Damaged hopes for Shanghai Expo By Wu Zhong, China Editor
HONG KONG - In the summer of 2007, a research professor with a top Chinese government think-tank bought up apartments in Beijing, full of confidence that the prestigious international events like the Olympics and the 2010 Shanghai Expo would help drive the nation's economic boom for at least another decade.
After a nationwide drive to privatize housing, like other state employees, he had paid a small sum and bought his state-allocated flat in the 1990s. In 2003, he rented it out and bought a larger apartment with a mortgage. "My rent from the old flat is enough to pay the mortgage installments," he said at the time.
As housing prices soared, a considerable portion of his and his wife's salaries were spent on the mortgage, but still he refused to sell either of the apartments, thinking that housing prices in Beijing could only rise.
Why was the professor so confident? "The Beijing Olympics will kick off next year, then in 2010 there will be the Shanghai Expo and the 16th Asia Games in Guangzhou. These major international events, taking place in three major cities, will spur the economy to faster growth in coming years," he said in 2007.
His confidence was common at the time. China's economy had been propelled alternatively or jointly in past decades by three engines of growth: the Bohai-rim region, the Yangtze River Delta and the Pearl River Delta. And with three major international events to take place in Beijing, Shanghai and Guangzhou - the leading cities of these three regions - there was no way the Chinese economy could slow down.
Then came a series of unexpected events.
The domestic stock market began a downturn after the Shanghai Composite Index reached over 6,000 in October 2007; housing prices in major cities began to fall as Beijing strengthened its macro-economic controls; and south and east China was devastated by heavy snow storms in early 2008. Southwestern Sichuan province was then hit by a magnitude-8 earthquake in May 2008 and protests by Free Tibet activists, following riots in Lhasa in March, marred the Beijing Olympics.
Although the Chinese government still managed to make the Beijing Olympics a success, they failed to boost the economy as much as had been hoped, and late last year began the first effects of the global financial crisis. Many people inside China, including the professor, now began pinning their hopes for economic growth on the Shanghai Expo.
So they were left disappointed and puzzled after last week's National People's Congress (NPC), when Premier Wen Jiabao made no mention at all of the event in his Government Work Report, which sets the work agenda of the central government for the year and beyond.
In the 2007 report, Wen pledged: " … to waste not time in making preparations for Beijing Olympics and Beijing Paralympics, to make good efforts in preparing Shanghai Expo … " But there was no mention of the expo this time around.
This year's report was drafted by an ad hoc group led by Ma Kai, the former director of the National Development and Reform Commission and now secretary general of the State Council, which is directly supervised by Executive Vice Premier Li Keqiang. The Shanghai Expo was reportedly mentioned in the first draft, but deleted at the last minute.
Because of this, speculation became to grow that Shanghai, the city, had lost favor with the central leadership since the decline in the influence of the so-called "Shanghai clique", a group of politicians who were the power base of former president Jiang Zemin. Support for the clique has waned since the ascendancy of President Hu and Premier Wen Jiabao, neither of whom have political ties to Shanghai.
In view of China's financial woes, the conspiracy theory is an unlikely one.
As Chinese premier, what is in Wen's mind at the moment is the overall economic health of the nation. So in this year's report he focused on measures to ensure 8% GDP growth and tackle unemployment, in addition to the 4 trillion yuan (US$586 billion) stimulus package. It was for this reason that preparations for Shanghai Expo were not mentioned in Wen's report.
To host the Beijing Olympics, China made a total investment of 800 billion yuan over eight years. According to Zhou Hanmin, a deputy to the Chinese People's Political Consultative Conference from Shanghai, direct investment for the Shanghai Expo will reach 28 billion yuan, also over eight years. This is like a drop in the ocean when compared with the stimulus package, which is to be spent in the next couple of years.
Having drawn lessons from the high-profile, spectacular publicity for the Beijing Olympics, the Chinese government seems to have decided to take a more pragmatic approach towards publicity for the Shanghai Expo.
Heightened expectations can end in disappointment, and under the current circumstances, China seem wary to boost the public's hopes for the Shanghai Expo. Shanghai officials at the congress said none of 185 countries and 46 international organizations scheduled to attend have cancelled, but many have been severely affected by the global financial crisis and may need to reduce their presence.
London's Daily Telegraph reported on March 9 that the US has failed to find the $80 million it needs to build its pavilion, despite being given one of the prime spots in the site. More than 120 companies, including Disney and Pepsi, have declined to participate.
There are also signs that the government is lowering its overall investment for the event. For example, plans for a magnetic levitation (maglev) rail track linking Shanghai to Hangzhou - a scenic town 170 kilometers to the southeast - have been suspended indefinitely. The 35 billion yuan project, originally planned to be complete before the expo, was aimed at boosting tourism in Yangtze River Delta during the international event.
Supported by Jiang and then premier Zhu Rongji - both former mayors of Shanghai, the city began to construct the world's first commercial maglev rail link in 2001. The 30 kilometer track linking its Pudong airport to Longyang Road (Shanghai Metro) began commercial operations on January 1, 2004.
Proud of and inspired by this "great achievement", the Shanghai municipal government planned to build more maglev rail links including a passenger line linking the city to Beijing as well as the Shanghai-Hangzhou line, not to mention the extension of the Shanghai maglev. (See Shanghai-Hangzhou maglev work to start in '06, Asia Times Online, Apr 4, 2006)
But from the beginning, the Ministry of Railways has been strongly against the building of any inter-city maglev links, not only because such projects need much larger investment than high-speed rail tracks, but also because maglev lines cannot be connected to the country's existing rail networks.
The Shanghai maglev project is failing: its accumulated losses reached 1 billion yuan by end of 2006 after three years of business operations, according to official figures. Half of its total 10 billion yuan investment came from bank loans and each year Shanghai maglev has to pay 300 million yuan as interest. In contrast, revenues were only 163.73 million yuan in 2006. Passengers are scarce these days, not only because the fare is expensive - 50 yuan for a one-way ticket - but also largely due to the inconvenience as it is not connected with the city's subway system.
The latest issue of the influential Caijing magazine reported that construction of a high-speed track rail linking Shanghai to Hangzhou already kicked off on February 26 and public service is expected to commence before the Shanghai Expo. This is proof that the maglev plan has now been indefinitely shelved, if not cancelled, and a high-speed track rail is now busily under construction.
Some see this as a victory of the central authorities over the "Shanghai clique". However, a more likely explanation is that rationalism has gained an upper hand in spending decisions on major events and projects.
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