第8号 2005.2.1発行

By Stephen M. Harner

Shanghai, Failing to Become a Financial Center, Emphasizes Shipping and Trade Services Development

金融センターに成り損ねる上海 −海運と貿易サービスを強調−


During the week of January 17 Shanghai held its annual “two meetings” (两会):市政府人民代表大会.,市政治协商会.  On January 18 Shanghai mayor 韩正 delivered his government work report (政府工作报告) for 2004 and announced targets for 2005.  Though never explicitly admitted by Shanghai’s leaders, it was clear to analysts that Shanghai’s ambitions to become a financial center have been broadly frustrated.  In particular, the contribution of financial services to GDP has failed to achieve strategic plans.  Accepting reality, the government has begun redefine Shanghai’s strategy.  In place of financial services, the city hopes to develop ocean transport and port services as a major services pillar with the deep water facility of 洋山港 in Hangzhou Bay 杭州湾as the key project. 






Han Zheng’s 2004  Government Work Report and 2005 Targets 2004政府工作报告以及2005 目标)


The Mayor’s report told the story of a successful year for Shanghai’s overall development, as follows:

Ø        City GDP of Rmb 7440亿,up 13.5%.  2004 was the 13th consecutive year of double digit GDP growth for the city.

Ø        City financial revenues up 24.5%.

Ø        Over 608,000 new jobs created; registered unemployment at 4.5%, the first year of decrease in recent 10 years.

Ø        Increase in resident consumer prices 2.2%.

Ø        Increase in disposable incomes of urban and rural residents households of 12.2% and 10.2% respectively.

Ø        Total import/export trade passing through Shanghai: US$2825.8亿, over 1/4 of the total of China.  Exports from Shanghai of US$735.2亿, up 51.6%. 

Ø        Actual foreign FDI received: US$65.4亿, up 11.8% over 2003.


Mayor Han Zheng then outlined the government’s targets for 2005 as follows:


Ø        GDP growth of “about” 11%

Ø        Growth of financial revenues “higher than economic growth”

Ø        Registered unemployment of “about” 4.5%

Ø        Index of consumer prices of 103

Ø        R&D spending and environmental protection spending at 2.4% and 3% of GDP respectively

Ø        Energy consumed per Rmb 10,000 of GDP below the equivalent of 1.02 standard coal tons

Ø        Increasing of disposable income of urban and rural resident households of 10% and 8% respectively.


Industry Growing Faster than Services:  Adjusting the 三,二,一 Model


Other reports heard at the meetings were from the 市发展和改革委员会:《关于上海市2004年国民经济和社会发展计划执行情况与2005年国民经济和社会发展计划草案的报告》。  In this report, 市发展和改革委员会主任蒋应时reported:


Ø        2004 industrial value added increased 16.1%

Ø        Tertiary (service) industry value added increased 12.9%


The report suggested that the gap between growth in secondary industry and tertiary industry is narrowing.  But is it?  In fact, the gap is widening.  Indeed, what was not emphasized by Han Zheng or other Shanghai officials is that, in comparison with targets included in its 15 year development plan, as well as its “vision,” Shanghai is failing to achieve the transformation to a modern “service” oriented economy, the “三,二,一 Model”.  Rather, it is becoming more relatively concentrated on manufacturing and heavy industry.


The Biggest Disappointment:  Financial Services

According to Shanghai’s 15 year plan, announced in 1999, the value added in the financial services industry should grow by an average of 15% a year.  By 2005 the contribution of financial services to GDP should be 18%.  In fact, since the start of the 15th plan that share of financial services in Shanghai’s GDP has been declining.  In 2003 the share was only 10%, which is 5 percentage point below the average level of the 1995-1999 9th five year plan period.


The truth is that financial services has failed to achieve the level of contribution expected by Shanghai’s planners.  In 1992 the Central government decided to establish Shanghai as a financial center.  This decision underwrote the establishment of the Shanghai Stock Exchange, the China Foreign Exchange Trading System, the Shanghai Metals and Commodities Exchanges. 


But since the Asian financial crisis in 1997, progress in developing Shanghai’s financial base has been very slow.  As some Chinese newspapers described the problem:  后有狼,前有虎”.  The wolf “” in the rear is the overly conservative and restrictive regulations that have limited the development of China’s financial market.  The tiger “” in front is the vested interests of Beijing and Shenzhen governments and the banks, securities and insurance companies located in these places. 


In reality, Beijing has also been pursuing the goal of becoming a financial center and, viewed objectively, it is much more successful than Shanghai.  The head offices of China’s main banks, insurance companies, and several securities and asset management companies are all in Beijing.  Of course, the Central Bank is also headquartered in Beijing, as are the regulatory agencies for the financial industry.  Most of the financial companies have relocated to 西城区-金融街 (Finance Street).  This is a real estate development that might be considered Beijing’s 陆家嘴.  But unlike Shanghai’s 陆家嘴, Finance Street is really a center of financial services activity.

陆家嘴- Primarily a Real Estate Play


Indeed, if the role of 陆家嘴 in Shanghai has been to become the physical location for Shanghai’s development as a financial center.  It must be said that it has not been successful, at least not yet.  What 陆家嘴 has increasingly become is an over-crowded high end residential development.  Viewing all of the high rise apartment developments, an observer of 陆家嘴 is likely to ask where is the room for new office projects?  It could be that Mori Co.’s 环球金融大厦, if ever built, will be the last major office project. 


Hoping to Be a Shipping Center 国际航运中心建设


上海转身” declared a headline in the January 20 21st Century Business Herald 21世纪经济报道).  What the newspaper reported was the relative down-playing in Mayor Han Zheng’s speech of the idea of Shanghai becoming and financial center, and the repeated emphasis on a new theme:  that Shanghai should establish itself as China’s primary shipping and cargo handling center with particular emphasis on the 洋山港 project in 杭州湾 as well as Pudong airport.  Thus, in his speech, Han Zheng appealed as follows:  “全面推进上海国际航运中心建设,按期建成洋山深水港区一期工程和东海大桥工程并投入运营,完成长江口深水航道整治二期工程,显著提升国际航运中心功能和能级”。


Can Shanghai develop itself into a global transport center?  Of course it has some advantages, but it also faces challenges. “后有狼,前有虎” might also describe them.




The author is president of S.M. Harner and Company, a financial services consultancy, and a ten year resident of Shanghai.

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