Shanghai a world city
the last 15 years Shanghai has leapt forward and positioned itself
as the gateway to China. Now the city is caught between its forward
momentum and the challenges it must overcome.
it - will it - become one of the world's centres for finance,
commerce and shipping? Will it elevate itself into a hub and a
gateway, for China and for Asia Pacific?
seems to me that today's topic is about a dream, the dream of
a global metropolis," said China Daily's Editor-in-Chief
Zhu Ling at the opening of the newspaper's 12th CEO Roundtable
in Shanghai on Friday.
has surprised the world with tremendous achievement along the
way building itself into a centre for the world economy, finance,
shipping and trade."
than 30 business and government executives gathered at Shanghai's
Hyatt Hotel for a discussion on "The World's Shanghai by
the last 15 years we have seen a lot of changes in Shanghai,"
said Edward Tse, managing director of greater China for consultant
Booz Allen Hamilton in his opening speech. "Pudong has changed
into a very modern living and working environment."
own momentum has created challenges that the city now has to overcome.
lot of people have the confidence that Shanghai will continue
to do well," Tse said. "The question is how do we get
it there? How can we as the various stake holders from the business
community as well as the government work together?"
city has a lot to offer, Tse said. It has a reasonable transportation
and infrastructure network with a large port facility, comparatively
ordinary off-market conditions, access to human resources, a location
at the mouth of the Yangtze River Delta, financial institutions
and a comparatively pro-business government with a reasonable
degree of transparency.
the same time, Shanghai has embraced outside influences faster
than almost any other city in the mainland. Look at fast food.
Chu, senior vice-president for the McDonald's China Development
Company, said market penetration of fast food in Shanghai is over
59 per cent, similar to the 65 per cent rate in developed countries.
By comparison, other places in China have allowed a 20 per cent
penetration rate for restaurants such as McDonald's.
as it becomes a more cosmopolitan centre, Shanghai is at a crossroad.
per capita GDP has increased significantly over the last five
to 10 years," Tse said. "Today it is roughly about US$6,000,
depending on what statistic you believe."
should focus on achieving something like US$8,000 per capita GDP
by the year 2008," he said.
way to accomplish this goal is to bring in more foreign investors
in specific fields.
Shanghai government recognizes its limitations on its land, on
its resources, on its environment," he said. "They believe
they have to turn their attention to knowledge intensive, high
value added, lower resource utilization and lower environmental
pollution types of business."
areas that can play a big role are advanced manufacturing and
high-end services such as finance, trade and information.
executive that called for the development of the service sector
was the chairman of Carrefour, the French retail giant with 62
hypermarkets across China.
think it is time to establish a service sector, such as tourism,
insurance companies and consumer rating," said Chereau. "Shanghai
can be the first (in China) to be open to do this kind of business."
it develops even further, Shanghai may just have to tackle a few
issues, said Tse. Among them are diminishing human resources,
the rising cost of real estate and obvious environmental concerns.
issues raised around the table were government transparency and
access as well as a need for better transportation links.
the problems that we are currently discussing are not new to the
major cities in the world," said Ying Yeh, vice-president
of Eastman Kodak.
fact that Shanghai is now trying to tackle these issues is a clear
sign of its growing stature.
Ying agreed that higher costs are a problem that corporations
setting up in Shanghai have to deal with.
the last few years, its relative affordability made Shanghai an
attractive option when setting up shop, she said, after all "a
Chinese PhD is just as good compared to all the other PhDs."
"it is getting more expensive." Corporations need Shanghainese
to help them "provide a more competitive edge."
any business, it is people that make things happen.
banker HSBC makes finding the right people a standing order.
is no shortage of very, very highly qualified talent coming out
of the schools and the universities. The challenge for all of
us is to hire experienced talent," said Richard Yorke, HSBC's
chief China executive.
plans to add 800 staff in the next 12 months, a quarter of them
in Shanghai, he added, and that is not always easy.
of the biggest challenges is the competition for experienced HR
Tse of Deloitte, agreed. With turnover of between 20 and 25 per
cent the company is always on the lookout for talent.
for talent, training, retaining them and developing them into
leaders of our practice is always in the top of our agenda."
tough competition can force companies to rely on expensive expatriates
for their development needs, said Foo Piau Phang, president of
would like to know if there is any way we can relieve some of
the expatriate cost," he asked.
aspect that is lacking is focused education, said Horst Loechel,
board chairman and vice-president of the Shanghai International
Banking and Finance Institute.
is really needed is professional education of a high, high level,"
he said. "It's nice to know a lot of things, but more importantly
is how to use it and make the business more efficiently and more
cost of real estate was never far from the surface during the
luncheon and the hour-long discussion that followed.
