Activist Mayor Stumps for China

SHANGHAI: IN SEARCH OF FOREIGN CAPITAL

CHINA's highest-ranking delegation to visit the United States since the Tiananmen Square crackdown is scheduled to arrive next week on a 20-day mission to boost US-China business. The delegation of six Chinese mayors will tour the east and west coast from July 7 to 26, meeting US company executives, civic leaders, and government officials, according to Jan Berris of the National Committee on US-China Relations.

The committee, which will play host to the Chinese, is a nongovernmental organization of businessmen and academics that aims to advance US-China ties.

Although the visit is technically private, Chinese leaders clearly hope it will promote a thaw in Sino-American relations while reviving the flow of badly needed financing and investment to China.

Already, Beijing can point to signs that the West and Japan are loosening restrictions on high-level official exchanges with China.

Britain revealed last week that a visit to Beijing by Foreign Minister Francis Maude is ``under discussion.'' Mr. Maude, who would hold talks on Hong Kong's reversion to Chinese rule in 1997, would be Britain's first minister in China since the massacre June 3-4 last year.

Early next month in Tokyo, Japanese Prime Minister Toshiki Kaifu will meet State Councillor Li Tieying, the highest-ranking Chinese official to visit Japan since last June.

Also in July, leaders of the United States, Japan, and Western Europe are expected to reassess their China policies at a meeting of the Group of Seven industrial nations, diplomatic sources say.

Beijing's priorities for the forthcoming mission to the US are reflected in its choice of the delegation head: Shanghai Mayor Zhu Rongji.

Mr. Zhu, an English-speaking technocrat with hands-on experience in running the country's economy, has impressed foreign businessmen and diplomats as a dynamic and open-minded proponent of reform.

``Zhu Rongji doesn't gloss over problems,'' says Norman Givant, co-president of the American Chamber of Commerce in Shanghai. ``He's a doer, not a talker.''

Zhu is also a skilled politician with evident clout among central leaders in Beijing. He is widely rumored to be a candidate for elevation to the Communist Party's ruling 14-man Politburo later this year.

Perhaps more vital from Beijing's perspective, Zhu is not tainted with direct responsibility for the Army massacre of Chinese civilians last June.

Unlike his hard-line counterparts in Beijing, Zhu resisted calling in troops when student demonstrations and citywide traffic barricades brought Shanghai to a standstill last June.

Instead, the mayor gambled successfully on the pragmatism of Shanghai residents, paying thousands of factory workers to clear the streets peacefully. ``People give him high marks for avoiding bloodshed last summer,'' says a Shanghai-based Western diplomat.

Zhu's less-offensive image appears to have won him the job of China's top public relations man. This month alone, he has made whirlwind visits to Hong Kong and Singapore to promote foreign investment and trade.

With Zhu as its salesman, Beijing seeks to reverse a sharp decline in new foreign direct investment in China, which plummeted roughly 40 percent after the June crackdown, according to official Chinese figures.

In the US, which is China's second-largest foreign investor after Hong Kong, Zhu will seek funds for a new economic zone in Pudong, 120-square-mile stretch of land across the Huangpu River from downtown Shanghai.

In April, the government unveiled the long-awaited Pudong Development Zone as the beachhead for an ambitious drive to modernize the entire Yangtze River valley in the 1990s.

Opening up the Yangtze valley is ``even more important'' than was the creation of free-enterprise zones in southern China in the 1980s, Vice Premier Yao Yilin declared in May.

For Shanghai, Pudong offers a lure for foreign capital and technology that are vital to reinvigorating the outmoded economy of the once vibrant seaport.

``Pudong will be a new Shanghai,'' says Yang Xiaoming, director of information at the Pudong Development Office.

``It will make Shanghai an economic, trade, and financial center of the Pacific Basin,'' said Mr. Yang above the clanging of workers' hammers and the whir of an overhead fan.

Nevertheless, constructing Pudong's infrastructure alone will be an enormous, long-term task.

On the main road crossing into Pudong from Shanghai, bamboo scaffolding juts out from rising buildings alongside watermelon stands and make-shift eateries. Bicycle-drawn carts, women with parasols, and 1960s-era buses move slowly up and down the road.

Beijing has pledged $1.4 billion of an estimated $10 billion needed to build roads, bridges, tunnels, power stations, and an airport over the next decade.

Shanghai hopes to draw $5 billion from foreign investors.

The rest of the funds must come from the city of Shanghai and foreign companies, governments, or lending institutions.

To attract foreign capital, Pudong will offer: a free-trade zone; a securities market allowing foreign investors to buy and sell shares of Chinese companies; regulations permitting foreign banks to set up branches and engage in hard-currency transactions; and, tax breaks for companies investing in Pudong's infrastructure.

Nevertheless, foreign businessmen warily await investment regulations, expected this summer.

``Pudong today is basically castles in the sky,'' says Mr. Givant. ``It is something they are pushing, but nothing is concrete.''

Foreign companies will not invest in Pudong's infrastructure unless they can operate and earn foreign exchange profits from the ventures, powers which Shanghai is unlikely to offer for political reasons, Givant says.

Businessmen also worry that Shanghai's sluggish, state-owned industries will erect protectionist barriers against a more-competitive foreign sector.

Businessmen say that for Pudong to succeed, China's leaders must carry out fundamental market-oriented reforms.

``Until basic problems are solved, they can't expect Pudong to become a financial center,'' says John Frisbie, Beijing director of the US-China Business Council.

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