerry Lou, China strategist       robust system of corporate
investors (largely limited to     pricked it just in time; and      at Morgan Stanley in Shang-       governance; a transparent
equities or real estate), and     they shied away from the          hai. Daunting challenges lie      political system; and ulti-
very restrictive access for       introduction of margin trad-      ahead: China’s currency is        mately, freedom of informa-
foreigners.                       ing in time to avoid a fur-       not convertible; its legal sys-   tion. But Shanghai govern-
  But progress has been           ther dangerous inflation in       tem, though improving, is         ment officials argue that a
excruciatingly slow. An           the Shanghai stock market,        still at best unreliable if not   system of transparent laws
exchange was established in       which would have further          downright unfair to foreign-      and information freedom
2006 to trade stock index         devastated the savings of         ers; there is a vast “talent      was not enough to save the
futures, but the first product    millions of Chinese pension-      gap” between the demand           US from financial meltdown
has yet to be introduced; and     ers who have seen the mar-        and supply of qualified and       – and may not be necessary
though market regulators          ket halve since its 2007 peak.    experienced financial profes-     for Shanghai to achieve its
announced several months            Prof Wang says China is         sionals; and the punitive 45      goal of Asia market domi-
ago that short selling and        fed up with great leaps for-      per cent income tax rate          nance either.
margin trading would be           ward: “Groping forward” is a      scarcely encourages those            “Shanghai has done many
introduced on a trial basis,      wiser strategy, he says, “that    made redundant on Wall            things I never thought they
nothing has happened.             way we won’t so easily make       Street to set up shop in          could do,” says Kenneth Yu,
  The global financial crisis     a big mistake”.                   Lujiazui.                         managing director of 3M in
has, if anything, encouraged        All that groping leads to a        Those are just the more        China. “When I first came
this ultra-cautious pace of       pace of change that is pain-      tangible hurdles. Some long-      here in the 1980s, if you had
modernisation. “What was          fully slow. “But it never goes    term China analysts think         said this city would be what
previously     regarded     as    backward,” says Peter Alex-       Shanghai has no hope of           it is today, I would not have
overly prudent is now             ander, of Shanghai-based          becoming a world-class            believed you.” In China,
regarded as a sign of             investment analysts Z-Ben         financial centre until it can     some things happen very
strength,” says Richard           Advisors.                         boast not just the trappings      quickly and some happen
Yorke, CEO of HSBC in               So Shanghai is on track to      of a more open and modern         very slowly. No one knows
China. Chinese officials are      become a global financial         market, but those of a more       whether the transformation
congratulating themselves         centre – eventually. The city     open political economy: an        of Shanghai in the next dec-
that they have dodged a           has long had this ambition,       education system that fos-        ade will play out in fast or
number of financial bullets –     and now Beijing has thrown        ters creativity and independ-     slow motion.
4                                                                                                   ★                                                                                                                    FINANCIAL TIMES THURSDAY APRIL 30 2009


Lessons on creating a friendly business environment
                                     The most significant ingredient        Kong as a textile powerhouse in      unbiased and minimally                Yu’s assessment. Yi Qian of               The aiml of the city is to          treatment of businesses, and
Guest Column                         in the making of a successful          the 1960s and 1970s. Other Hong      interventionist.                      Northwestern University and I          vault itself into a high-tech state    then moving to improve its
YASHENG HUANG                        capital market is a vibrant            Kong entrepreneurs                     Contrast Hong Kong with             have performed statistical             overnight, but this is built on        regulatory quality, curb
                                     entrepreneurial base. After all, a     subsequently branched into           Shanghai. Probably the most           analysis on a large database of        the erroneous notion that large        corruption and increase
                                     capital market exists to serve         newer industries, such as            penetrating indictment of             Chinese companies and we show          companies are sources of               transparency.
