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Powerful Backer for China’s New Manhattan

Keith Bradsher | The New York Times
Tuesday, 20 Nov 2012 | 12:54 AM ET

China is full of big bets that the country's breakneck economic growth will continue apace, but few are bigger than the vast Yujiapu financial district here.

Sarmu | Flickr | Getty Images

Zhang Gaoli, the Communist Party secretary of Tianjin, at the 18th Party Congress on Friday. He is closely associated with the district project.

Nicknamed China's new Manhattan, the district comprises at least 47 skyscrapers being built on desolate coastal salt flats 100 miles southeast of Beijing. Financed by huge loans from state-owned banks, the district is an immense public works project, and is closely associated with Zhang Gaoli, the little-known Communist Party secretary of Tianjin who joined the new seven-member Politburo Standing Committee last week at the end of the 18th Party Congress.

Mr. Zhang has emerged as the man expected, after approval by the National People's Congress in March, to handle day-to-day management of the Chinese economy. He won out over Wang Qishan, who has a much deeper background in economic and financial policy making and was seen as likely to clash with and perhaps even overshadow the incoming prime minister, Li Keqiang. Chinese leaders have not forgotten how Zhu Rongji, with a similarly deep background, managed to dominate economic policy making from his position as executive vice premier in the mid-1990s.

As the Yujiapu project makes clear, Mr. Zhang has been a defender of huge government-guided investments, an approach that very much fits the mold of ambitious party officials eager to get ahead within the existing power structure. At the same time, say experts and people who know him, he has cultivated an image as a stern bureaucratic taskmaster, a politician who can get things done by working with powerful business interests rather than challenging them.

(Read More: From China's Great Wall to Great Hall: "We're Not That Interested")

"He's a very strong guy," said Jean-Luc Charles, the general manager of Airbus's assembly plant here for the A320 jetliner, who had nothing but praise for Mr. Zhang. "He sets a target and people run."

But Mr. Zhang also has some surprising characteristics. In Tianjin, he has pushed to expand retailing and other services as a way to create jobs beyond construction and manufacturing. He also is an advocate for firm environmental and labor standards aimed at improving the lives of ordinary Chinese.

After a series of increases during Mr. Zhang's tenure, the city's minimum wage is now 4 percent higher than Beijing's — even though Tianjin is considerably poorer over all. And while Tianjin cracked down on labor protests in the summer of 2010, the municipal authorities have since set up a trade union for migrant workers, who usually have few legal protections.

The migrant workers' union "negotiated a reasonable deal for sanitation workers in the city," said Geoffrey Crothall, the spokesman for China Labor Bulletin, a nonprofit group in Hong Kong that favors the establishment of independent unions in China.

Tianjin residents described two street protests here in April, one against a $1.7 billion expansion project at a chemical plant and the other against a real estate developer who was accused of absconding with apartment buyers' deposits. The authorities were quick to negotiate compromises in both cases, suspending construction at the chemical plant, even though it was being built by Sinopec, one of the largest state-owned enterprises, while tracking down the developer and requiring restitution. They did not resort to calling riot police to disperse the protesters, as municipal leaders have sometimes done elsewhere in China, residents said.

Tianjin has adopted many Western pollution regulations and in some cases tightened them further. Air and water emissions from the Airbus factory here are monitored by pollution equipment that is connected around the clock to government monitoring computers.

It is not clear, though, whether these policies reflect a personal commitment by Mr. Zhang to progressive social policies or his penchant for setting rules and making sure people follow them. Perhaps both.

"Zhang is very strong with all the regulations — do it in accordance with the regulations and no joke," Mr. Charles said.

Mayor Huang Xingguo of Tianjin, the second-ranking official in this city of 13 million after Mr. Zhang, cited the city's many parks and its air quality — though by some estimates it is only marginally better than Beijing's — at a news conference in Beijing late last week during the party congress.

(Read More: Changing China: The New Leaders)

At the same time, he added a commercial note that captures the tone of the city's administration: "We hope you come to Tianjin to buy houses."

Selling real estate is crucial to the deeply indebted city. Total credit issued in Tianjin grew faster than anywhere else in China during the economic stimulus program in 2009 that led the country quickly out of the global financial crisis. Now the question is whether city-owned enterprises can sell or lease enough of the buildings they are erecting to avoid a fiscal disaster.

Jones Lang LaSalle, a global real estate services firm, estimates that available commercial real estate in central Tianjin will double in the next four years. In the new financial district 30 miles from downtown Tianjin, the first dozen office buildings will have the combined floor space of four Empire State Buildings. Many Hong Kong developers with investments here are worried about a glut of office space.

Another worry here is that most of the construction is on coastal salt flats that are scarcely above sea level, and could be vulnerable if climate change leads to increases in sea level or typhoons with large storm surges. After deluges last spring, "you had to roll up your pants and take off your shoes to walk across the street," a local resident said.

But such concerns are taking a back seat to the more pressing task of filling empty buildings in the district. The local operations of big state-owned enterprises, like the Agricultural Bank of China, may be pushed by the municipal government into leasing lots of space, said Michael Hart, the managing director of the Tianjin office of Jones Lang LaSalle.

The new financial district is not quite the unoccupied desert that it appears. Mr. Zhang personally ordered two little-known tax breaks that have led as many as half of the country's private equity funds to transfer legal residency and some offices to Tianjin, either to the nascent financial district or areas nearby, finance experts said. Mr. Zhang reduced business taxes for private equity funds based in Tianjin and nearly halved the income tax rate for limited partners in those funds.

The tax breaks have not only lured private equity funds to Tianjin but also may have yielded valuable political advantages. Princelings, the sons and daughters of current and former senior Chinese officials, have flocked to the private equity industry, using their formidable connections to secure valuable government contracts and low-rate loans from state-owned banks for their investments.

Princelings have emerged as an increasingly powerful political force. Three of the seven members of the new Politburo Standing Committee are the sons of former Chinese senior leaders. A fourth member is married to a princeling and a fifth has a son married to a princeling. The princelings are close to former President Jiang Zemin, who played a powerful role in selecting members of the new Standing Committee.

(Read More: Why China's New Conservative Leaders Will Be Reformists)

Mr. Zhang and Mr. Li, the incoming prime minister, are the only two members of the new Standing Committee who are not directly linked to princeling families through parentage or marriage. (Mr. Zhang's daughter married the son of a Hong Kong glass manufacturing tycoon with factories all over China, including in Tianjin.) But Mr. Zhang, who earned his bachelor's degree in statistics and started his career in the oil industry, has succeeded in assiduously building close personal ties to Mr. Jiang, according to a Chinese business leader with extensive top-level contacts in the Communist Party. He insisted on anonymity because of the political sensitivity of discussing top officials.

When Mr. Jiang visited Shandong Province soon after Mr. Zhang was made the governor there in November 2001, Mr. Zhang decorated the sites of each of his stops with large banners carrying quotations from Mr. Jiang, even covering signs honoring previous Chinese leaders.

This maneuver generated considerable discussion at the time among senior cadres over whether the banners were an astute political move or a sign of excessive obsequiousness, the business leader said. Mr. Jiang's subsequent support for Mr. Zhang's political career indicated that the banners had been a shrewd decision.

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