EDITOR'S note:

Stepping out of the impact of the global financial crisis, Shanghai has been revving up efforts to develop its economy in a sustainable way. That involves a transition in the economic structure with a focus on advanced manufacturing, services and high-tech industries. Besides, measures are being put in place to improve people's living standards and spur innovation. Shanghai Daily begins a weekly column tracking the changes as well as their influence on the city and its people.

Shanghai, which bucked the trend last year when overall foreign investment in China slumped after the global financial crisis, isn't resting on its laurels. The city famous as a beachhead for foreign firms entering China wants to insure that its future prospects aren't washed out with the tide.

In the first six months of this year, foreign direct investment in Shanghai grew 4.1 percent from a year earlier to US$5.37 billion, after increasing 4.5 percent last year.

"We will continue to improve the local investment environment this year," said Sha Hailin, chairman of the Shanghai Commission of Commerce. "The goal is to promote innovation, streamline administrative procedures and adjust the structure of foreign investment."

Shanghai officials and managers of foreign companies doing business in China have been eager to pour cold water on some overseas media reports suggesting that China's business climate soured after the exit of Google Inc from the Chinese mainland and the trial of Rio Tinto executives earlier this year.

"We don't see a dramatic change in sentiment," said Brenda Foster, president of AmCham Shanghai. "Is China a challenging place to do business? Yes. It always has been. But our member companies remain committed to the China market, and we are seeing many of them expand their operations here."

Reinvention

Indeed, a survey of 218 United States companies conducted by AmCham Shanghai in March found that 65 percent of respondents said business had improved in the past six months despite steadily increasing competition in the Chinese market. Three-quarters said the business environment had not deteriorated.

Shanghai is in the throes of trying to reinvent itself as a global finance and shipping hub. At the same time, it is promoting the development of advanced technologies such as software, biomedicine and green services.

"Shanghai is pinning part of its future on the development of advanced technologies in a cleaner corporate landscape," said Li Maoyu, an analyst at Changjiang Securities Co. "The city is putting out the welcome mat, and many multinational companies are rushing to embrace the invitation."

The dream of city planners comes to life in the proud face of Zhang Hongjiang as he sits in the newly completed, 700 million yuan (US$103 million) research center opened by Microsoft in Shanghai.

Zhang has worked for the company for 11 years, now in the role of chief technology officer of Microsoft's Asia-Pacific Research and Development Group. The new center is a paradigm of energy efficiency and water conservation. More than that, it's a statement about foreign confidence in the city.

"My boss approved investment in this project without even poring over details of the budget," said Zhang. "The reason is simple: We can't miss the opportunities of a market with the world's biggest Internet population."

In the first three months of this year, city officials said, 18 additional multinational companies chose Shanghai as their regional headquarters or the site of research and development centers. That brought the number of major global companies operating in Shanghai to 773.

"We came to Shanghai because our clients are here," said Vince Gao, Asia-Pacific manager for California's based AB Sciex. "Shanghai has a strong life sciences industry chain that doesn't exist in other places in China."

AB Sciex, a global leader in life science analytical technologies, announced on Monday it will open an applications support center in Shanghai to serve as a regional hub for innovation in analytical-based laboratory instrumentation. In its initial stage, the facility will employ about 65 engineers.

The city of Shanghai is dangling tax and other incentives in front of multinational companies to attract the kind of forward-looking businesses it deems important to its economic restructuring.

Microsoft apparently took advantage of incentives in its choice of Shanghai to build its first technology park outside the US. The company's Zhang declined to discuss numbers but did say that it will increase its engineering staff in Shanghai by 20 percent, or 100 people, this year.

"We have our strategy and focus," Zhang said. "Cloud computing and search services are two of the fastest-growth sectors in our research and development plan for China."

Shanghai municipal officials are pledging stepped-up efforts to reduce red tape in the foreign investment application process. The city is now allowing district and county level governments to approve projects of up to US$100 million, raising the cap threefold.

Companies like Houston-based Waste Management Inc stand to benefit from simplified entry procedures. The largest waste disposal and environmental services company in North America announced in March that it would invest US$75 million to buy a 40 percent stake in Shanghai Environment Group Co Ltd from Shanghai Chengtou Holding Co Ltd.

"These Shanghai companies are great partners for us as we venture into the growing Chinese market," said David Steiner, Waste Management chief executive officer. "We see waste as a resource, and we see international expansion of our waste-to-energy business as a growth engine for us."

He said the company's goal is to build 100 recycling plants producing renewable energy in Shanghai in the next five years.

Competition

Waste Management's investment was the largest overseas capital so far to pour into that sector, marking a new foreign inroad into what has long been regarded as the traditional turf of state-owned companies.

China is already the world's second-largest market for waste management. In five years, it is expected to grow to the same size of the industry in the United States, which is valued at up to US$40 billion.

Advanced technology, not garbage, tends to dominate the headlines where investment in Shanghai is concerned.

ASE Electronics, the world's No. 1 chip assembly and testing firm, announced in March it would invest US$1.3 billion to build a manufacturing facility in Shanghai. It was the biggest high-tech investment project unveiled in the first quarter.

The chip firm's expansion addresses huge demand in China, where packed chips are used in mobile payments, digital TV and the Internet of Things.

No one is claiming that all the problems of foreign companies in China have been solved.

"We will continue to work with the national government to develop a more competitive, open market in China," said AmCham's Foster.

"It is business as usual in China, but the environment is becoming more competitive," said Pierre E Cohade, president of Goodyear Asia Pacific. "The focus is now 'in China for China.' Successful companies need to continue to invest in building both capacity and capabilities and incorporate best global business practices to thrive in this market."