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September 18, 2009

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Home » Business » Economy

City economy posts Expo-led growth

SHANGHAI'S economy maintained steady growth in August with resilient retail sales and infrastructure spending, as activities related to preparations for the 2010 World Expo countered a persistent slump in exports.

"The Expo has buoyed the economy, not only from the standpoint of construction spending, but also in terms of a very upbeat mood in the city," said Li Maoyu, an analyst at Changjiang Securities Co.

Retail sales in the city expanded 14.6 percent from a year earlier to 43.9 billion yuan (US$6.42 billion), accelerating from an increase of 14.3 percent in July.

Fixed-asset investment in the first eight months grew 12.3 percent to 316.6 billion yuan, according to the Shanghai Statistics Bureau.

Meanwhile, consumer prices dipped 0.6 percent from a year earlier, easing from a 1.9 percent slide in July.

"Shanghai's economic performance is at least stable," Li said. "Although the city's gross domestic product grew at a slower pace than the nation, the underlying economy remains strong."

Figures released in July showed Shanghai's first-half GDP rose 5.6 percent, the second worst performer in the Chinese mainland because of the city's reliance on export manufacturing.

In August, exports in the city declined 23 percent year on year to US$12 billion, little changed from a month earlier.

Foreign direct investment in Shanghai last month increased 9.9 percent to US$900 million, the fastest pace this year.

"More foreign investment reflects the strong confidence of overseas investors in Shanghai's economy," Li said. "Shanghai has a good investment environment and intentions of becoming a global financial center, which is lucrative for long-term investors."

Dong Xian'an, an analyst at Industrial Securities Co, said Shanghai is on track to achieve its target of 9 percent growth this year despite weak exports.

"The key to growth momentum is local consumption and investment," Dong said. "It is really hard to predict when external demand can be restored. The good side of declining exports is that they force Shanghai's manufacturers to lift their game."

The city's export decline was led by products in labor-intensive industries such as clothing, toys, shoes and furniture.

Shanghai is a high-cost manufacturing center.

Analysts said the city should shift to more high-technology products, such as green vehicles and biomedicine.

The latest city data mirrored generally stronger-than-expected national economic figures released last week.


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