Shanghai, located on the Yangtze River Delta in East China, is one of the four municipalities under the direct control of the central government in China. The city borders the Jiangsu and Zhejiang provinces in the west with Hangzhou Bay lying to its south.
As the financial center of the country, Shanghai occupies a central location along China’s coastline. It is also an excellent sea and river port, boasting easy access to China’s vast hinterland. Shanghai is also one of the world’s busiest ports, ranking first in terms of cargo throughput in 2006 and handling a total of 537 million tons of cargo during the year. In terms of container traffic, it was the third busiest port in the world after Singapore and Hong Kong in 2006. The city has two central business districts - Lujiazui on Pudong, and the Bund and Hongqiao areas in Puxi.
In 2006, Shanghai’s economy maintained a rather stable development. The city’s GDP amounted to RMB 1,029.7 billion (US$131.2 billion), 12.0% more than that of 2005. Shanghai’s tertiary industries contributed to 50.6% of the city’s total GDP. As seen in the figure, the industrial and service sectors make up approximately half of Shanghai’s GDP each, with the agricultural sector playing an almost non-existent role in the economy.
Due to the central government’s macroeconomic control, fixed asset investments have also seen a moderate growth in 2006. During the year, fixed asset investments stood at RMB 392.5 billion, up 10.8% year-on-year. However, the overall growth rate fell by four percentage points.
Unlike most other Chinese cities, the service sector in Shanghai has attracted the most investments, totaling RMB 269.8 billion in 2006 and accounting for 68.7% of total fixed asset investments that year.
Shanghai has long been a large consumer market. In 2006, retail sales of consumer goods reached RMB 336.1 billion, up 13.0% year-on-year, the highest increase in growth rate since 1998. Among consumer goods, sales of food products amounted to RMB 132.8 billion while sales of clothing came up to RMB 42.6 billion. Sales of durable goods have also seen a steady growth, with 96,000 automobiles, 2.3 million mobile phones and 65,500 video cameras being sold in the local market.
In 2006, the value-added industrial output amounted to RMB 464.2 billion, while the total industrial output reached RMB 1,963.1 billion. All in all, the five pillar industries - electrical and electronics, automobiles, petrochemicals, steel manufacturing, and equipment - contributed more than 60% of the total industrial output, up 17.9% year-on-year. As can be seen, the electrical and electronics industry takes up nearly a quarter of the total industrial output.
In recent years, the city has started to develop high value-added products as the labor and land cost is increasing rapidly. The biopharmaceuticals industry, although still small in size, will have great potential with governmental support. Biopharmaceuticals have contributed 1.7% to the city’s total industrial output in 2006. Table 6.2.2 shows the number of enterprises in the pillar industries, the total industrial value, the value-added industrial output and profits from each industry.
Electrical and Electronics
The electrical and electronics industry has been one of the fastest-growing sectors in Shanghai, and has contributed significantly to the city’s economy. In 2006, the value-added industrial output of the industry increased by 31% annually to RMB 85.68 billion, a rate far higher than the other industries.
SVA (Group) Co. Ltd, founded in 1995, mainly engages in the manufacturing of photoelectron display products. Its products include liquid crystal displays and television sets, plasma displays and television sets. In May 2006, SVA and Cadence Design Systems Inc. inked a joint investment contract for the formation of SVA Integrated Circuit Co. Ltd. The joint venture will develop driver ICs for TFT LCD panels, HDTV applications and applications for use in the optoelectronic industry.
SMIC was founded in 2000. It is one of the leading semiconductor foundries in the world and the largest foundry in China. They provide IC manufacturing service at 0.35 micron to 65 nanometer, and finer line technologies. Shanghai is the headquarter and main wafer manufacturing base of SMIC. The corporation has also set up three 8-inch fabs and one 12-inch facility in Shanghai.
