Shanghai: growing economy, consumer-oriented in emerging strategic sectors. The “city on the sea” will continue to develop
Shanghai, 上海 (literally “city by the sea”) recorded an increase of 6.8% GDP in the first quarter of 2017, a better performance than expected thanks to the recovery of industrial production and the continuous growth of the services sector. This is according to the statistical and development and reform authorities of the city.
Despite the slowdown in the growth of transactions and investments in the real estate market after the introduction of restrictions on domestic purchases, the economic development of Shanghai in the first quarter of 2017 was better than the 6.7% recorded in the first quarter of 2016, according to the Shanghai Statistics Office.
The city has always been one of the most important economic centers in China. Located on the Yangtze River Delta between two of China’s richest and most productive regions, Zhejiang and Jiangsu, Shanghai has developed a true ecosystem of entrepreneurship.
On the other hand, Shanghai’s name itself denotes trade. The port of the “city on the sea” is by volume of interchange, the largest in the world. It is easy to imagine how in the logic of Chinese leadership this city will be a decisive commercial junction used to strengthen the New Silk Road.
A financial center of excellence, the city is home to the 上海 证券交易所 or the Shanghai Stock Exchange. The service sectors have largely contributed to Shanghai’s economic growth, but the city is opening up to new production horizons.
“The data on the economic growth of the first quarter showed that Shanghai’s growth model has been oriented towards consumption, with the service industry, tech, and emerging strategic sectors that contribute most to growth”, stated Ruan Qing, deputy director of Shanghai municipal development and responsible for the reform of the Commission.
Industrial robotics grew by 87.5% and renewable energy cars by 29.3%, demonstrating that the emerging high-end industrial sectors are expanding rapidly.
Imports and exports also recovered from weak growth in 2016, with growth in 2017 of 13.2% for exports and 25.3% for imports. “Raw materials, including crude oil, coal, steel and iron ore are dominating imports, reflecting the recovery of manufacturing sectors,” said Tang.
The real estate market in Shanghai declines along with the average price of apartments
With regard to the real estate market, policies against speculation in the sector have a positive effect, and more will be done to support stable and healthy market growth, according to the authorities.
New home transactions in Shanghai fell 67.2%, while prefabricated house transactions declined 72%. Average house prices have been declining since March 2017, which saw a 0.1% month-on-month decline, Tang said.
Emerging sectors are driving consumption in Shanghai, as is the case with the main cities in China, but also consumer spending in general, and the continued recovery of manufacturing sectors.
Analysts have said that the economic growth of major cities reflects the general trend of China’s economic model moving towards a self-consumption scenario. The country is undergoing changes, including reducing overcapacity and supporting the growth of emerging sectors such as the production of high-tech and artificial intelligence.
“In general, conventional manufacturing sectors have recovered since November 2016, and the first quarter of 2017 has shown that consumption has undergone rapid growth, particularly in the areas of healthcare, food and beverages,” the Chair of China Galaxy Securities commented.
The leisure and sports industries also expanded rapidly in Shanghai. In the first quarter of 2017, sports and leisure consumption grew by 22%. Meanwhile, Beijing recorded 6.9% GDP growth in 2017, according to the city’s statistics office.
During the first quarter, it recorded 604.05 billion yuan (US$87.75 billion) of gross domestic product. Investment in real estate development fell by 7.2% for the first three months compared to the same period of 2016 to 62 billion yuan.
Pang Jiangqian, an office spokesman, said that the decline in investment in the real estate sector is mainly due to the reduction of investments in real estate projects for commercial use. Raw materials, including crude oil, coal, steel and iron ore are dominating imports, reflecting the recovery of manufacturing sectors.
Shanghai promotes ‘real economic growth’ towards innovation and greater openness to the market. Positive forecasts in the industrial and manufacturing sectors and in the emerging technology sectors
The Shanghai authorities have promised to encourage real economic growth by supporting innovation, entrepreneurship and market-oriented business conditions. “The growth of the emerging strategic sectors will represent 20% of the city’s GDP and will represent 35% of the value of Shanghai’s gross industrial output,” said Chen Mingbo, director of the Shanghai Commission for the Economy and Information.
“At one time it was discussed whether Shanghai, a metropolis, and a financial center, needed an industrial and manufacturing sector, the answer, we can say now, is yes: Shanghai needs manufacturing and industrial companies, and we are doing it in a high-value innovation optics, “Chen said.
The emerging strategic sectors include information technology, the production of intelligent equipment, biopharmaceutical and medical equipment, new materials sciences and environmentally friendly solutions.
Development goals by 2020: a value of nearly US$9 billion in the production of innovative technologies for various sectors
Shanghai will continue the development of projects worth about 60 billion yuan (US$8.8 billion dollars), including the creation of new electronic integrated circuits, the production of passenger jets and the manufacture of smart cars connected to the internet, Chen said.
By 2020, Shanghai will be the most populous city in China and the world, with at least 10 leading companies offering intelligent manufacturing systems solutions, 100 smart plants and 1,000 companies using smart manufacturing solutions, upgrading the city’s manufacturing sector be based on technology and innovation.
An important measure to be introduced is to reduce costs to allow companies to invest more in innovation, research, and development. This is what the Shanghai authorities have said. For example, when land is offered to industrial companies, the authorities have ensured that one-third of the 550 square kilometers of the city’s industrial surface goes to production and provides more leasing and land lease models.
“A smaller company can rent a parcel before becoming a large company that can afford the purchase, while flexible land use programs allow the manufacturing companies of the city to allocate more resources to the technological upgrade,” said Cen Fukang , deputy head of the urban planning and land use department of the city.
MORE ON THIS TOPIC