Editor’s Note
This article revisits a pivotal era of Shanghai’s development in the 1990s, highlighting how the city’s landmark projects and economic transformation were propelled by the broader national drive for reform and opening up. It serves as a historical reflection on the concerted efforts that shaped modern Shanghai.
The 1990s was a period of unprecedented rapid economic development and dramatic urban transformation for Shanghai, hailed by international opinion as the “Shanghai Speed” and “Shanghai Miracle.” The Shanghai Diamond Exchange, from its conception to its opening, spanned the entire 1990s, taking nearly a decade. This work was advanced under the leadership of the Shanghai Municipal Party Committee and Municipal Government, with comrades such as Huang Ju, Xu Kuangdi, and Zhao Qizheng playing key roles. The Pudong New Area Administrative Committee, the Municipal Planning Commission, the Municipal Commission of Foreign Trade and Economic Cooperation, the Municipal Foreign Investment Commission, the People’s Bank of China Shanghai Branch, Customs, and other departments all cooperated fully, undertaking a substantial amount of solid groundwork. In the autumn of 1996, the preliminary work for the Diamond Trading Center project entered an intensive phase. By then, I had been transferred to work in central government agencies, so I can only provide a brief review of the early stages of the project’s preparation.
Shanghai was relatively early among Chinese cities in starting to build domestic factor markets and bulk commodity trading markets. For example, in May 1992, the Shanghai Metal Exchange, built in cooperation with the former Ministry of Domestic Trade, launched copper futures trading; later, there were the Shanghai Grain and Oil Exchange, launching grain and oil trading, and the Shanghai Building Materials Exchange, launching rebar and wire rod trading. These were all quite successful, and later these exchanges were merged into the Shanghai Futures Exchange.
When the municipal government discussed the planning and specific options for financial market construction back then, we emphasized the principle of starting with the easier tasks, building on existing foundations and conditions, and accumulating small steps into big strides. For instance, under conditions where the capital account was not fully open, we first promoted the construction of the foreign exchange market. Because Shanghai already had the Shanghai Foreign Exchange Adjustment Center, although the trading scale was still relatively small, after several years of operation, it had preliminarily established a certain foundation in technology, rules, and market environment. Further enriching and enhancing the functions of the Shanghai Foreign Exchange Adjustment Center was also supported by relevant central departments. In mid-1993, when the People’s Bank of China considered establishing a nationally unified interbank foreign exchange market, Shanghai naturally actively pursued it. To create conditions, we first mobilized the Aerospace Bureau located on the Bund to relocate its office building. Shanghai offered a preferential price and gave the building at No. 15, the Bund, to the People’s Bank of China. On April 18, 1994, the China Foreign Exchange Trade System (CFETS) opened, becoming Shanghai’s first national-level financial factor market.
Apart from the foreign exchange market, what else was relatively feasible? After research and consideration, we believed that gold and diamond trading markets could be key focuses. Regarding diamonds, compared to gold, they have a smaller volume but higher value. With China’s economic development and the gradual enrichment of its people, the demand for gold and diamonds was bound to grow continuously, making the prospects for building gold and diamond trading markets promising. Consequently, Shanghai simultaneously initiated the preparation for establishing both a gold exchange and a diamond exchange.
In September 1993, the European Capital of Culture event was held in the port city of Antwerp, Belgium, with “Shanghai Week” as an important component. As a sister city of Antwerp, the Shanghai Municipal Government sent a friendly delegation led by Mayor Huang Ju to visit Antwerp. I was the Director of the Municipal Planning Commission at the time and also participated in this visit. Our schedule in Belgium was very tight, with only a two-day stay. Comrade Huang Ju specifically proposed to visit local diamond trading and diamond processing projects because Antwerp has a very developed diamond trade and world-class diamond processing industry. Through this investigation, we gained a deeper understanding of diamond trade and processing, and a basic grasp of the status, rules, and development patterns of the world diamond industry.
