Mayor's view: Shanghai by 2020

The following is the full text of the speech by Mayor Han Zheng in meeting with the delegates to the China Daily CEO Roundtable in Shanghai.

I believe everybody in the room has some knowledge about the past and present of Shanghai. Under the guidance of the central government, Shanghai is considering its plans.

Next year, our country will launch the 11th Five-Year Plan (2006-11). Shanghai is also set to draft its social and economic development plan for the period.

The general goal of our city is to become an international economic, financial, trade and shipping centre. This goal was tailored for Shanghai by the central government and matches the theme of this roundtable - 2020: The World's Shanghai.

We designed two stages for the achievement of our goals.

The first is to build a framework for an international economic, financial, trade and shipping centre by 2010. The second stage is to fully accomplish that by 2020.

An international economic centre should first tap its potential as a metropolis. Its industrial structure, in particular, should be developed as those of international cities. Shanghai has mapped out an industrial structure that puts the "service industry first, manufacturing second, and agriculture the third."

As it has done since the 1990s, Shanghai is going to give priority to the modern service sector. The service sector now accounts for 48 per cent of Shanghai's GDP, compared with 30 per cent or so in early 1990s. The 48 per cent ratio takes into account the suburban areas of Shanghai. If we only count the figures in the 600-square-kilometre urban area, the ratio is between 75 to 80 per cent, and it is comparable to that of New York or Paris.

The development of the service sector matters to the nature and function of Shanghai. We are changing from a manufacturing and commerce-themed city into an international economic centre. Development of the service sector is key to the change. I think the service sector will grow further growth in the next few years.

Shanghai's financial industry will grow further under the leadership of related central government administrations. The financial industry in Shanghai already has a solid foundation. Shanghai is home to the country's capital market, foreign currencies market, many futures exchanges, a diamond market, gold market and property exchange.

However, we are still lagging in the extent of internationalization, but we have a way to tackle this issue. The Shanghai Municipal People's Government is fully committed to developing an international financial centre.

The financial industry is the core of the modern economy and the key to the development of our service sector. Besides that, the information and logistics industries are also very important. The information industry has surpassed finance, automobiles and real estate to become Shanghai's largest industry. But now the output of the industry is mainly generated by manufacturing rather than service. Information services will be a priority in our future plans.

Besides the service sector, our manufacturing industry will still continue to make progress in the future. Shanghai has historically been the country's manufacturing centre and in the city's suburbs manufacturing will boom.

In manufacturing, the automobile industry will have major growth. Shanghai will ultimately have a production capacity of 2 million automobiles each year. This does not include the output from Shanghai manufacturers' workshops outside the city.

Another important area is equipment manufacturing, especially accessories for major industries, such as rolling stocks and parts for building ships. Baosteel now has a yearly output of more than 20 million tons of iron and steel products. I think the volume is big enough but we can upgrade the product structure by producing more refined steel.

The petrochemical industry will also see fast growth in the next a few years. There is now a 50-square-kilometre chemical industry park along Hangzhou Bay, where I think some of you may have investments. I believe it will become a world-class chemical industry zone.

Shanghai's strategy in the next five years is to fully develop modern service in the urban area and foster advanced manufacturing in the suburbs. This is the direction of the adjustment of Shanghai's industrial structure. The key to this adjustment is technological innovation.

From the past to the present and from the present to the future, Shanghai needs to fulfil several major changes.

First is to transform the economic system from a planned system to a market-oriented one. All our jobs, including the shift of the government's role, must be in line with the transformation. The point is to let the market play a fundamental role in the distribution of social and economic resources.

The second is to transform from a manufacturing-and-commerce-based city to an economic centre. The key to this job, as I've mentioned, is to optimize the industrial structure.

The third is to shift the focal point of urban construction from bailing out non-performing projects to building an international infrastructure pivot network. Shanghai is moving ahead towards this goal.

In the past, Shanghai was a major port city, and it will become a world-class port in the future. I would like to share with you some numbers of which I am pretty confident: The cargo handled through Shanghai's ports will exceed 400 million tons this year, a volume no port in the world achieved last year. In particular, container handling will surpass 17 million TEUs (twenty-foot equivalent units) this year, up 3 million TEUs from last year. Based on this growth the volume will likely exceed 20 million TEUs next year. By my reckoning the growth of Shanghai's handling capacity will continue to grow at three million TEUs each year.

