[By Ma Dengjia/China.org.cn]
Shanghai retains its allure as a destination for foreign investment, bucking a nationwide trend of declining overseas capital flows. But here is little room for complacency.
In March, the city had more than a 40 percent year-on-year surge in foreign direct investment, while China as a whole suffered its fifth consecutive monthly decrease.
Some analysts attribute Shanghai's good fortune to the magnet of the huge Disneyland theme park under construction in the city.
They warn, however, that the aura of Mickey Mouse and Donald Duck is no guarantee that Shanghai will continue to be immune to a global economic slowdown that is causing investors to tighten their belts and competitors in other emerging markets to redouble the chase for foreign capital.
The humbling fact remains that Shanghai's first quarter growth of 7 percent was among the slowest of all China's provinces and provincial-level municipalities. That suggests more needs to be done.
One of the biggest challenges Shanghai faces in keeping itself competitive in the foreign investment sweepstakes is rising production costs.
During a seminar with a Norwegian business delegation last month, one official from the solar-products industry posed a telling question: "Why on earth should I outsource my business to Shanghai when the costs are almost the same as in my homeland, if you take transportation into account?"
Many overseas investors are beginning to feel that way. China, hailed as "the factory to the world," is rapidly losing its luster where cheap production is concerned. In big cities like Beijing, Shanghai and Guangzhou, labor costs have risen to almost world average levels.
Business people don't make decisions based on charity. They want returns. China once delivered them big profits. Can it still do that?
Direct foreign investment in China in March fell 6.1 percent from a year earlier to US$11.7 billion, worsening from February's 0.9 percent drop. Just 12 months earlier, such investment was up almost 33 percent.
Shanghai looked exceptional in the data. In March, foreign investors channeled US$1.3 billion into the city, a whopping 46 percent gain.
In the first quarter, foreign investment increased 29.2 percent to US$3.3 billion, making it among the best performers among China's provinces and municipalities.
Based on such encouraging signs, the Shanghai government released an ambitious target for foreign investment of at least US$10 billion a year between now and 2015. It is forecasting that 150 multinational companies will locate new regional headquarters in the city, adding to the 370 already here.
Shanghai also unveiled a grand blueprint to try to channel investment into areas it considers key to its economic restructuring: information technology, high-end machinery, biotechnology, alternative energy, advanced industrial materials, environmental protection, green vehicles, finance, logistics and tourism.
Unfortunately for Shanghai, these are some of the same sectors that other countries have placed high on the priority list of their own economic development.
India is strong in information technology. Germany is a veteran in manufacturing machinery. France is good at developing new energy products, and the US is virtually advanced in everything. Why should investors choose Shanghai instead of anywhere else?