The People’s Republic of China is at its most powerful for 200 years, but there’s no reason to believe it’s about to rest on its laurels. The nation’s leader, Hu Jintao, wants the economy to more than triple by 2020, and Shanghai is the city at the sharp end of China’s supercharged economic thrust. The city is currently undergoing one of the fastest economic expansions that the world has ever seen.
Shanghai’s economy has grown steadily since the millennium, hovering at a muscular 11 percent. Last year, while other nations in the West were digging in and preparing for the worst, Shanghai was forecasting GDP growth of 14 percent. That’s nearly three times greater than London’s projection figure.
Over the last 25 years, China has surged ahead to establish itself as a huge manufacturing base. There are now so much goods surging in and out of Shanghai and China’s lesser ports that there are not enough vessels to carry them. And while the ship building industry has ground to a halt in Britain, shipyards in China are churning out hulls at a record rate. And still they’re struggling to meet the demand. As with the requirement for commodities, China’s burgeoning trade has triggered rises in Global freight rates which have increased fivefold last year under a deluge of orders.
Shanghai’s real building boom is just a stone’s throw away from the docks on dry land. In 2003, half of the concrete used in construction around the world was poured into China’s cities – and most of that was used here.
Towering monuments to Shanghai’s regained strength reach for the sky and alter the skyline with alarming regularity. The process is like a game of Tetris in reverse. The predominant style is for future-retro postmodern designs. While London flatters itself with smooth phallic edifices like 30 St Mary Axe, Shanghai’s skyline looks like the Martians have landed – The Shanghai Radisson New World Hotel, being a prime example. The cityscape could be the set of Blade Runner 2.
There are already plans in place to build 300 hotels here in the next five years – which perfectly illustrates the sheer scale of Shanghai’s vaulting ambition.
International realtor, Guy Hollis of Jones Lang LaSalle, believes the demand for new apartments, office blocks and skyscrapers will merely intensify as China’s rural population heads to Shanghai in pursuit of their fortune. “In the next 25 years, 345 million people are going to move from the rural areas into the city areas, which is the biggest mass migration of people ever, anywhere. This happened during the industrial revolution in the last century in Europe, but we tended to do it over a 150 year period. Here we’re trying to do it in 15-20 years.”
Shanghai is now rivaling Hong Kong as China’s chief economic powerbase. In 2006, China is opened the Local currency business sector to overseas players under World Trade Organisation treaties. And recently the big guys have scrambled to position themselves ahead of the open season. US banking giant Citigroup bought five percent of Shanghai Pudong Development Bank in 2003, striking a deal to issue credit cards to Chinese customers. While US private equity firm Newbridge Capital bought 18 percent of Shenzhen Development Bank in 2004.
Hong Kong still has the advantage of a stronger legal system and greater banking and service expertise, but its island location restricts its expansion. Shanghai, on the other hand, has a freer approach to development.
Just across the Huangpo river from Shanghai, a whole new city has sprung up – this is the financial district of Pudong. Until recently, this was farmland and marshes. Now inside the space of adecade, it’s become a modern metropolis, home to huge factories, offices, and hotels. China’s government offers huge incentives for companies to move into Pudong.
Lee-in Chen Chiu is a research fellow at the Chung-hua Institution for Economic Researc. In 1992, she, watched a corporate film outlining plans for what was then rice paddies and swamp across the water from Shanghai. She doubted the plan: “I didn’t believe that they could make a miracle here,” she says. Just six years later she was eating her words. “It is not just Pudong – the whole town changed dramatically. Every three years, there is a big wave of change.
The city has an already excellent public transportation system, with over a thousand bus lines, and a program of expansion is already in place on the flourishing Shanghai Metro. This rapid transport network is set to more than double in size before 2010. There’s two airports, including the brand new Pudong International Airport which is connected to Shanghai via the world’s first 430 km/h Maglev train. There’s no time for refreshments, however – the 30km journey takes just eight minutes. Shanghai’s physical links to the rest of China and the Asian continent also give it the edge over Hong Kong, with three major rail networks intersect at Shanghai.
There’s another even more important advantage over Hong Kong – Shanghai has intrinsically stronger links to both the Chinese interior and the central government. Since the handover of Hong Kong to the PRC in 1997, Shanghai has flexed its financial muscle and become a major destination for corporate headquarters and banking. In turn this is fueling an unprecedented demand for a highly educated and modernized workforce.