Now we have a solid foundation for further growth of port's handling capacity. The first-phase project of the Yangshan deep-water port will be finished and start operation in the fourth quarter this year. The bridge linking the port to the mainland, which is more than 30 kilometres long, was nearly completed last month when its two ends met. It will open to traffic in late October or November. The first-phase of the Yangshan Port, with five deep-water berths, will start operating in the fourth quarter this year. The second phase, with four more berths, will start operating next year. The third phase is being prepared now. Shanghai's ports are developing under strong conditions.

With regard to airports, the Pudong International Airport, designed by the central government to be a pivotal port, is undergoing construction of its second phase. The second runway is in operation and we are preparing for the third. A new passenger terminal covering 400,000-square-metres is under construction. So far everything with the construction is going well and we are confident it can be open by 2008. We have a goal that by 2010, when Shanghai hosts the World Expo, the Pudong International Airport and the Hongqiao International Airport will together be able to serve 80 million passengers a year.

The express railway network linking Shanghai to the Yangtze Delta is being optimized. Construction of inter-city express railways is speeding up under the plan of the Ministry of Railways.

These are also some short-term goals and they will push Shanghai's transformation as an infrastructure pivot for the world and the entire country.

The fourth transformation is to change the city's economic growth from quantity-based to quality- and efficiency-based, blazing a trail that features technological innovation and improvement in the quality of human resources. It demands greater courage.

The city of Shanghai, like your enterprises, needs constant innovation, which is indispensable for any city that wants to grow by leaps and bounds. The government needs to cultivate an environment that encourages innovation. Certainly it is very important to rely on technological progress and a strategy of rejuvenating the city through science and education that will improve the quality of human resources.

As long as we can fulfil the four changes mentioned above and if we shift the government's function successfully according to the central government's requirements, Shanghai will develop well. In future reforms we will shift the government's role faithfully.

These are the changes that will take place or are taking place in Shanghai. But there are also challenges and bottlenecks we have to tackle.

First, we need to strike a balance between economic growth and protection of the environment. I envy many cities in America and Europe that have a nice environment. But it is impossible for Asian cities where land is so scarce in per capita terms.

Today Shanghai has a de facto population of 20 million. The environmental conditions created by 20 million people are totally different from those created by 10 million. Considering the high population density and the limited per capita possession of land and resources, it is a big test for the government to achieve harmony between economy, society and the environment.

We have to crack the nut. The only way out is to develop a recycling economy in Shanghai. We must promote the concept of an economical society - to save energy, save resources, and save every inch of land. Meanwhile we have to make efforts to protect the ecology. The municipal government has decided that the input in environmental protection in the future should not be less than 3 per cent of Shanghai's GDP.

These efforts are paying off.

From 2003 to the end of last month, first-and second-rate weather days were up to 85 per cent of the total. The municipal government will work with more dynamism to treat Shanghai's water and air according to the law.

As you have seen, Shanghai is creating more and more green land. We plan to increase Shanghai's per capita possession of green land to 12 square metres within the term of this administration (2003-08). Last year, Shanghai was awarded the "national garden city" award. It was a hard-won merit, but we will not stop and will continue to work hard.

The second issue is Shanghai has very limited resources, especially energy and land. There are few resources that can be supplied locally so the city has to save as many resources as it can. In this regard, we focus on three areas.

The first is to save land. Land is not recyclable and we have to treasure every inch. The second is to save water, which is the most important resource to human development. Shanghai does not lack water, but lacks good water. So Shanghai suffers water shortages in qualitative terms. Shanghai has to make tough efforts to protect water resources for the sake of our future generations. The third is energy sources. Currently Shanghai's energy is mainly supplied by coal. I think in the future Shanghai's energy source structure should be a mixture of coal, natural gas and oil - with a sound and safe proportion. We will also follow the central government's plan to increase the use of natural gas.

The third challenge is tackling the many social issues created by the city's huge population. We always say, "people first," which means all the government's work is for the public. To be frank, as the mayor of Shanghai, there are several problems to deal with. First, with a population of 20 million - 17 million of them permanent residents, Shanghai now sees growing employment pressures. We must create more jobs. The registered jobless rate in Shanghai is 4.5 per cent, which indicates relatively sufficient employment. I hope the situation will last. This is also a fundamental factor in our pursuit of a harmonious society. Today you can see our citizens in the street wearing happy faces and one of the biggest reasons is they have jobs.