Shanghai is the second largest auto production base in China. In 2006, the total industrial output of Shanghai’s auto industry was RMB 146.2 billion, up 42.5%, while the net profit was RMB 13.3 billion, up 35.7%. Within the same year, 682,200 automobiles were produced in Shanghai, of which 665,600 were sedans. The auto output accounts for 9.4% of China’s total and it ranks second after Beijing, where 683,700 automobiles were produced in that year. Sedan car output in Shanghai was ranked first in China as it accounts for 17.2% of the total.
Shanghai Automotive Industry Corporation (Group) or SAIC in short, is one of the “Big Three” auto groups in China. In 2006, the total sales of SAIC amounted to RMB 218.9 billion, up 27% year on year. Sedan production is the most important business for SAIC, accounting for more than 70% of the group’s total vehicle output. In 2006, SAIC sold 1.34 million autos, including 915,000 passenger cars and 429,000 commercial vehicles, taking the lead among all automakers in China.
Shanghai is the major production base of SAIC and more than 50% of its automobiles were produced at its Shanghai site in 2006. The corporation has a total of five auto manufacturing enterprises in the municipality. They are: Shanghai Volkswagen Automotive, Shanghai General Motors Corporation, Shanghai Huizhong Automotive Manufacturing, Shanghai Sunwin Bus Corporation and Shanghai Passenger Car Manufacturing.
In December 2007, SAIC signed a deal with Nanjing Automobile Group to buy the latter’s auto-assembly and manufacturing assets. As SAIC already has the top automakers in China under its belt, the merger will further strengthen SAIC-Nanjing Auto’s leading position.
Shanghai is an important chemical industry base of China. In 2006, total sales in the petrochemical sector reached RMB 213.2 billion, ranking second among five pillar industries in Shanghai. Within the same year, crude oil processing amounted to 182.3 billion tons, a decrease of 7.44%, while gasoline production amounted to 24.8 billion tons, falling by 6.2%. Sinopec Shanghai Petrochemical Co., Ltd, Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd and Wujing Chemical Zone are the major contributors to the city’s petrochemical industry.
Shanghai Chemical Industry Park is located at the north coast of Hangzhou Bay. With a total planning area of 29.4 km2, it is the first industrial zone specializing in the development of the petrochemical and fine chemistry business. Investments in the first-phase projects came up to RMB 150 billion. These projects are designated to develop petroleum and natural gas, synthetic new materials and special chemicals, etc. In 2003, BASF Chemical Co., Ltd, the largest chemical company in the world, signed major industrial gases pipeline supply contracts with Shanghai Chemical Industry Park Industrial Gases Company (SCIPIG), investing a total of US$305 million.
The Shanghai Steel manufacturing industry mainly relies on Baosteel Group Corporation, the largest iron and steel manufacturer in China. In 2006, Baosteel produced 21.8 million tons of steel, accounting for 4.6% of China’s total. Within the same year, the value-added industrial output of Baosteel was RMB 44.8 billion, while sales amounted to RMB 180.7 billion. Baosteel is the 6th largest steel producer in the world in terms of sales volume. In that year alone, the total export value of the group was US$2.3 billion, up 28.5% year-on-year.
In recent years, Baosteel has begun to develop high-end products. For instance, in 2006, Baosteel sold 2.7 million tons automotive sheets, controlling over 50% of the domestic cold-rolled automotive sheets market. These products have also been exported to Fiat, Ford Europe, General Motors North America and other famous international automakers.
Equipment manufacturing saw a value-added industrial output of RMB 49.6 billion in 2006, contributing 4.8% to the city’s economy. By the end of 2006, Shanghai had 1,601 equipment manufacturing enterprises with 297,300 employees.
Shanghai Electric Group is one of the largest equipment manufacturing enterprises in China. Among its extensive products, the fossil fuel generators, elevators, air conditioners, and package and print machinery hold the highest market share in China and play an important role in the global market. In 2006, the total sales of Shanghai Electric Group amounted to RMB 23.7 billion, up 29.2%, while total export reached US$78 million, an increase of 30% year-on-year.
