Shanghai bucks trend of falling investment
By Wang Yanlin |
January 23, 2013, Wednesday
|
Print Edition
Print Edition
ANALYSTS and the media are reading a lot into figures showing that direct investment in China fell in 2012 for the first time in three years.
The money flowing into the country over the few decades has been regarded as a hallmark of the nation's high-flying economic status. But, last year, foreign direct investment in what had become the world's second-largest economy fell 3.7 percent.
What went wrong?
Trinh Nguyen, an economist at HSBC Holdings Plc, says multinational companies are looking for new investment sites because the cost of everything in China, from salaries to land prices, has risen and the yuan's steady appreciation isn't helping.
"India, Indonesia and Vietnam will be among the biggest beneficiaries in this process because they have huge workforces, booming domestic markets and plenty of young people," he wrote in a recent report.
In fact, China's working-age population will peak in two or three years' time, then it will slip into an aging spiral similar to the one that has cocooned Japan's economy for decades.
Bloomberg News says China is gradually losing its luster for foreign investors.
"It is a non-reversible trend for labor costs to increase in China," it said, citing analysts. "Such a trend is not confined to coastal cities. It's fast spreading to inland areas as well."
Amid all the hand-wringing about China pricing itself out of the market lies the curious fact that Shanghai, a city with the highest production costs on the Chinese mainland and one of its fastest aging populations, managed to deliver a 20.5 percent surge in foreign direct investment last year, bucking the national trend and setting a new record.
"Considering last year's bad economic conditions around the world, Shanghai has done a great job in retaining foreign-invested companies and expanding their presence," Chen Xianjin, deputy chairman of the Shanghai Commission of Commerce, told Shanghai Daily on January 9.
For many years running, Shanghai has retained the title of the most attractive city for foreign investment on the Chinese mainland. Certainly, Shanghai has been rolling out a red carpet for foreign investors for years.
Regional headquarters
Last October, the city announced a series of new measures to entice foreign investment and particularly to attract more multinational companies to locate or upgrade regional headquarters in the city.
Among the many new pro-business measures were expanded loan quotas and a reduction in red tape.
Last May, Shanghai set up the so-called Shanghai Investment Promotion Partnership to encourage two-way investment. The partnership has 73 overseas-invested businesses or organizations and 26 mainland members.
The city is continuing to host regular annual meetings between the mayor and top global business leaders under the auspices of the International Business Leaders' Advisory Council. The group was initiated in 1989 when former Chinese Premier Zhu Rongji was mayor of Shanghai.
Shanghai is attractive, says Joseph Hogan, chief executive officer of ABB Ltd, because it's such an open city, and good at absorbing foreign wisdom.
The European Union Chamber of Commerce in China said in its 2013 Position Paper, an annual report gauging the environment for foreign investment, that "Shanghai is likely the most open city on the mainland towards foreign companies."
Apart from that, Shanghai offers great potential for further development, the paper said.
"Shanghai continues to work toward the 2020 goal of becoming an international center for finance, shipping, the economy and trade, which creates a tremendous number of opportunities for foreign participation," it said.
"The city is always a leader in experimenting with pilot projects and spares no efforts in innovation. That is deeply appreciated by foreign investors."
City fathers are also viewed as quick to react to problems facing foreign investors.
Last year, soon after the EU Chamber of Commerce in China raised concerns about the limited number and high fees of international schools in Shanghai, the city government announced it would support the construction of more international schools and extend subsidies for child tuition in an effort to attract more overseas professionals.
Some people may argue that Shanghai managed to attract record foreign investment last year largely because of the mammoth Disneyland Park under construction in the city.
Mickey Mouse effect
That is probably true. Financing related to the park and ancillary facilities no doubt accounted for a big share of investment.
The city has not disclosed exact figures, but it requires no fancy calculations to conclude that much slower growth in investment would have occurred without the Mickey Mouse effect.
Then again, one could argue that investment on a scale of the Disney project is possible only because of the image the city has worked so hard to create.
Disney could have chosen another site in China if it didn't deem Shanghai the hottest spot on the mainland.
Shane Tedjarati, chief executive officer of Honeywell China and India, represents the feelings of many overseas business people when he says Shanghai occupies a special place in his heart.
"Whenever I land in Shanghai, I have that comfortable feeling that I am back home," Tedjarati said.
And he, like many others, is soothed by the convenience stores around every corner, the widespread use of English in everything from package labeling to transport system information, and the lively entertainment scene that mitigates homesickness for New York or London.
