Northern star

Once a source of pride for the country's pedaling proletarians, the Flying Pigeon bicycle has taken a battering of late thanks to China's love affair with the car.

Produced since 1950 in Xiqing District on Tianjin's west side, the bike was the brainchild of model worker Huo Baoji who named his prototype feige, or Flying Dove, as a wish for peace during the Korean War. Bad translation, however, saw Huo's bicycle rechristened Flying Pigeon. And even though the brand became phenomenally successful, the name of a scruffier, more proletarian bird stuck.

Huo's predicament is a suitable analogy for Tianjin's progress. The city, China's third-largest, never lacked ambition or industry but has often ended up the unglamorous cousin to Beijing and Shanghai. Until now, perhaps.

Half a century after quite literally putting wheels under Mao's revolution, the city is poised to build passenger jets. Tianjin got the nod over Shanghai, Xi'an and Zhuhai to be home to Airbus's US$1.3 billion assembly plant.

Dangling a free runway in front of the European aircraft maker probably helped, but it was reportedly Tianjin's history of manufacturing and its proximity to Beijing that ultimately swung the Airbus A320 jet building project in its favor.

This handy geography is also set to make Tianjin a player in financial services. Clustered around Tianjin, the Binhai New Area has been marked out by China's State Council as a new breed of economic zone. It will not only invigorate the surrounding Bohai region of northeastern China, but also test new reforms in the financial services sector.

Speaking at a conference to promote the Binhai development, Vice Premier Zeng Peiyan promised a series of as yet unannounced "experimental schemes" for the development of the 2,300-square-kilometer zone. He said Binhai would host pilot financial service reform programs in "venture capital, foreign exchange administration and offshore banking".

Dreaming of Pudong

Lapped by the sea 50 km from downtown Tianjin, the Binhai New Area could yet be the Pudong of Tianjin, boasting high-value manufacturing and cutting-edge financial services.

By offering incentives and low-cost land Binhai will help the comparatively unglamorous Bohai Rim suck investment into the north and rival the Pearl and Yangtze river deltas, both southerly dynamos of the Chinese economy.

The Bohai Industry Investment Fund was announced earlier in the year, with approval to spend up to US$2.5 billion, 80% of it in the Tianjin region. Early investors in the fund included the National Social Security Fund, China Life and China Post.
From Tianjin, goes the logic, investors can also tap the market of populous northern China. But with a sea connection to South Korea and a capacious airport, Binhai will also serve as a gateway to Northeast Asia, promised a circular issued in mid-2006 by the State Council.

The area, the document said, will become "a northern door open to foreign trade, a base for high-level modern manufacturing and R&D conversion [and] a northern center of international aviation and logistics."

So far there's been plenty of investor approval, notably from Bank of Beijing, which opened a Tianjin branch to service small- and medium-sized enterprises looking to expand in the northeast.

"Given the close economic and geographic relationship between Beijing and Tianjin, it is natural for us to choose this neighboring port city," said Yan Bingzhu, chairman of the bank, on announcing the opening. "We are very optimistic about the future of the Binhai New Area ? as a gateway to North China."

UK-based Standard Chartered chose Bohai bank – which became China's first new bank in a decade when it was established in February 2006 – as the first Chinese lender worth taking a stake in.

The bank, which plans to build beyond Tianjin into the Yangtze and Pearl river deltas, was a good investment choice, says Lyn Kok, manager of Standard Chartered's Beijing branch.

"There is a lot of scope in the Bohai area for expansion."

There were more signs of investor confidence in the rise of the Bohai Rim with the debut of Tianjin Port Development, the operator of north China's largest seaport, on the Hong Kong Stock Exchange. It saw its share price surge 26% on an, at the time, somewhat sleepy bourse.

"Investors believe the company will benefit from the rise of the region," said Lai Wai-shing, head of Hantec Investment's research department.

Tianjin's rise can to a certain extent be linked to that of its mayor, Dai Xianglong. A former central bank governor, Dai was handpicked for mayor – which is a cabinet position as Tianjin is one of the four municipalities under central government control – in 2003.

Financial focus

Unsurprisingly, financial services have always loomed large in his ambitions for the city. However, he did meet with disappointment when the securities regulator rejected Tianjin's bid to set up a third Chinese stock exchange.
Yet interestingly, mayor Dai's old employer, the People's Bank of China, saw the city's proposal as "positive" for China's capital markets because of the liquidity it could open for get-ahead SMEs unable to meet the threshold of the SME board in Shenzhen.

"Tianjin would like to be the financial hub of North China," said Steve Tam, president of the American Chamber of Commerce in Tianjin. "There's a lot of banking heritage here. This was a sophisticated banking city twice before, in imperial times and during the period of foreign concessions."
Tianjin does indeed have a strong historical pedigree for business.

In China's imperial period, merchants from the northeastern provinces clustered here to ship and trade goods. Some of the older establishments, set up by Shandong businessmen, were reopened in the 1980s.

A sizeable Western business community which settled when Tianjin was open to foreign trade in the early 1900s is still visible on the roads twisting off the Haihe River.

A neoclassical building on Jie Fang Bei road, built in 1921 for the National City Bank of New York, today houses a branch of Agricultural Bank of China. More aesthetically minded executives are opening offices in 1920s-era red brick villas complete with Romanesque columned walls and double-groove windows.

Capital delights

But others prefer the comforts of Beijing. It's increasingly difficult to distinguish between the two on the dusty 90-km highway that connects them.

Stuck amidst the low-rise sprawl is a monotonous place to be on a Sunday afternoon, but manufacturer Rebecca Tan often makes the 70-minute journey in the company supplies van. Busy during the week in the company's office in central Beijing, weekends are her only chance to get down to the OED textiles factory in Tianjin Economic Development Area, in the heart of the Binhai zone.
Life and talent are both better in the capital, says Tan, whose 300 or so workers in Tianjin stitch and pack healthcare clothing which is designed and patented in Beijing. "It's easier to get semi skilled labor in Tianjin cheaper but there are many more English speakers in Beijing," explained the Hong Kong native.

Industry makes up over 55% of Tianjin's gross national product, mostly in machine building, chemicals and pharmaceuticals. Flushed with confidence after bagging the Airbus deal, Tianjin wants to be more than a manufacturing back yard of Beijing.

With Shanghai too costly and Beijing too crowded, Tianjin is a good compromise, especially for manufacturing.

"It's a port town," said Tan. "They want quality investors, no matter what the size." Investors are well attended to, she believes, with regular meetings of investor companies held to solicit opinions.

An issue of identity

The question is whether Tianjin's rise will be sufficient and sustainable enough to fend off the tightening embrace of Beijing. Tianjin's proximity to the capital, just as it has been its greatest asset, could also be its Achilles heel.

It will become either a sleeper town or a handy commute from the capital upon the completion of a 200-kph train that will shuttle passengers between the cities in just half an hour, 45 minutes shorter than the current travel time.

Caught in this balance, individual decisions grow in significance. Hainan Airlines is planning on running its short-haul subsidiary, Dazhonghua, out of Tianjin's Binhai International Airport, which so far has specialized in cargo traffic.

The airline has ambitions to become the country's biggest short-haul air carrier with 100 aircraft in five years, plans which are awaiting regulatory approval.

But will this be enough? By the time people throng the glass towers rising over Binhai and the first Airbus jets expected come off the assembly line in 2008, Beijing will be looking its best as the Olympics come to town.

Hardwired to a history that has seen it continually come third out of the big three cities, Tianjin may find that its destiny belongs with the capital.