The 2000 census put the population of Shanghai Municipality at 16.7 million – including the floating population, which made up 3.871 million. That’s an increase of nearly 3.5 million people in just ten years. In the last five years, the Greater Shanghai area is believe to be home to 20 million people – nearly three times the population of London.
While many of them work in manufacturing, an increasing number of them are in possession of laminated company IDs from the likes of IBM, Siemens, Nokia, Duracell, Sanyo. An indication of just a few of the major international brands that have set up shop here to soak up some of the talented one million graduates China produces every year.
Computer giant IBM recently conducted a report which found that Shanghai is strengthening its ability to attract high-tech businesses to the region. They found that Shanghai was well placed to develop the areas attributes into a world-class high-tech industry. And of course, market-watchers will remember that IBM sold its PC hardware division to China’s number one computer maker Lenovo.
Despite China only having a three percent share of the world market, locally business is booming. Shanghai’s software industry recorded 30.2 billion yuan (US$3.72bn) revenue last year. The city’s software export amounted to US$476m, up 50 percent and 80 percent respectively over that of 2003. Shanghai is obviously taking the lead in China’s software industry.
Sun Jiarong is director of the sci-tech development & technology trading bureau of Shanghai Foreign Economic Relation & Trade Commission. He attributes the rapid growth to the trend of international division of labour in the software industry. According to Sun, the software industry plays an indispensable role in upgrading Shanghai’s information industry. Sun’s organisation backed up further efforts to build on international software outsourcing with the 2005 Shanghai Global IT Outsourcing Summit in November 2005.
With the city’s new business acumen comes new wealth. Unheard of just a decade ago, China’s rapid economic growth has boosting disposable wealth, and there’s been a rush on luxury goods.
While Japan currently dominates the global market, with 41 percent of all luxury brand sales, pundits predict that China will have a 29 percent share by 2015. Sales of luxury cosmetics and clothing here are growing at 20 percent a year.
Lamborghini has recently opened their first dealership in China making the Volkswagen-owned Italian marque the latest luxury carmaker to exploit the country’s growing taste for expensive Western goods.
Luxury carmakers have increasingly been looking east as sales in Europe and the United States have dipped, as evinced in Lamborghini’s statement: “Recent research has proven that China is the next best area for high-end vehicle growth and for that reason Lamborghini has chosen to open a dealership in China.”
Their entry level model starts at $180,000. Still, there’s no shortage of customers. A recent survey by Forbes magazine found that there are now eight billionaires in China while the country’s 100 richest people have a combined fortune of $41bn. Many of this new breed are increasingly basing themselves in Shanghai. As is customary with any luxury item worth its hand-stitched leather seats, there is now a waiting list for Lamborghinis with a Shanghai license plate.
Representing the biggest business opportunity in decades, foreign investors are falling over themselves to moving in on the action. William Grant & Sons, the family-owned whisky distiller, is setting up a distribution and marketing base in Shanghai. Meanwhile, Chanel recently splashed out on an exclusive party in Shanghai, inviting Chinese film stars, models and local business tycoons for a ride on the airport’s Maglev train.
Shanghai even has a burgeoning contemporary arts scene – a litmus test for evidence of a cultural and financial elite. It’s epicentre is warehouse district (what else!) in Old Shanghai – one of the few areas of the city that has not undergone massive transformation in recent times.
Yvonne Han is one of two partners in a successful Shanghai chain of restaurants. She’s a typical of the consumers the luxury brands are trying to woo. She wears Prada, drives a German car, and owns an apartment straight out of the pages of Wallpaper* magazine in the heart of the Shanghai. She has around $4,000 dollars to drop on whatever takes her fancy, every month. She realises having a Porsche is quite pointless, she says, “because the roads in Shanghai are so congested, but it can show off how rich you are.”
Mao will be spinning in his grave.
Happily, not every comrade has been corrupted by the decadent and morally bankrupt ways of the West. Some citizens are concentrating their efforts on more worldly issues.
Like, for example, the 18 Buddhist monks who recently enrolled on business classes in temple management at Shanghai’s Jiaotong University – one of the city’s most prestigious educational facilities. Their study will include corporate strategy and religious product marketing.
After all, you can’t keep a good yuan down.
