china business weekly
Shanghai - a model for the future
One side effect of the recent worsening of Beijing's air pollution is the likely attraction of more investors to booming Shanghai. Although Shanghai, like Beijing, struggles with pollution due to nearby industrial development, its growth is increasingly concentrated on the cleaner services sector, which already contributes 60 per cent of its economic output.Big IT names such as Motorola and Microsoft are setting up research facilities in Shanghai, which is seen as younger, flashier and more Westernised than its northern counterpart.
Most recently Shanghai authorities said Apple would open a multimillion dollar R&D centre there, which will further boost its services sector.
However, Shanghai still falls well short of Beijing as a magnet for big global companies. Beijing is now second only to Tokyo in the number of Fortune 500 companies with country headquarters there.
According to the magazine's 2012 list, Tokyo has 49 and Beijing 44. In economic growth, there is little to separate Shanghai and Beijing. This year Shanghai is targeting growth of 7.5 per cent, while Beijing's target is 8 per cent. However, since Beijing has suspended operations at over 100 factories and ordered steel and chemical plants to cut back in response to the surge in air pollution, this may affect its ability to reach its target.
An important influence on Shanghai's future growth is its plan to establish a free trade zone that will help to cut the cost of trade and improve economic efficiency. This will build on the Waigaoqiao Free Trade Zone, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.
The zone will integrate three
ports and three areas on 22.76 square kilometres of land. It will encompass imports and exports,
customs supervision, foreign cur-rency management and inspection and quarantine. Among other measures, businesses will be able to establish foreign-denominated offshore bank accounts and financial leases, which will further support Shanghai's financial credentials. Partly as a result of the integrated free trade zone, Shanghai aims to attract 150 more multinationals to set up their Asian regional headquarters over five years.
Shanghai now ranks as the sixth-leading financial centre in the world behind New York, Tokyo, London, Hong Kong and Singapore. According to the Xinhua-Dow Jones International Financial Centre's Development Index, Shanghai also has the greatest potential based on indicators such as markets, economic prospects, services and regulatory environment.
Already Shanghai boasts the world's fourth-largest stock exchange by value and sixth largest by market capitalisation. It also has China's largest commodities exchange. The country's debt capital market is the second largest in Asia, just behind Japan. It is well on the way to achieving its goal of becoming a leading global international financial centre. Key reforms still to be implemented are financial transparency and full convertibility of the yuan, but they are coming.
Beijing and Shanghai will always be friendly rivals, and both cities have their distinct advantages.
Beijing is not only the seat of
government and big business,
but is also a centre of art, media and culture. Shanghai - where I live - is the home of finance and is the largest, richest and most cosmopolitan city in China. Both will play essential roles in building the China of the future.