The Chinese government               the needs of entrepreneurs, not        machinery, electronics and           Shanghai’s treatment of local         that the indigenous private            technology and innovation.                It will be a huge blow to
recently announced a decision        the other way around.                  professional services.               entrepreneurs came from Yu            sector in Shanghai lagged              Large companies are risk-averse        Shanghai, to Hong Kong and
to turn Shanghai into an               It is here that Shanghai has a         That indigenous Hong Kong          Zhensheng, its party secretary.       behind not just the most               and it is the vibrancy of smaller      indeed to China itself, if it
international financial centre by    lot to learn from Hong Kong.           entrepreneurs were able to           In October 2007, Mr Yu said:          entrepreneurial provinces such         groups that keeps the large            repeats its past mistake of
2020 to rival the likes of New       Long before the territory              prosper between 1950 and 1997 is     “Since last June, more than           as Zhejiang and Guangdong but          companies on their mettle –            propping up the Shanghai stock
York, London and Hong Kong.          became known as a world class          particularly significant, because    7,000 private enterprises have        the national average across            sometimes by destroying the            exchange by restricting the
  Similarly ambitious goals, set     financial centre, it was an            Hong Kong was ruled by its           moved out of Shanghai. Many of        almost all measures of                 most lethargic and sometimes           listing options of Chinese
forth a decade ago, have             incubator of entrepreneurship –        British colonial masters. In 1950,   these Zhejiang entrepreneurs          entrepreneurship and business          by forcing large companies to          entrepreneurs. Restricting
remained largely unfulfilled but,    especially that of the                 the huge British merchant            moved their headquarters to           development.                           acquire smaller ones as a way          competition with the Hong Kong
this time round, there is a          home-grown, local variety.             houses, such as Jardines,            Hangzhou and Hong Kong. We              Shanghai’s indigenous private        of upgrading their technology.         stock exchange, as the city did
greater realism attached to the        Take Li Ka-shing, the world’s        dominated the commercial and         need to change policy.”               companies tend to grow more               For Shanghai to have any            when it restricted domestic
city’s aspirations. Officials        most successful Chinese                industrial landscape.                  Mr Yu made this comment             slowly, generate smaller               realistic prospects of catching        entrepreneurship’s ability to
acknowledge the huge gap             entrepreneur. Mr Li, born into a         By the early 1970s, local          after he learned that Ma Yun,         revenues and hold fewer                up with Hong Kong, it needs to         compete with foreigners, will
between the capital market in        humble family of teachers,             entrepreneurs more than              one of China’s most dynamic           patents.                               figure out how to enable the           only thwart Shanghai’s lofty
Shanghai and that of Hong            started his business making and        matched their colonial               entrepreneurs, had first started        The root of the problem is a         likes of Li Ka-shing.                  aspirations.
Kong. In particular, they have       selling plastic flowers. He was        counterparts and, by the late        his business in Shanghai but          system that is highly biased in           To foster entrepreneurship,
identified the need to recruit       by no means alone. The group           1980s, surpassed them by a large     left for the neighbouring             favour of certain companies and        Shanghai needs to go back to           Yasheng Huang is a professor at
competent professionals.             of industrialists who left             margin. This is the moral of the     Zhejiang province because of the      discriminates against others. It       the basics of reducing                 MIT Sloan School of
  Shanghai trails Hong Kong in       Shanghai in 1949 were                  story: Hong Kong entrepreneurs       latter’s friendlier business          woos multinational corporations        government intervention,               Management and author of
financial talent, but arguably       single-handedly responsible for        thrived under a British system       environment.                          while shunning domestic, small-        removing bias in its licensing,        Capitalism with Chinese
this is the least important gap.     the miracle growth of Hong             because that system was fair,          Systematic data support Mr          and medium-sized businesses.           financing and regulatory               Characteristics (2008).

gets a new life
1933 CULTURAL CENTRE             toir that is rapidly filling      is more than ready for that.”
                                 with restaurants, recording          Born in Brazil to Chinese
Michael Skapinker                studios, photographic busi-       parents, Mr Liu grew up in
on making a place                nesses and bookshops.
