Xi Jinping fluffs lines in sticking to FTZ script
Urgings to plant more seeds on more trade zone lands are unlikely to bear any fruit
I always thought it was Mr Xi's predecessor, President Hu Jintao, who conceived it his mission in life to remain on script no matter how great the embarrassment.
Here, however, we have Mr Xi acting as though he were still party boss of Ningde in Fujian province, jollying the farmers into working longer hours to meet the harvest quota and then immediately writing the visit up as a success. It is what the rule book prescribes. It is what Mr Hu would do.
But it all looks rather silly on the international stage when the Shanghai FTZ has clearly proven a dud. The key was to have been financial reform, starting with a freely exchangeable yuan within the zone.
One year later, however, this FTZ's boosters on that notable self-praise forum, Wikipedia, still start the list of its virtues with an assurance that video game consoles will be allowed, after case by case approval of course, and too bad if internet access remains denied.
The rest of the list is in character. There is a tweak here and twitch there, nothing significant, and not another word heard about foreign exchange reform. Forget the quick harvest of the fruits, Mr Xi. This plant has never even blossomed.
But I understand Mr Xi's difficulties. He cannot restrict free exchangeability of the yuan to a 29 sq km zone within Shanghai unless he builds a wall around that zone and guards it as carefully as any other of the mainland's entry or exit ports, which would defeat the purpose of having such a zone.
Yet if he allows free movement in and out of the zone, the mainland's capital flows will move across it as easily as goods and people do. Beijing would then start to lose control of the yuan's foreign exchange rate and find its control of allocation of investment capital seriously weakened.
Opening the capital account would be a major reform, the final and biggest one on the road to a market economy. It would significantly strengthen the economy. It would also significantly undermine the Communist Party's hold over that economy.
As long as this reform is shunned, however, any FTZ remains a joke expressed in three capital letters. Mr Xi is quite right in saying the lessons learned should be applied to other areas. The lesson for him is not to do it. All he gets is property speculators with political connections enriching themselves on dreams that he has spun and cannot fulfil.
As long as the capital account is closed China will have only one real FTZ. That FTZ is Hong Kong. It galls the authorities in Beijing mightily that this is so, particularly with the challenge to central authority in the Occupy Central movement, but there is no escaping this truth.
It is regrettable that a man who was billed as bringing real intelligence and initiative to the presidency should now be foremost among those trying to escape it by calling for repetition of a deeply flawed experiment.
Perhaps it was just party blah-blah at a party talk shop to offset unhappiness among the geriatrics with his anti-corruption drive, and he had his fingers crossed behind his back the whole time. Let's hope so.
