Profits and patriotism

So who wants to be a billionaire? Those pioneers who invest in China's far west could be some of the 10 richest men in Hong Kong, Premier Zhu Rongji told a delegation of SAR tycoons yesterday. In a sense he was preaching to the converted. Many of them are already on that rich list -- but could they get even richer as northwestern entrepreneurs?

Mr. Zhu can be forgiven a little hyperbole. SAR business leaders are a risk-taking bunch, but have reservations about the Go West venture. Any undertaking of this scale requires visionary enthusiasm from the top.

The more important question is, will Hong Kong firms stump up serious cash once the hype recedes? Privately, many are skeptical and rule out any notion of putting patriotism before profits. Still, no one should doubt Beijing's commitment to Go West. Developed properly, the region represents a huge source of wealth and natural resources.

The asymmetry of China's coastal-focused development is environmentally and socially unsustainable and Beijing knows that. What role the SAR can play is less clear.

As a financing center it is a conduit for local and foreign capital. Specifically, that means contract building of bridges, toll roads and property developments. Hotels are an SAR speciality and investment in power utilities is likely.

But on what terms? SAR firms will be looking for government- guaranteed rates of return and contract enforcement. That is understandable given the risks, but the provincial Investment Trust Corporation debacle reminds us that such guarantees can be fool's gold.

Hong Kong firms -- and the SAR as a whole -- prospered because they rationed capital on the basis of risk-adjusted rates of return. No one expects them to give up that discipline and nor should they.

Success in the West depends on provincial governments convincing hard-nosed entrepreneurs that projects are viable and contracts will be honored.

That may require Beijing to establish special economic zone- type conditions. The point is that maintaining strong commercial rigor is in all parties' best interest and might even make a few billionaires.

-- The South China Morning Post, Hong Kong