                                   1933, named for the year in
                                                                   Ann Arbor, Michigan, and
                                                                   worked as an investment
for people with                  which it was completed, is        banker in New York and
a creative bent                  an intriguing, slightly forbid-
                                 ding structure, with a con-
                                                                   Hong Kong. He was chief
                                                                   financial officer of Three on
                                 crete lattice façade. The inte-   the Bund, a revamped shop-

      n western cities, new      rior is filled with uneven        ping and restaurant centre       Cool cultural quarter: the 1933 building is filled with uneven spaces and ascending ramps along which cattle were once herded to their deaths
      cultural quarters usu-     spaces and ascending ramps        that also hosts the Shanghai
      ally develop because       along which cattle were once      Gallery of Art.                  the world. The others were       ally the home of artists and        Hongkou is a gritty place      staff are putting the final      around a glass recording stu-
      rents are low enough       herded to their death.               The Bund, Shanghai’s his-     in London and New York.          writers, Hongkou provided        now. Electric wiring hangs        paint dabs on an alarmingly      dio. American Apparel, the
for artists to move in. Or, in     Paul Liu, chief executive       toric riverside boulevard, is    Designed, with an art deco       refuge to tens of thousands      from a power cable above          realistic-looking      broad-    US clothing retailer, is open
the case of London’s South       of Axons Concepts, has been       filled with imposing banks       touch, by British architects     of European Jews during the      the street near Mr Blumen-        trunked tree. The studio         for business.
Bank, because a determined       asked to give effect to           and designer shops. 1933 is a    and built by Yu Hong Ji, a       second world war. At a time      thal’s one-time home. The         offers wedding photographs.        This is what Mr Liu is
Shakespeare enthusiast, Sam      Shanghai’s vision of a new        world away, as Mr Liu            Chinese construction com-        when most doors were             old synagogue has been               Elsewhere, there is a read-   looking for – a mixture of
Wanamaker, decided to build      cultural centre. “A lot of        observed when he first saw       pany      using     concrete     closed to them, Shanghai         beautifully restored as a         ing area, with books on          offices, retail and exhibition
a replica of the Globe Thea-     areas of Shanghai are about       it, empty, on a cold winter’s    imported from the UK, the        demanded neither visa nor        museum, but the surround-         angled shelves. At the top of    space for those of a creative
tre there and the Tate Mod-      consumption,” he says over        day.                             building typified the interna-   passport. When the Japanese      ing streets are shabby. The       the building is a vast, light-   bent. He is pretty clear
ern art gallery followed.        lunch at the Jade Garden             The old abattoir was once     tional flavour of Hongkou,       occupied Shanghai, they          area is ripe for refurbish-       filled exhibition space, with    about the tenants he is not
   In China, cultural quarters   restaurant, a 1933 eatery.        a marvel. Designed to pro-       the Shanghai district in         forced the Jews into a           ment and 1933 is meant to be      a circular glass stage, which    looking for. He does not
develop because the authori-     “But a lot of Shanghai’s pop-     vide Shanghai with meat          which 1933 is located.           ghetto, but resisted German      part of that. The building        has already hosted car           want logistics companies or
ties decide they should. At      ulation are intellectual, cul-    whose provenance it could          “This is part of old Shang-    demands to deport them to        has played many parts.            launches.                        accounting firms. “We have
least, that is the theory        tured. We want to become          trust, it was one of the three   hai. Pre-1949 colonial Shang-    concentration camps.             From 1959 until 1970, it was         Over in an old warehouse,     rejected 50 per cent of the
behind 1933, a one-time abat-    their destination. Shanghai       biggest slaughter houses in      hai,” Mr Liu says. Tradition-      After the war, almost all      a cold storage facility. Then,    now glass-enclosed, next to      people who wanted to come
                                                                                                                                     the refugees left. One,          until 2002, it was a medi-        1933, workers are drilling       here.”
                                                                                                                                     Michael Blumenthal, became       cines factory. No one ever        around staff from Profero, a       What other tenants and
                                                                                                                                     US     Treasury    Secretary     envisaged it being a cultural     London-based marketing           events does he want?
