Focus on high-end manufacturing, tech-driven modern services pays off
Shanghai has reaffirmed its credentials as a long-term investment destination, as its resilience on high-end manufacturing and tech-driven modern services helped offset the downtrend due to the novel coronavirus outbreak, according to official data.
While the city’s total economic output contracted 6.7 percent in the first quarter, strategically-emerging industries that are technology-intensive posted a 3.6-percent decline, milder than the entire industrial sector, according to latest economic indicators published on Monday.
Output of industries like new generation information technology jumped 15.3 percent on a yearly basis, while that of new energy cars grew by 5.7 percent year-on-year.
Despite posting a 9.3-percent slide in fixed asset investment, investment in manufacturing soared, recording a 12.1-percent year-on-year growth and outstripping the national reading by 37.3 percentage points.
Among them, six key industries, including electronic information manufacturing, petrochemicals and refined chemicals and biomedicine posted 28.9 percent growth in investment, accounting for over 80 percent of newly added investment in this area.
Manufacturing, especially in innovation-rich industries, has been perceived as a stabilizer in economic development, and is key to strengthening economic resilience, said Deng Zhituan, a researcher at the Shanghai Academy of Social Sciences.
“Compared with the service sector which was dealt the heaviest blow by the contagion, manufacturing activities are quickly regaining momentum. This will help mitigate the overall negative impact on the local economy,” Deng said.
“We are committed to the China market and will continue to invest in production and research and development that will support the national priorities on sustainability, circular economy and open innovation,” said Holly Lei, president of the Chinese unit of German chemicals giant Covestro. The company is planning to upgrade its regional headquarters in Pudong, Shanghai, to further expand its scope to include functions such as R&D and accounting.
“The extraordinary performance in advanced manufacturing is highly inseparable from the notable achievements China made in terms of epidemic control,” said Luo Changyuan, an economics professor at Fudan University. “First-tier cities like Shanghai are among the first to see a resurgence in investment and foreign capital utilization.”
But other factors are also at play, such as market scale, human resource advantages, as well as a comprehensive package of policy instructions to facilitate business and improve the business environment, Luo said.
For instance, among the latest efforts to promote social economic development while taming the novel coronavirus outbreak, the city unveiled last month 26 special industrial parks, each around 3 to 5 square kilometers, an additional 60 square kilometers of new industrial space; and the Shanghai Investment Promotion Platform.
The dedicated platform aims to function as a smart service platform to attract investment. It has aggregated 400 policies, covered 200 industrial zones and 3,000 office buildings, and provided over 200,000 pieces of industry-specific information.
Meanwhile, 152 major investment deals worth 441.8 billion yuan ($62 billion) were signed, concentrating on sectors like integrated circuits, artificial intelligence, biopharmaceuticals, aviation and aerospace, and intelligent manufacturing, all of which are in line with Shanghai’s pledge to move toward high-end manufacturing and seek high-quality economic growth.
Apart from the scene-stealing manufacturing investment, the services sector, which accounts for roughly 70 percent of Shanghai’s GDP, ebbed 2.7 percent to 609.6 billion yuan, thanks to technology empowerment to help many businesses weather the storm.
Industries with a high level of internet penetration, digitalization and innovation bucked the overall gloomy trend, with the information and software-related sectors posting 13.1-percent year-on-year growth.
This was followed by 7.3 percent in financials, and 5.2 percent in education, as well as 23.5 percent in healthcare and social work due to the dedication in combating the virus. The above four industries boosted citywide economic growth by 3.1 percentage points.