The trick is for Shanghai to continue the momentum and burnish its image as a premier city and the place to be.
The money flowing into the country over the few decades has been regarded as a hallmark of the nation's high-flying economic status. But, last year, foreign direct investment in what had become the world's second-largest economy fell 3.7 percent.
What went wrong?
Trinh Nguyen, an economist at HSBC Holdings Plc, says multinational companies are looking for new investment sites because the cost of everything in China, from salaries to land prices, has risen and the yuan's steady appreciation isn't helping.
"India, Indonesia and Vietnam will be among the biggest beneficiaries in this process because they have huge workforces, booming domestic markets and plenty of young people," he wrote in a recent report.
In fact, China's working-age population will peak in two or three years' time, then it will slip into an aging spiral similar to the one that has cocooned Japan's economy for decades.
Bloomberg News says China is gradually losing its luster for foreign investors.
"It is a non-reversible trend for labor costs to increase in China," it said, citing analysts. "Such a trend is not confined to coastal cities. It's fast spreading to inland areas as well."
Amid all the hand-wringing about China pricing itself out of the market lies the curious fact that Shanghai, a city with the highest production costs on the Chinese mainland and one of its fastest aging populations, managed to deliver a 20.5 percent surge in foreign direct investment last year, bucking the national trend and setting a new record.
"Considering last year's bad economic conditions around the world, Shanghai has done a great job in retaining foreign-invested companies and expanding their presence," Chen Xianjin, deputy chairman of the Shanghai Commission of Commerce, told Shanghai Daily on January 9.
For many years running, Shanghai has retained the title of the most attractive city for foreign investment on the Chinese mainland. Certainly, Shanghai has been rolling out a red carpet for foreign investors for years.
Regional headquarters
Last October, the city announced a series of new measures to entice foreign investment and particularly to attract more multinational companies to locate or upgrade regional headquarters in the city.
Among the many new pro-business measures were expanded loan quotas and a reduction in red tape.
Last May, Shanghai set up the so-called Shanghai Investment Promotion Partnership to encourage two-way investment. The partnership has 73 overseas-invested businesses or organizations and 26 mainland members.
The city is continuing to host regular annual meetings between the mayor and top global business leaders under the auspices of the International Business Leaders' Advisory Council. The group was initiated in 1989 when former Chinese Premier Zhu Rongji was mayor of Shanghai.
Shanghai is attractive, says Joseph Hogan, chief executive officer of ABB Ltd, because it's such an open city, and good at absorbing foreign wisdom.
The European Union Chamber of Commerce in China said in its 2013 Position Paper, an annual report gauging the environment for foreign investment, that "Shanghai is likely the most open city on the mainland towards foreign companies."
Apart from that, Shanghai offers great potential for further development, the paper said.
"Shanghai continues to work toward the 2020 goal of becoming an international center for finance, shipping, the economy and trade, which creates a tremendous number of opportunities for foreign participation," it said.
"The city is always a leader in experimenting with pilot projects and spares no efforts in innovation. That is deeply appreciated by foreign investors."
City fathers are also viewed as quick to react to problems facing foreign investors.
Last year, soon after the EU Chamber of Commerce in China raised concerns about the limited number and high fees of international schools in Shanghai, the city government announced it would support the construction of more international schools and extend subsidies for child tuition in an effort to attract more overseas professionals.
Some people may argue that Shanghai managed to attract record foreign investment last year largely because of the mammoth Disneyland Park under construction in the city.
Mickey Mouse effect
That is probably true. Financing related to the park and ancillary facilities no doubt accounted for a big share of investment.
The city has not disclosed exact figures, but it requires no fancy calculations to conclude that much slower growth in investment would have occurred without the Mickey Mouse effect.
Then again, one could argue that investment on a scale of the Disney project is possible only because of the image the city has worked so hard to create.
Disney could have chosen another site in China if it didn't deem Shanghai the hottest spot on the mainland.
Shane Tedjarati, chief executive officer of Honeywell China and India, represents the feelings of many overseas business people when he says Shanghai occupies a special place in his heart.
"Whenever I land in Shanghai, I have that comfortable feeling that I am back home," Tedjarati said.
And he, like many others, is soothed by the convenience stores around every corner, the widespread use of English in everything from package labeling to transport system information, and the lively entertainment scene that mitigates homesickness for New York or London.
The trick is for Shanghai to continue the momentum and burnish its image as a premier city and the place to be.
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