McCall, CEO of TNT China, said his company's real estate costs
have shot up in little more than a year.
has gone up 45 per cent in 16 months," he said. "We
can't go to our customers with an increase of 45 per cent every
aspect that may be tackled in the future is relocation of people,
said Nicholas Loup, Grosvenor's managing director for Asia Pacific.
coming out with a better, more effective system for relocation
you can then come up with a plan for redeveloping and providing
more properties in areas where they are needed," Loup said.
who need to be relocated should not be moved to the far reaches
of the city, rather, affordable housing should be built not far
from where they live and work.
the cost of real estate is a growing concern, said McCall, so
is the ability to get to work or move products and people within
the city, the country and beyond.
would say people and infrastructure are clearly the two most important
things if Shanghai wants to be a truly international hub and a
hub of Asia."
said the cost of logistics in China is double what it is in other
parts of the world. While the average spent on logistics in developed
countries is between 9 and 11 per cent of GDP, the cost in China
is between 18 to 22 per cent. The difference, some 140 billion
euros (US$180.60 billion), could be spent on upgrading infrastructure.
have to be a low cost provider. It is very difficult to be in
Shanghai," he said.
difficulties - and regulatory problems - can have very practical
effects. Among other things, those difficulties put Shanghai at
a disadvantage in the fashion world, said Pierre Denis, regional
managing director of Asia Pacific for LVMH Perfumes and Cosmetics.
could become a major international fashion city but "what
counts is to have the products first."
Shanghai the import situation is a little bit complicated. We
are one month behind," he said.
said McCall, logistics can hurt any development effort.
if you drive you understand. People don't have licenses. People
have no insurance - Just coming to Pudong is very difficult."
some executives, hassle-free access to the world is a top priority.
to have large flexibility in things like access to the airport
without queuing for hours. Need to have flexibility of visas.
Need to have flexibility of moving the goods and services,"
said Christian Reinaudo, Executive Vice-President and Asia Pacific
world-class airliner - akin to Cathay Pacific - would give the
city a big push towards that flexibility, added Jack Lin, CEO
of Franklin Templeton Sealand Fund Management.
logistics, there were also legal concerns that will need to be
addressed as Shanghai looks towards 2020.
Shanghai were to be a financial centre of China or the region,
we need to work towards getting a transparent capital market here,"
the most urgent issues, however, is IPR protection. IPR plays
a role in a lot of industries, from fashion to high tech and entertainment.
whole world entertainment industry obviously very much believes
in China," said Andrew Wu, Managing Director of Sony BMG
Music Entertainment (China).
has a very important role to play because the Shanghai government
wants Shanghai to become the cultural centre of China," he
is related to law and order. Law and order should not be just
in theory but in practice."
cost of doing business in Shanghai is rising but the cost of IPR
violations in Shanghai is going down - that is not a good match."
have to raise the cost of violating IPR issues in Shanghai. And
that can be done, I'm sure."
important area is access to the government, said Anne Lam, chief
representative at the Shanghai office of Fidelity Investment.
always find it difficult to communicate to the related government
is one area where Shanghai can take the lead in the next few years
in environmental protection, said Peter Leupp, chairman and president
of ABB China.
Shanghai and China face numerous environmental challenges but
the city, as the financial engine of the country, could stay one
step ahead. China is consuming energy at a rate 10 times the rate
of the developed world.
is in environmental protection that there are opportunities for
improvement from which "you get immediate payback in a few
particular concern was the high consumption of energy coupled
with a lack of supply.
all know that we are facing power shortages, but I think nobody
can imagine a power outage during the World Expo (in 2010),"
said Leupp. "I think this is an area where Shanghai really
has to work."
could also lead by complying with worldwide environmental agreements
before it has to.
thing Shanghai can do is take a leadership position in areas China
does not need to legally comply," Shane Tedjarati, president
of Honeywell China.
example, China has until 2040 to comply with the Montreal Protocol
and eliminate ozone-depleting refrigerators. Europe has already
complied and the United States is expected to by 2009.
think Shanghai can show a leadership position in the areas the
can easily do with very little extra cost to the consumer, very
little extra cost to the government but it can show it cares about
avenue open to both the city and its corporate citizens is to
focus on energy saving at the same time as it increases capacity.
is talking about adding capacity on the energy supply but I think
it is also very important to saving on the energy supply,"
said Elmar Stachels, managing director for greater China for Bayer.
both sides you have the advantage. Less energy supply and less
pollution on the environment - Beijing is talking about the green
Olympics, I think Shanghai should talk about the green metropolis
in Asia Pacific and we hope to help."
area the city may have to seriously consider is transportation.
would like to see an improvement in the environment in terms of
traffic, public transport, pollution related to the energy consumption,"
said Ian Thackwray, corporate vice-president of Dow Corning Asia.
future is anything but settled. Without a doubt, there are challenges
ahead, but history has shown that there is also great opportunity.
are increasingly more concerns about Shanghai but there is increasing
interest to come to Shanghai. The two forces are in a bit of a
tug of war," said Dr. Tse.
said Shanghai's authorities can continue to improve the legal
environment, improve IPR protection, look to attract more and
better trained workers fluent in both English and Chinese, work
towards improving the environment and provide more facilities
that would make life more attractive for foreign families.
we move to the year 2020 we would likely see Shanghai as a very,
very international metropolitan area," Tse said.
China Daily's Zhu, Richard Lee, the China chairman of a company
that sells Ferrari and Maserati vehicles sees Shanghai as a place
that makes more than just products and services.
to be an international city, needs to be a manufacturer of dreams."
(June 21, 2005)