After I became Vice Mayor of Shanghai, from June 29 to July 10, 1995, I led a delegation including Chen Zhengming, Deputy Director of the Municipal Commission of Foreign Trade and Economic Cooperation, and Cao Hengli, Director of Shanghai Customs, to visit Israel and South Africa. A key focus of this trip was to investigate projects related to diamond trading and processing.
South Africa is the world’s largest diamond producer, with high processing levels and large trading volumes; Israel does not produce diamonds, but its advanced diamond cutting technology has made it a globally renowned diamond processing hub and trading center. In these two countries, we conducted in-depth investigations into the diamond processing and trading industry chain, particularly gaining detailed understanding of diamond import-export procedures and related formalities.
The Pudong New Area was the host unit for the Diamond Trading Center project, so internal affairs related to the project were then under the responsibility of Vice Mayor Zhao Qizheng, who was also the main leader of the Pudong New Area at the time. I provided assistance from the perspective of the municipal government’s functional responsibilities. Matters involving macro-control, finance, import-export, and other areas beyond Pudong’s authority were coordinated through meetings I convened. The most memorable municipal government special office meeting I recall was held on September 11, 1995, jointly convened by Vice Mayor Zhao Qizheng and myself.
At that meeting, a consensus was also formed: The Shanghai Diamond Trading Center project would play a significant role in perfecting and leveraging Shanghai’s financial and trade functions and was a project of strategic importance; Shanghai needed the strategic vision and sense of urgency to compete with other Asian countries and cities potentially vying for this project and should actively facilitate it; it was necessary to refer to international practices to research and resolve policies related to customs, finance, taxation, industrial and commercial administration for this project. For policies that might require support from relevant central ministries and commissions during implementation, it was necessary for relevant departments to explain the situation to the respective central ministries and seek support when needed.
The meeting concluded that this project could basically operate under the policies of the Pudong New Area and the Waigaoqiao Free Trade Zone. The Diamond Trading Center could be regarded as an extension of the Waigaoqiao Free Trade Zone and managed according to its policies. Later, Cao Hengli, Director of Shanghai Customs, suggested that the phrase “regarding the Shanghai Diamond Trading Center as an extension of the Waigaoqiao Free Trade Zone” should not be included in the meeting minutes. This opinion was reasonable because the central government had clear definitions regarding the area and policies of the Waigaoqiao Free Trade Zone. Rashly proposing such wording could have negative effects and easily cause misunderstandings, especially among other provinces and cities. Flexible approaches could be adopted under the premise of adhering to principles, such as establishing a public bonded warehouse within the Shanghai Diamond Trading Center and managing it according to relevant bonded policies.
In addition to customs management issues, regarding financial management, the meeting agreed to allow foreign banks to set up offices within the Diamond Trading Center, which could be handled according to policies for registering and establishing foreign banks in the Pudong New Area. Regarding gold and silver management, since gold and silver were controlled by the People’s Bank of China at that time, if the Diamond Trading Center engaged in processing diamonds, gemstones, and jewelry, it could start with platinum jewelry processing and expand to gold and silver jewelry processing when conditions matured. Regarding project approval, the meeting authorized the Municipal Foreign Investment Commission to approve the Shanghai Diamond Trading Center project.
Furthermore, the meeting agreed in principle to invite World Federation of Diamond Bourses President Eli Izhakoff to visit Shanghai in the name of municipal leaders to further discuss and implement the project. After this meeting, Mayor Xu Kuangdi personally wrote to Izhakoff inviting him to visit Shanghai. In late August 1996, a week before I left Shanghai, Eisenbeck, President of the Israeli Eisenbeck Group, visited Shanghai and insisted on meeting me, perhaps to make up for not meeting during our visit to Israel. At that time, we had a fruitful discussion on intentions to strengthen bilateral economic and technological cooperation.
Looking back, aiming to build a financial center, Shanghai utilized existing conditions as much as possible, sought support from all parties, and established multiple factor markets including the Shanghai Diamond Exchange. It can be said that Shanghai seized a rare historical opportunity, creating a situation and laying a foundation for Shanghai to become a financial center.