Shanghai star fading

Many cities have left it behind in terms of production, GDP and investments while energy shortages remain unresolved. Experts say a free flow of information is necessary, as well as a review of the prevalent development model that fails to protect the workforce and ignores the environment.

Shanghai (AsiaNews/SCMP) – Shanghai's economic growth is slowing down as its Gross Domestic Product (GDP) is overcome by that of other Chinese cities and it lags way behind Hong Kong and even Beijing as a financial hub. Sixteen years ago, the then president Deng Xiaoping predicted that the megalopolis would become Asia's premier financial centre. Now, its development model has apparently been gripped by a crisis.

The city does not feature among the top-10 list of fastest-growing areas and in the first half of 2006, fixed-asset investment grew by 9.5% compared to 2005, while 31.3% growth was recorded in areas experiencing substantial development. In the same period of 2005, the growth in Shanghai was 15.1%. In the first half of 2006, the city's GDP was 478.193 billion yuan (+12.6%), much less than the biggest provincial economies: Guangdong had a GDP of 1.14 trillion yuan (+14.4%), Shandong's GDP was 1.02 trillion yuan (+15.3%) and Jiangsu's was 987.12 billion yuan (+15.4%). The economies of most other coastal provinces expanded between 13 and 15%.

Guo Zhanheng, deputy head of the Zhejiang Provincial People's Government's Policy Research Centre, said: "While the city has yet to become an international financial centre, it has lost its former advantage as a leading manufacturing hub."

Experts believe higher labour and land costs and energy shortages have made the city less attractive to investors and less competitive compared to emerging realities like neighbouring Suzhou and Hangzhou. Even development of the tertiary sector has slowed, growing by a mere 11.7% in the first six months of 2006, less than the overall GDP growth. Before the 1980s, Shanghai was unchallenged as China's leading manufacturing area. But now, said Guo, "the city has only a few brand-name products now and has lost the lead to many provinces, including neighbouring Zhejiang and Jiangsu."

Anyhow, Shanghai never grew to the dimensions of an international financial hub, which would be characterized by a concentration of financial institutions, banks and big enterprises, as well as stock exchanges that influence the regional economy.  Although Shanghai is home to the headquarters of 144 multinational firms (more than any other Chinese city), it is far behind Hong Kong, which has about 7,000.

Beijing is the base of nearly all the main banks, insurance companies and financial institutions of the country, with branches of around 300 leading firms and trade accounting for 90% of national credit, 60% of banking assets and 65% of national insurance assets. In 2005, banking and financial assets in the capital amounted to 14.1 trillion yuan, or 44% of China's 32 trillion yuan in financial assets. Shanghai garnered only 10% of the national total at 3.2 trillion.

Among other things, experts maintain that state control prevents free flow of information, which is essential to the functioning of a free market: this is a major hurdlesstopping Shanghai – and Beijing – from ever becoming world-class financial centres.

Shanghai's stock exchange has also been struggling with years of crisis, compared to values at the turn of the century.

The difficulties experienced by the city are held to reflect the crisis afflicting the national development model, which for years has been based on increasing production without paying attention to energy and infrastructural needs, and without protecting production factors like the workforce. Economic growth alone, achieved at the cost of damage to the environment, urban quality of life, organization of services and energy sources, has ultimately led to slower and most costly development in human and financial terms.

Zhou Zhenhua, deputy head of the Shanghai Municipal People's Government Development Research Centre, said the current Chinese leadership "has developed a strategy to achieve a more balanced development among all regions now, rather than the strategy of allowing some coastal regions to develop first adopted during 1980s and 1990s." The former strategy was partly down to the then president Jiang Zemin and premier Zhu Rongji, both pushing to make Shanghai a powerful hub.

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