Shenzhen's "mini-Hong Kong" to test China's financial ambitions

Wed Jun 27, 2012 11:06am EDT
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By Alison Leung and James Pomfret

SHENZHEN/HONG KONG (Reuters) - China's southern boomtown of Shenzhen, a pioneer of economic reforms but long in the shadow of Hong Kong, is plotting another bold ploy: a $45 billion 'mini-Hong Kong' to return it to the limelight and aid China's rise as a financial power.

On a barren stretch of reclaimed land in western Shenzhen and near the Hong Kong border, China wants to build another financial services hub from scratch in the Qianhai Bay economic zone, offering the low taxes, rigorous legal regime and anticorruption vigilance enjoyed by its affluent neighbor.

For the former British colony, which this weekend will mark the 15th anniversary of its return to China, the project could bring fresh business opportunities and bolster its position as China's financial window on the global markets.

But Shenzhen's ambitions are running into the brick wall of Beijing's caution over reform, as China's grand hopes of becoming a global financial powerhouse struggle to overcome its fear of freeing markets from government control.

Local officials have given up, for example, on the idea of an independent antigraft body similar to Hong Kong's, settling for a hybrid that mixes features of the Hong Kong and mainland systems, said Cao Hailei, head of the Qianhai Authority overseeing the project.

"The structure of the two governments is different," Cao told Reuters in an interview at a Shenzhen municipal government office.

Chinese President Hu Jintao is expected to announce preferential tax rates and other incentives for the Qianhai Bay zone when he visits Hong Kong this week to fete the anniversary of the city's return and swear in a new administration.

China has been steadily expanding the role Hong Kong plays in internationalizing the yuan, which it hopes one day will be a global currency like the dollar, and in building up the Chinese financial markets.   Continued...

Container trucks cross a bridge in front of the 100-floor Kingkey 100, the tallest building in downtown Shenzhen neighboring Hong Kong, May 16, 2012. REUTERS/Bobby Yip