In recent years, Shanghai’s service sector has developed rapidly, with a 12% annual rate of increase. It also accounted for 50.6% of Shanghai’s total GDP in 2006. Shanghai’s development trends draw parallels with those of Hong Kong. The main difference, however, is that Shanghai still maintains high value-added manufacturing industries.
In 2006, the value-added output of the financial industry reached RMB 79.9 billion, up 17.6% from the previous year. By the end of 2006, there were 563 financial institutions in the city, including 109 banking institutions, 281 insurance companies and 90 securities firms. Among them, 105 were operated by foreign financial institutions. The total assets of foreign banking institutions reached RMB 509.4 billion, accounting for 62% of China’s total.
Boosted by the new, modern financial system, the capital market saw a rapid growth during the year. The Shanghai Stock Exchange is the bigger of the two bourses in mainland China, and ranks fourth in the world after the U.S., Japan and UK. By the end of 2007, 1,125 securities were traded on the exchange, of which 904 were stocks. The total market cap of the Shanghai bourse reached RMB 26.9 trillion. The insurance market also continued its steady growth in 2006. The annual insurance premium income reached RMB 40.7 billion, of which RMB 10.1 billion was from property insurance and RMB 30.6 billion was from life insurance. The premiums of domestic insurance companies amounted to RMB 32.9 billion, while foreign insurance companies earned RMB 7.8 billion, accounting for 19% of the total.
Since 2004, the central government has implemented various tightening measures such as raising the interest rate and strengthening the administrative control in a bid to curb the overheated real estate industry. However, due to the rising cost of land and construction materials, the price of commercial and residential buildings has remained high over the past three years. In 2006, investment in real estate development amounted to RMB 127.6 billion, up 2.3% from the previous year. However, the growth rate fell by 3.8 percentage points.
The macro control has also shown effect. Even though the price remains high, the property market has been gradually cooling down. From January to November 2007, sales of commercial buildings amounted to RMB 269.1 billion, of which commercial residential building sales reached RMB 244.8 billion.
Shanghai is well known for its advanced shopping facilities that attract the locals as well as customers from other parts of China. The affluent consumer market has become a strong drive for its sustained retail growth.
In 2006, Shanghai’s retail sales of consumer goods was at a 9-year high, having risen by 13% year-on-year. It amounted to a grand total of RMB 336.1 billion. The strong growth was a result of a rapid increase in food and beverage (F&B) sales, as well as the huge consumption of household and telecommunication products. This strong purchasing power has, in turn, stimulated the continuous expansion of international and local retailers alike.
In Shanghai, chain stores have developed at a fast pace. By the end of 2006, the number of chain stores in Shanghai reached 10,791, of which 2,414 were supermarket chains. The total sales of chain stores amounted to RMB 124.5 billion, up 15.6% year-on-year.
Foreign Trade and Foreign Investment
Total foreign trade in 2006 saw a rapid increase of 22.1%. It reached US$227.5 billion, of which imports amounted to US$113.6 billion and exports totaled US$113.9 billion. During the same year, private enterprises also witnessed a rapid increase of 54.3% in export. The major export destinations include the U.S., Japan and Hong Kong, while the main import regions are Japan, the U.S. and Taiwan.
Foreign investment continues to expand in Shanghai. In 2006, 4,061 foreign investment projects were approved, with a total contracted FDI of US$14.6 billion. In 2006, the total utilized FDI reached US$7.1 billion, up 3.8% year-on-year. Major investment sources include Hong Kong (US$1.35 billion), Japan (US$0.83 billion), Germany (US$0.74 billion), the U.S. (US$0.36 billion) and Taiwan (US$0.32 billion).Foreign investment in the service sector experienced rapid growth in 2006. The total utilized FDI in the service sector amounted to US$4.42 billion, accounting for 62% of the city’s total. In addition, the industrial sector attracted US$2.7 billion during the year. By the end of 2006, 154 multi-national corporations had set up their regional headquarters in Shanghai, of which 30 had been launched that very year. Shanghai has also attracted 196 foreign R&D centers. The paid-up capital of foreign financial institutions in Shanghai stood at US$5.2 billion by the end of 2006, of which US$1.6 billion had been raised during that year. Banks and financial companies have a paid-up capital of US$3.1 billion, while insurance companies and securities companies have US$ 0.6 billion and US$1.1 billion respectively.