                                                                                                                                     under President Jimmy            centre. It still feels cold and   agency, who are setting up       “Design firms, graphic art-
                                                                                                                                     Carter. Mr Blumenthal’s          slightly bleak.                   shop. People from a com-         ists, cultural events, lec-
                                                                                                                                     home is marked by a plaque          Some of the building’s         pany called Factory stand        tures,” he says. “We have to
                                                                                                                                     on the low building where        occupants have just moved         amid what will be a complex      get the critical mass to make
                                                                                                                                     his family once lived.           in. In a photographic studio,     of eating and drinking places    this a destination.”

                                                                                                                                     Another coming­of­age
                                                                                                                                     party for Brand China
                                                                                                                                     EXPO AND TOURISM                                                                                    to go in terms of profession-

                                                                                                                                     Patti Waldmeir on                 Paradise for bargain hunters                                      alism,” she says.
                                                                                                                                                                                                                                            From a tourism point of
                                                                                                                                     ambitions to score                When it comes to price,
                                                                                                                                                                       Shanghai has a split
                                                                                                                                                                                                        cheerful tailors of the
                                                                                                                                                                                                        Soft­Spinning Material
                                                                                                                                                                                                                                         view, the immediate priority
                                                                                                                                                                                                                                         is Expo, which starts on May
                                                                                                                                     another triumph                   personality. Food is far         Market to keep to their side     1 next year. Expo organisers
                                                                                                                                                                       cheaper than London (small       of the bargain and make          are worried that too many
                                                                                                                                                                       surprise there); but the         sure that the buttons will       top-end hotels are being
                                                                                                                                     Sometimes China seems to          city’s luxury good stores        not fall off the next day.       built and not enough budget
                                                                                                                                     have cornered the market          are every bit as costly as          Truth be told, Shanghai’s     rooms for the thrifty domes-
                                                                                                                                     for superlatives: the biggest,    anywhere else, and certainly     best tourist attraction is its   tic tourists. They are looking
                                                                                                                                     the fastest, the cheapest, the    much dearer than Hong            buildings. Even the most         into training local citizens to
                                                                                                                                     best – whether the subject is     Kong. Lettuce is dirt cheap,     mundane suburban                 offer bed and breakfast
                                                                                                                                     economic growth or Olympic        but lattes are astronomical.     apartment block often            accommodation – but there
                                                                                                                                     pageantry. Now the country           So the best advice is: do     sports an extravagant roof       is no tradition of such home
                                                                                                                                     is planning the biggest ever      not go shopping alone, take      ornament, from the               stays in Shanghai.
                                                                                                                                     world’s fair – the Shanghai       a personal shopper.              neo­classical to the                Making Expo succeed is
                                                                                                                                     World Expo, which will run        Shanghai is one of the           ultra­futuristic, illuminated    obviously as important a pri-
                                                                                                                                     for six months next year,         safest cities on earth for       after dark. And the city’s       ority for the Shanghai gov-
                                                                                                                                     and is expected to attract        tourists.. But the best deals    three tallest buildings – the    ernment as the Olympics
                                                                                                                                     70m visitors, 3.5m of them        are not on Nanjing West          101­storey Shanghai World        were last year for Beijing.
                                                                                                                                     foreigners.                       Road or Huai Hai Central         Financial Centre, the            But one big national partici-
                                                                                                                                       Beijing’s goal is to score      Road, the main brand             88­storey Jin Mao Tower          pant is going down to the
                                                                                                                                     another triumph for brand         thoroughfares.                   and the fuchsia­tinted           wire on whether or not it
                                                                                                                                     China: yet another giant             Shanghai’s competitive        Oriental Pearl Tower, all        will be there: the US has
                                                                                                                                     coming-of-age party, like last    advantage is imitation, so       offer splendid views over        failed to raise the $60m
                                                                                                                                     year’s Beijing Olympics.          take along a long­loved suit     this vast, dirty and chaotic     needed to build and operate
                                                                                                                                     Shanghai wants to take its        or overcoat, a dress or          metropolis.                      its pavilion because govern-
                                                                                                                                     place in the history books,       blouse and have it copied           But visitors need to take     ment funding is prohibited
                                                                                                                                     alongside the world’s great-      at the South Bund                away, not just a memory of       by law and corporate donors
                                                                                                                                     est world’s fairs: London’s       Soft­Spinning Material           a startling view, but that       are being squeezed by the
                                                                                                                                     Great Exhibition in 1851, at      Market – preferably in a         blouse or cashmere               financial crisis.
