ShanghaiPowerhouses losing steam – the WTO-column
(later also at Chinabiz)
China’s stellar growth might fascinate the outside world; when you are living and working inside this economic miracle you know that it is not only an easy way upwards. The winners of last century, like Volkswagen, might not necessarily make into this century. The successful SMS-services of two years ago do have a much harder time to generate a profit.
Not only companies and industries might lose the position they cherished for a while, fast changing realities change even the position of whole regions. Especially the former powerhouses Guangdong and Shanghai are heading for more troublesome times as the central government is shifting its attention more to other regions, away from the already industrialized centers.
The clearest signal that not all is good came from the party-secretary of China’s most prosperous province, Guangdong. Zhang Dejiang talked in closed meetings with Hong Kong law makers even about ‘crisis management’, a rather candid admission from a very high party official. He doubted that, considering the problems he faces, the Guangdong citizens might become “well off”, the official political target.
His speech, obtained by the Standard in Hong Kong, details competition from other regions, a deteriorating security situation and literally killing pollution as some of the province worst problems.
"Guangdong faces [serious] problems arising from our rapid economic growth,” said Zhang. “The land area is getting smaller. Water and air pollution is serious and getting worse. We are worried about the safety of what we eat and drink."
Interesting is to see with whom Zhang thinks his province is competing. He does not mention other Asian countries, but points at domestic competition.
"In the past, Guangdong pioneered economic reform in the mainland and was a model for other provinces. But now we face keen competition from the Yangtze River Delta and Baohai-Rim Region, especially the former which is growing at an intimidating pace."
While Zhang mentions later explicitly Shanghai, next to Zhejiang and Jiangsu provinces, Shanghai also is getting out of steam, writes the Financial Times on Thursday. “Shanghai is quietly losing its lustre as its economic drivers run out of steam and new leaders in Beijing look askance on the privileges bestowed on the city by the previous administration.”
With Guangdong, Shanghai suffers from a change in economic priorities by the country’s president, the paper says.
Mr Hu has focused attention on the impoverished hinterland at the expense of the prosperous coast, and left hanging persistent rumours that the top leadership of Shanghai might be replaced by outsiders.
Fearing that the transition to a services model would take some time, Han Zheng, Shanghai's mayor, announced in 2003 that the city would try to retain heavy industry and halt the hollowing out seen in many other commercial cities.
Yet, with its higher wages, more expensive land and energy shortages, Shanghai has found it hard to compete. Although several multinationals have moved their Asian head offices to Shanghai and retail chains such as WalMart and B&Q have helped the city record a 63 per cent rise in foreign direct investment into services in the first half of this year, manufacturing FDI fell 11 per cent in the same period.
In the long run, just for geographical reasons, both Guangdong and Shanghai are in a position where it would be very hard to lose out. But for sure, tougher times are ahead. Foreign investors should follow this change in policy, although it might learn a few new names and longer travel times.
