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(A little over 6 months since "Shanghai Reality" that claire kindly posted for me under "Living in Shanghai," I'd like to add the following observations. Thank you. Ted)
With a population of 17.1 million and a land area of 6,340 sq km, Shanghai is a pretty big city. It contains 2.5 times the population and nearly 6 times the size of its perennial rival Hong Kong, and it is instead comparable with Taiwan (22.8 million), Australia (20.9 million), and Chile (16.1 million) in terms of population, and the US state of Delaware (6,447 sq km) in size.
Still, Shanghai is the smallest among China’s 31 provinces, autonomous regions, and municipalities (Delaware, too, is the second smallest), with 0.066 percent of China’s vast territory, and by population, it ranks 25th, making up only 1.32 percent of this most populous country on earth.
By contrast, Shanghai’s population density is the nation’s highest, 2,699 per sq km, and so is its per capita GDP, US$5539 during the first half of 2005, while its overall GDP is the seventh largest among the 31 regions, or 5.36 percent of the national GDP, amounting to 625 billion yuan (2003) after the sixth largest Henan (704 billion yuan or 6.04 percent, but with 5.5 times the population of Shanghai).
The most controversial measure for Shanghai is its per capita GDP, because it is a whopping 13 times that of the poorest province, Guizhou, but only one-fifth of Hong Kong. The gaps on both ends are actually bigger than these numbers suggest, however, and how to solve this dilemma (catch up with Hong Kong without expanding income disparities within the Mainland) should be the centerpiece of Shanghai’s future strategy.
In the first half of 2005, Shanghai’s GDP advanced to US$48.5 billion, or an annualized US$97 billion. Yet, Hong Kong’s GDP is still 70 percent larger, whereas Hong Kong’s population is only two-fifth of Shanghai. By industry, agriculture is nonexistent in both cities, while manufacturing accounts for 50 percent in Shanghai but a mere 4 percent in Hong Kong, and in exchange, the service industry is 88 percent of GDP in Hong Kong but 45 percent in Shanghai.
Within the service industry, the size of the financial sector must be the concern of many people. Hong Kong’s financial sector is generating about US$20 billion so far this year, or 13 percent of GDP and 14.8 percent of its sizable service industry. On the other hand, Shanghai’s financial sector is half of that, US$10 billion, but comprises 10.5 percent of GDP and 47 percent of the service industry.
It appears that Shanghai’s service industry is financial sector-oriented, but it is unsure whether the financial markets are centered on Shanghai or Shanghai is centered on the financial sector. In either case, we could probably argue that Shanghai is a financial center, although their meanings are quite different.
Externally, in foreign trade, Shanghai should be way ahead Hong Kong already, right? Not really, since Shanghai’s exports, US$140 billion during the first six months this year, are 5 percent larger than Hong Kong’s, while Hong Kong’s imports are also US$140 billion and it is 28 percent larger than Shanghai’s imports, US$109 billion, so overall, Hong Kong’s total foreign trade is still larger by 9 percent (including re-exports in and out of both Hong Kong and Shanghai).
The gap in foreign direct investment (FDI) is even wider. At the end of 2003, Hong Kong had about US$380 billion outstanding position, although net changes were marginal in recent years. On the contrary, foreign money is tumbling into Shanghai, US$6.5 billion in 2004 and US$3.9 in the first half of 2005, but its outstanding position was still US$46 billion at the end of 2003, one-sixth of Hong Kong’s in aggregate, and one-fifteenth on a per capita basis.
Of course, Shanghai will continue to receiving more FDI, going forward, and eventually catch up with Hong Kong, but even with 15 percent annual growth in incoming FDI, it will be only around 2018 when Shanghai finally reaches Hong Kong’s level today, with 10 percent in 2021, and with 5 percent in 2026. And this is only for the aggregate outstanding position. For its per capita amount to catch up with Hong Kong, it will take a good while, depending on population growth.
While the upside is still substantial, the downside is not limited, either. Shanghai’s service industry comprised 48.4 percent of its economy in 2003, and it ranked number three after Beijing and Tibet, compared with the (simple) nationwide average of 39 percent.
Particularly, Shanghai’s financial industry is as large as 10 percent of the city economy, only second to Beijing’s 15 percent, while the national average is just 4 percent. In addition, the real estate industry occupies 7 percent of Shanghai’s economy, the highest in China, versus 3 percent nationwide.
These concentrations of the service sectors, primarily high-end services, are the main drivers of Shanghai’s highest per capita GDP, nearly 50 percent larger than second highest Beijing, and five times that of the national pre capita GDP. But that’s not where a sense of inequality ends
Shanghai received 10 percent of the total FDI in China during 2003, the fourth largest, after Jiangsu (20 percent), Guangdong (15 percent), and Shandong (11 percent), although the top three’s population is far bigger than Shanghai’s 17.1 million; Jiangsu 74 million, Guangdong 79.5 million (as large as 100 million in some estimates), Shandong 91 million. Consequently, Shanghai’s per capita FDI, too, is the highest in China.
But, Shanghai’s per capita FDI is not only the highest but also way ahead of the rest of the country; twice that of Beijing, close to 3 times Jiangsu, four times Guangdong, six times Shandong, almost 50 times Chongqing, more than 100 times Inner Mongolia, and a staggering 500 times more than Xinjiang.
So, how should Shanghai close those gaps both inside and outside at the same time? In fact, the gap with Hong Kong may not be a big deal, although Hong Kong’s per capita FDI is 15 times that of Shanghai. The question is how to close the other gaps, especially with 20 other provinces Hubei and down (where more than 800 million people or nearly or two-thirds of China’s population happen to live), which are actually larger than Shanghai’s gap with Hong Kong, 15 times or more in per capita FDI.