Expertise in the Shanghai Financial Market

Giulia Dal Maso October 23, 2012

Giulia Dal Maso

The Pudong zoning pattern provides a privileged perspective from which to consider how the Chinese state articulates its territory. The Shanghai financial center in Pudong and its development as a zone also allows for an exploration of the conflicts between diverse understandings of ‘expertise’ held by different actors investing in the stock exchange. This analysis also focuses attention on the emergence of a contested space, in which labor subjects negotiate their expertise, and allows for an examination of if and how this expertise clashes with the type of expertise required by the state.

The Shanghai financial center is represented by the skyline of Pudong, an island located directly in front of the Bund on the east side of the Huangpu river. During the colonial period, Shanghai’s banks and financial institutions, including the first Chinese stock exchange, were located in the Bund. Pudong was previously a little-developed agricultural site, however in the last 20 years, it has become the symbol of the country in the global economy. The contrast between the two sides of the River reveals the new physical and symbolic rise of the Pudong area as a Special Economic Zone. This new urban development serves as the infrastructure for the creation of a hub that unites technological, logistical, and financial functions. Thus the physical transition of the zone into a broad multiple services complex was intended to attract capital investment and the recruitment of new, specialized, expertise in the high tertiary sector.


In this analysis I will problematize the role of the Chinese financial experts, arguing that they occupy a position that is “in tension”: on one hand the state needs to employ labour subjects who embrace the image of Shanghai as a ‘Global City’. That is to say, they have to be able to participate in and promote contemporary knowledge economies; they need to know the international role of the market; and they have to be flexible enough to move internationally. On the other hand, given the role of the Chinese state as an authority that conducts regulatory commissions for each type of practice within the financial system, Chinese experts must also behave as proper members of the ‘nation’ - technocrats in the institutions through which the state assigns to them certain rights and privileges.


As Sassen points out, even though finance is the most mobile and global sector, it is also the most bound to place; it develops through a constant combination of hyper mobility and capital fixing, which is not limited to national capabilities and infrastructure, but may also be found in cultures of interpretation. This is a crucial point in understanding the extent to which financial systems are complex environments which need to nurture a culture of interpretation, in order to mediate between national cultures and new global standards and norms. In saying this, I do not intend to suggest a clear-cut separation between the zone of finance and the rest of the socioeconomic sector, nor a drawing back of the state from the financial center as a zone. Instead, I want to suggest how the zone emerges as a new terrain for engaging intermediate actors, transcending the binaries between neoliberal market rationality and state-planned market regulation. In fact, although we have been accustomed to talking about the Zone as an exceptional model of regulations and norms, the following cases instead suggest that exceptionality lies in the ineffective implementation of jurisdiction.


This has been the case for every Special Economic Zone in China, starting with those established in the 1980s by Deng Xiaoping in Chinese central coastal areas such as Shenzhen, Xiamen and Shantou. At that time, the intentional decision to refer to “Special Economic Zones”, rather than “Export Processing Zones” (which at the time was more common in the rest of Asia), demonstrated the government’s intention to build a laboratory of capitalist jurisdiction that would allow foreign participation. While the EPZs were typically established for industrial development with foreign participation, the Special Economic Zones are, primarily sites of special jurisdiction, and only secondly physical zones; they serve as a laboratory for different kinds of production and labor regimes. In particular, Special Economic zones are, in the first instance, post-colonial, capitalist laboratories, set up to deal with foreign presence.


There is a long history of ‘laboratory’ experiments in China, for example, the so-called first Chinese modernization in the second half of the Eighteenth century [1861-1895], which caused a shift whereby foreign engineers involved in the shipbuilding and arms industry were pushed to become foreign entrepreneurs. This was accompanied by a second shift in which the imperial officers in charge of supervising this rising industry became a new public/private rich bourgeoisie. Later, in the Maoist period, distrust towards intellectuals and ‘experts’ resulted in the formulation of the ‘red and expert’ principle.


The process of governing is a never-ending process; the process of translating objectives into practice inevitably encounters resistances and failures, which in turn generate further initiatives. With this in mind, I would argue that even if some of these zones have always been considered areas of experimentation, we should instead refer to ‘areas of exercise’. For, while ‘experiment’ always implies a degree of control through a repeatable procedure and logical analysis of the results, ‘exercise’ suggests a series of activities and tests that are necessary to acquire experience, and which are always imperfect, unpredictable and contingent. Equally, the Special Economic Zone faces the same inevitable contingency, unpredictability that nevertheless extends to a national level.


Thus, the Special Economic Zone as ‘exercise’ better frames the origins of the Chinese financial market as a zone, and allows for an analysis of how its labor regimes engage multiple actors and norms. Specifically, it allows one to consider the practice of acquiring foreign expertise by sending Chinese students abroad through the formula of education ‘delocalization’, and how this is enabled by a series of governmental techniques aimed at fostering talents and bringing them back. Here, the actions of the State are aimed at producing ‘professional’ development experts, where these experts are not identified by the content of their knowledge, but purely because they studied abroad. If the acquisition of foreign expertise legitimizes and authorizes their participation in and support of the market, at the same time this acquisition must be kept at distance. In fact, once the talents have returned, they are constrained within a hierarchical structure and a techno-administrative apparatus that tries to re-engineer and re-domesticate their expertise according to its own logic or view of the market.


In addition, the division of international and domestic stock-shares creates systems of differential administration. The international system is arranged for foreign investors and foreign investments. Initial investigations reveal that its rationale is precisely to be a laboratory to catch up with the financial market. The second system is exclusively for domestic investors. These individual, dispersed players - known in Chinese as sanhu - invest through different channels. In recent years, the process of digitalization and increasing use of the Internet has allowed these small players to escape direct control of and surpass the physical, established places of the market and to recreate a new organizations. The sanhu are known to embrace stock fever. Stock fever needs to be understood as a massive social phenomenon that, because of its size, disturbs the market because it acts “irrationally”, but which is also necessary to maintain the movement and circulation of stocks.


To conclude, the scenario sketched out above illustrates the constant attempt of the state to separate and confine different kinds of knowledge, which are in tension and which overlap, and establish bounded zones of expertise. These conflicts and tensions over the concept of expertise can be seen at different levels. The first is at the level of the institutions: state financial institutions desperately demand highly qualified financial players to be able to play on a transnational scale but at the same time they ask for ‘ethnically Chinese people, loyal to the Party’.


In the financial market as a zone, a border is continually drawn between multifarious tensions: the claim for independence and autonomy through the practice of their expertise by the returnees; access to the Internet and the use of low-end information as informal expertise by the sanhu, which provides an escape from the direct control of state financial institutions; and a constant intertwining of the influences of formal and informal expertise against the trends of the market.