Economic center of China-Shanghai

What more can be said of perennial mainland favorite Shanghai? With a sometimes gritty and rather colorful 700 years of embellished history behind its rise as one of East Asia's international financial centers and mega-metropolises, the city evokes all the feelings of nostalgia and excitement that market-based economy can.

Since China's reform and especially since the 90's when Shanghai implemented the strategy of opening up and developing the Pudong area, the city's economy, social structure, and appearance have all undergone huge changes and the stately Pearl Tower now presides, not just over the Bund and the Huangpu River, but over a vast commercial giant stretching out in every direction.

The city's cosmopolitan flavor originates from its historical role as an early entry point into the mainland markets. Foreign companies have been doing business here for decades, thus providing a feeling of stability and comfort for an increasing number of foreign firms seeking a Chinese mainland presence. The city is host to the Asian corporate headquarters of over 130 multinational companies and/or conglomerates, with 45 of them setting up in the new Pudong area.

Shanghai is truly a city of firsts in China. After China's accession to the WTO, Shanghai became the first mainland city to open up all areas of retailing, banking, insurance and telecommunications to foreign investment. Shanghai continues to deepen its economic reform process and has accelerated market access and trade programs. From 1992 through 2006, total GDP has experienced double-digit growth. By 2006, GDP reached RMB 1.3 trillion ¨C yes, that's right ¨C 1.3 trillion RMB, an increase of 12% over the previous year and which ranked Shanghai No.1 among China's big four municipalities. Expectations are; that by the end of 2007, per capita GDP in Shanghai will be US$7500, while at the same time, the rate of unemployment will be between 3%-5% and inflation between 2%-4%. Total investment in fixed assets reached 392.51 billion RMB, up 10.8 % from the previous year. GDP gains over the past 11 years are shown below:

Economic Contribution Ratios by Sector
In 2006, the economic contribution ratio of the primary industries including agriculture, forestry, animal husbandry, and the fisheries was 0.9%; while manufacturing, the value added sector and construction combined totaled 48.5%; and the tertiary sector made up 50.6% of total economic output.

Foreign Trade and Cultural Ties
Shanghai's burgeoning exhibitions and conferences sector is one of the city's greatest tools in promoting the formation of an international marketplace and seeding interest from companies seeking to do trade with China. The exhibition, conference and convention industry experienced an amazing growth rate of 30% in 2006, coming on the heels of a string of major world-class commercial and political conferences convening in Shanghai in recent years, such as the Fortune 500 Forum, the APEC Summit, the Shanghai 5 Summit, and the Annual Meeting of the Board of Governors of the Asian Development Bank to name a few.

Shanghai will also play host to the 2010 World Expo and is sure to set several new milestones for the event. For instance, it is the first time the Expo will be held in a developing nation. Furthermore, with its rising international prestige and an investment of over US$3 billion, Shanghai has made it a priority to hold the largest Expo in terms of space and visitors in the history of the event.

Shanghai enjoys friendly relations, regular cultural and academic exchanges with more than 66 cities in 50 countries world-wide and added Kazakhstan, Bulgaria, Portugal and Sri Lanka in 2005 to its growing list of now 55 countries that have established consulates in Shanghai.

City's Strategic Industries

Shanghai has already developed a comprehensive industrial structure and is currently furthering the development of its six pillar industries, two primary resource industries, four high-growth industries, as well as three urban industries. The six pillar industries are IT, finance, trade, the automotive sector, equipment manufacturing, and real estate development; the two primary resource-based industries are petrochemicals and steel; the four high-growth areas are optical-electronics, software, modern biosciences, and advanced materials; and the urban industries are urban manufacturing, urban tourism, and urban agriculture. In recent years, Shanghai¡¯s tertiary sector has been the most dynamic and has developed rapidly.

Economic Output of Shanghai's Six Pillar Industries (2000 and 2005)

Year

2000

2005

Total Value Added (billion RMB)

191.9  

398.1

Information Industry

33.8 

109.8

Financial Industry

60.3   

67.5

Business Trade Industry

43.1  

84.1

Automobile Manufacturing

16.6    

31.1

Equipment  Manufacturing

13.0  

39.9

Real Estate Industry

26.3   

67.6


Output as a Percentage of Total GDP of Shanghai's Six Pillar Industries
(2000 and 2005)

Year

2000

2005

Value Added Industries Percentage of Shanghai GDP (%)  

40.2    

43.5

Information Industry

7.1       

12.0

Financial Industry

12.6

7.5

Business Trade Industry

9.0

9.1

Automobile Manufacturing

3.5

3.4

Equipment  Manufacturing

2.7

4.4

Real Estate Industry

5.5

7.3


Foreign Trade & Foreign Direct Investment (FDI)

Shanghai's foreign-invested enterprises have by and large been encouraged by their own results in China and many continue to re-invest and make additional investments to improve their stakes and expand according to the country's vast market potential, its availability of a talented labor pool and favorable production cost ratios. According to statistics, during the 7-year period from 1999 to 2005, Shanghai foreign-invested enterprises increased their investments by a total of US$27.18 billion, amounting to an average increase of US$3.88 billion per annum. A full 30% to 50% of contracted foreign investment each year was as a result of additional capital in-flow from existing Shanghai-based foreign investors.

In 2006, Shanghai approved more than 4,060 FDI projects involving foreign capital of some US$14.6 billion, an increase of 5.4%, with actualized capital amounting to US$7.12 billion, an increase of 3.8%. There were 348 FDI projects with investments of over US$10 million, up 13.4% from the previous year.

In 2006, the major countries and regions that invested in Shanghai are shown as follows .

Top 7 Countries and Regions Invested in Shanghai£¨2006£©

Number

Country/Region

FDI (billion USD)

 

Total

112.3

1

Hong Kong

31

2

Virgin Islands

23.7

3

EU

17.6

4

Grand Cayman

13

5

Japan

11.6

6

U.S.A.

7.8

7

ASEAN

7.6


In 2006, Shanghai ranked No.1 in the utilization of FDI big four municipalities. The comparison of the utilization of foreign investment is below:

Shanghai has the greatest number of multinational companies out of cities on the Chinese mainland. By the end of March 2006, there were 133 corporate headquarters established in Shanghai by multinationals. Among them, there are 41 of the world's Fortune 500 enterprises including GE, GM, Exxon Mobil, Intel, Bayer and BASF to name a few. Shanghai multinationals largely focus on the chemical, electronic, light industry, automotive, mechanical, real estate, and infrastructure sectors. There are 20 multinationals in the chemicals sector alone, accounting for 15% of the total amount. Additionally, by the end of March 2006, there were 177 R&D centers established by international firms in Shanghai, among which there were 62 U.S. companies, 30 EU companies, 32 Japanese companies and 53 companies from other countries and regions mainly focusing on R&D in the electronics, bio-pharmaceutical, automotive and light industry sectors of the marketplace.