Major Development Zones
By the end of year 2006, Shanghai had 80 industrial parks. Among them, seven are state-level development zones and 14 are city-level zones.
Jinqiao Export Processing Zone
Jinqiao Export Processing Zone was approved in 1990 and enjoys the same preferential policies as the state-level economic and technological development zones. It is 25km away from the Hongqiao International Airport and 30 km from Pudong International Airport. The four pillar industries in the zone are information electronics, automobiles and components, electric home appliances and biopharmaceuticals. The total industrial output of the four pillars amounted to RMB 129.5 billion, accounting for 87% of the city’s total.In 2006, the zone attracted 54 investment projects with a total contracted foreign investment of US$ 328 million. By the end of the same year, 47 Fortune 500 enterprises had also invested in 80 projects within the zone.
Shanghai Waigaoqiao Free Trade Zone
Shanghai Waigaoqiao Free Trade Zone is the first free trade zone of its kind. It has been in operation since early 2004. Located at the northern end of Pudong New Area and spanning a total of 10 km2, it is one of the largest, most comprehensive and multi-functional foreign trade zones in China. It has become a public platform for export-oriented economic developments in the Yangtze River Delta and other parts of China. In April 2004, the zone set up a Bonded Logistic Park that connects the free trade zone with the port. 558 investment projects were approved in 2006, with a total investment of US$1.6 billion, up 16.3% year-on-year. The service sector, which includes international trade and logistics, contributed 80.6% to the zone’s total industrial output.
Zhangjiang Hi-Tech Park
Zhangjiang Hi-Tech Park, founded in July 1992, is located in the middle of Pudong New Area and spans 25 km2. The park is comprised of a Technical Innovation Zone, Hi-Tech Industry Zone, Scientific Research and Education Zone, and Residential Zone. The IT industry, software industry and biopharmaceutical industry are identified as the leading industries of the park.By the end of 2006, 1123 enterprises had set up business in the hi-tech park, up 28.8% from 2005. Also within the same year, the industrial output of the IT, biopharmaceutical and auto manufacturing industries amounted to RMB 17.9 billion (up 36.1% year-on-year), RMB 4.9 billion (up 12.6%) and RMB 3.25 billion (up 7.7%) respectively.
Major Administrative Areas in Shanghai
There are 19 administrative areas in Shanghai. Table 6.2.2 shows the districts in Shanghai together with their respective GDP, land area and population. As evidenced in the table, Pudong New District leads the economy with a GDP of RMB 236.5 billion. In comparison, the other districts trail far behind.
As of 2006, Shanghai has 60 higher education colleges and universities. The number of graduates from institutes of higher learning in Shanghai reached 110,500, up 6.9% year-on-year. Three prominent universities are Fudan University, Shanghai Jiao Tong University, and Tongji University.Fudan University was founded in 1905, shortly before the end of China’s Imperial Qing Dynasty. It is a comprehensive university and ranks highly in the discplines of physical and social sciences.On April 27, 2000, Fudan University merged with Shanghai Medical University, increasing its comprehensiveness and spectrum of learning.
Shanghai Jiao Tong University, formerly Nang Yang Public School, was founded in 1896. Shanghai Jiao Tong University merged Shanghai Second Medical University on July 18, 2005, and was renamed the Medical School of Shanghai Jiao Tong University. Tongji University, formerly Tongji German Medical School, was established in 1907. It is located in the northeastern part of the city.
Important Travel Information
Shanghai has two international airports. Hongqiao International Airport mainly serves domestics flights while Shanghai Pudong International Airport is geared towards international flights.
Time taken to travel from Hongqiao International Airport to:
- Tokyo 2hrs 20mins
Time taken to travel from Pudong International Airport to:
- Hong Kong
- Bangkok 2hrs 20mins