Shanghai FTZ Leader Removed During Anti-Corruption Drive

The leader of Shanghai’s free trade zone abruptly left his position with the slow developing economic project in what is suspected to be part of a crackdown on corrupt officials in China’s largest city.

Dai Haibo, the executive deputy director of the free trade zone and the highest-ranking member of the project’s leadership with meaningful executive duties is said to have been suspected of violations party discipline. Dai also served as the Communist Party chief at the zone in Shanghai’s Pudong district.

In addition to his roles with the FTZ, the 52 year-old Dai is also deputy secretary general of the Shanghai government.

Anti-Corruption Campaign Comes to Shanghai

According to an account in the South China Morning Post, Dai still made an appearance at a government port conference on Friday, but his title as head of the free trade zone was not used. An announcement by official news agency Xinhua on Monday confirmed that Dai had been dismissed from his roles at the FTZ.

The fact that Dai is still appearing in public at least is a positive sign for him. Other government officials who under investigation for violations of party discipline – usually used as a codeword for corruption in China – have previously been held incommunicado for extended periods before announcements were made regarding their status.

Dai’s removal is the latest event in China’s anti-corruption drive, which moved its focus to Shanghai during July when a government investigation team set up camp in the city. Earlier this month Xinhua announced that several journalists and two PR executives were under investigation in Shanghai for coercing payments from businesses.

Earlier this year, President Xi’s anti-corruption team cut a broad swath through Guangdong province in southern China, including arresting the party secretary of Guangzhou on charges of “violating party discipline.” The clean up campaign has also taken out a number of party officials in Inner Mongolia.

Another Setback for the FTZ

Dai’s removal appears to be just the latest in series of disappointments for the free trade zone project, which was launched to great fanfare just less than one year ago.

Although originally heralded as a major step forward for economic freedoms in China, the FTZ has been largely disappointing, as its promised liberalisations of business licensing and operations have failed to materialise for most companies.

Leading economists such as Derek Scissors of the American Enterprise Institute dismissed the top-level project as a “magician’s trick” and former Morgan Stanley economist Andy Xie characterised the zone as a cynical play on the local property market, rather than a serious attempt at economic reform.

For investors on the ground who once hoped for greater freedom to open and operate new businesses in the zone, these liberties have largely failed to happen. Even after the government in July announced a simplification of the “negative list” which determines which sectors are open for development in the zone, the major benefactors of this limited liberalisation appear to have been luxury yacht builders.

Now with its day-to-day leader under a cloud, the Shanghai Free Trade Zone will face even a greater challenge in trying to make progress toward liberalisation and even just staying relevant.