Also, we have to face the problem of an aging society. Now people older than 60 make up 19 per cent of Shanghai's permanent residents. Twenty per cent is the threshold of an ageing society according to the United Nations standard. Shanghai is approaching that point, given that its population is now in negative growth. I am pretty sure Shanghai will become an ageing society before my term of office expires in two years and a half or maybe as quick as next year. To make our senior citizens happy, allow them to contribute and ensure them a comfortable lifestyle is an important part of building a harmonious society. Everybody gets old, and if today we think about our senior citizens, tomorrow someone will take good care of us the same way.

We have taken a series of measures to improve the welfare of senior citizens and take care of those who are single. The municipal government has increased expenditure in this aspect.

We also need to create a sound social security system that covers all walks of life, which is very important to nourishing a fair society. The social security system should be compatible with the city's size, the extent of its economic development, and the livelihood of its citizens. Our social security system has taken shape, which includes unemployment insurance, health insurance, pension insurance, work injury insurance and pregnancy insurance.

This is a brief introduction to Shanghai. Thank you.

Questions&Answers:

Dr Elmar Stachels, Managing Director, Greater China Country Group, Bayer China Co Ltd: It is very difficult to raise questions after your very comprehensive elaboration on all topics, which is very impressive, responsible, and professional. My question is: Is it possible to build the kind of community where industry, academic institutions and the government work together? In a sense the companies will introduce their contribution to, for instance, energy saving and other technologies. I think many of us have a lot of know-how with regard to environmental protection. If we form a community to bring all these ideas together and then implement a market plan to promote Shanghai into a green Asian-Pacific metropolis, do you think it is a realistic or feasible approach?

Mayor: Your question indicates that you love Shanghai very much. The Shanghai municipal government cares a lot about learning from other world cities. We see their success as the fruits of human civilization. I am very pleased to introduce you the IBLAC (International Business Leaders Advisory Council for the mayor of Shanghai). The council has been meeting for more than a decade every year for this purpose. World-class economists and senior executives from multinationals participate. They have made a lot of suggestions on Shanghai's development and we took many of their suggestions. Now we are facing very tough challenges in our development, and we need a world perspective, world talent and world expertise. We will continue to listen to your opinions and are open to new ideas from you.

The government has procedures to discuss these ideas and opinions. For example, I have several environment experts who advise me directly, including Mr Klaus Toepfer, former German environment minister and now the director of the United Nations Environment Programme. He gave me many good suggestions. Thanks very much for your suggestion.

Actually now every job is multi-disciplinary and comprehensive. So having forums and discussions by experts from different disciplines, like this roundtable, is valuable. You know much about Shanghai after living here for three and a half years, and you'll know more in the future. Please feel free to write to me with your ideas at any time. Thank you.

Guy Russo, President, Greater China, McDonald's China Development Company: Thank you very much and I was also very impressed with your introduction to Shanghai. I've only lived here for two and a half days. I moved from Australia to work for McDonald's China. I was interested in your comments on the service industry and was wondering what we could do to help the government and the mayor to achieve your goal?

Mayor: McDonald's is quite successful in Shanghai. You really grabbed the hearts of the younger generation and kids. I tell you a secret in the Chinese market: you get the kids, and you get everyone. Six adults look after every child: The parents and four grandparents. If one adult accompanies the kid to McDonald's each time, there are six visits in a round. My suggestion is if you can develop something for the elderly, it is going to be very successful.

Anne Lam, Chief Representative of Shanghai Representative Office, Fidelity Investments Management (Hong Kong) Ltd: Can you enlighten us on what measures you would consider on training of human resources for the banking and financial industry?

Mayor: The financial system of a country is integrated, so the development of Shanghai's financial industry is part of the development of the national financial system. It takes several indispensable elements to be a financial centre. The first is world-class financial institutions. The second is an environment suitable for the growth of an international financial industry, including a compatible regulatory system. Third and also the most important is talented financial professionals.

Another thing is innovation of financial products. Shanghai now already houses many financial institutions, while there is still a need to optimize the market environment and we are short of professionals. Human resource is the most important factor in developing the financial industry.

To be candid, Shanghai is lagging in this aspect. We are taking measures to address it. First, we are strengthening the training for more financial professionals. Second, we are also seeking international co-operation. Third, we are trying to make Shanghai a magnet that attracts talented people. We have noticed the gap and we are making efforts. We believe the gap is going to be narrowed. Thank you.

(June 21, 2005)

 
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