                                                                                                                                     the Crystal Palace; the 1889      luxurious silk or cashmere.      overcoat. In Shanghai, the          “There is a lot of face at
                                                                                                                                     Universal Exposition in              Any hotelier can direct a     pace of change is                stake here for everyone,”
                                                                                                                                     Paris, which produced the         tourist to the famous            frightening. Blink and the       says Brenda Foster, presi-
                                                                                                                                     Eiffel Tower; and Chicago’s       “fabric market” on Lu Jia        neighbourhood’s favourite        dent of the American Cham-
                                                                                                                                     1893 Colombian Exposition,        Bang road. But once past         restaurant will disappear.       ber of Commerce in Shang-
                                                                                                                                     which introduced the first        the building’s handful of           Grab that silk blouse         hai. Ellen Eliasoph, co-chair-
                                                                                                                                     Ferris Wheel.                     beggars, all the stalls look     while there are still bargains   man of the US expo organis-
                                                                                                                                       This Expo, whose theme is       much the same A good             to be had.                       ing      committee,       says
                                                                                                                                     “Better City, Better Life”,       personal shopper will                                             corporate donors are emerg-
                                                                                                                                     will boast national, corpo-       browbeat the cheap and                    Patti Waldmeir          ing to support the pavilion
                                                                                                                                     rate and other pavilions,                                                                           and ground will be broken
                                                                                                                                     some with walls made of                                                                             within 90 days (with or with-
                                                                                                                                     soyabean fibre, air condition-   empty for years afterward?        50 per cent this year. “What     out all the money).
                                                                                                                                     ing systems run with river         Expo officials say they         will happen in 2010 is any-         “This is the most spectacu-
                                                                                                                                     water and lights powered by      expect the city to add 20,000     one’s guess,” he says, noting    lar site, in the most dynamic
                                                                                                                                     solar panels. The aim is to      starred hotel rooms by the        that at least seven luxury       city, in the most dynamic
                                                                                                                                     give 70m ordinary people a       end of the next year, an          hotels are due to open in the    region in the world,” she
                                                                                                                                     glimpse into a cleaner,          increase of more than a           city in the next 12 to 18        says. “This is China, and
                                                                                                                                     healthier, more sustainable      third. But Andreas Flaig,         months. “We’re going to be       every country and every
                                                                                                                                     urban future.                    managing director China of        in for a pretty rough ride       company wants to be there
                                                                                                                                       The event will doubtless       Jones Lang LaSalle Hotels,        when it comes to occu-           to show itself off to its best
                                                                                                                                     boost the Shanghai economy       says the upper end of the         pancy,” he says. The flip        advantage.”
                                                                                                                                     in the short term, and the       hotel market is already           side, though, is that the city      Shanghai is hoping that
                                                                                                                                     national prestige – not least    under serious pressure – and      will have a “breadth, quan-      the hyperbole will get the
                                                                                                                                     among the domestic tourists.     not just because of the inter-    tity and quality of hotels” to   Shanghai Expo into the his-
                                                                                                                                     But expectations for Expo,       national financial crisis; it     surpass Hong Kong, he says.      tory books. Another chance
                                                                                                                                     especially within Shanghai,      has been in oversupply for           But Connie Cheng, vice        for China to prove its prow-
                                                                                                                                     are extremely high: will         several years already.            chair of the Shanghai Munic-     ess: Shanghai (with Beijing
                                                                                                                                     it have a more lasting leg-        Shanghai’s five-star hotel      ipal Tourism Administra-         firmly behind it) will do eve-
                                                                                                                                     acy? Or will it merely inflate   occupancy rates fell 9 per-       tion, is not underestimating     rything it can to avoid miss-
                                                                                                                                     an asset bubble of luxury        centage points last year, to      the obstacles.                   ing that priceless opportu-
                                                                                                                                     hotels that will remain          59 per cent, and could fall to       “We still have a long way     nity.

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