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No time to rest on laurels as investment outlook flags by ferujkll sdff
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No time to rest on laurels as investment outlook flags |
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Business,Business News,Business Opportunities
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Shanghai retains its allure as a destination for foreigninvestment, bucking a nationwide trend of declining overseascapital flows. But here is little room for complacency. In March, the city had more than a 40 percent year-on-year surge inforeign direct investment, while China as a whole suffered itsfifth consecutive monthly decrease. Some analysts attribute Shanghai's good fortune to the magnet ofthe huge Disneyland theme park under construction in the city. They warn, however, that the aura of Mickey Mouse and Donald Duckis no guarantee that Shanghai will continue to be immune to aglobal economic slowdown that is causing investors to tighten theirbelts and competitors in other emerging markets to redouble thechase for foreign capital.
The humbling fact remains that Shanghai's first quarter growth of 7percent was among the slowest of all China's provinces andprovincial-level municipalities. That suggests more needs to bedone. One of the biggest challenges Shanghai faces in keeping itselfcompetitive in the foreign investment sweepstakes is risingproduction costs. During a seminar with a Norwegian business delegation last month,one official from the solar-products industry posed a tellingquestion: "Why on earth should I outsource my business to Shanghaiwhen the costs are almost the same as in my homeland, if you taketransportation into account?" Many overseas investors are beginning to feel that way. China,hailed as "the factory to the world," is rapidly losing its lusterwhere cheap production is concerned.
In big cities like Beijing,Shanghai and Guangzhou, labor costs have risen to almost worldaverage levels. Business people don't make decisions based on charity. They wantreturns. China once delivered them big profits.
Can it still dothat? Direct foreign investment in China in March fell 6.1 percent from ayear earlier to US$11.7 billion, worsening from February's 0.9percent drop. Just 12 months earlier, such investment was up almost33 percent. Shanghai looked exceptional in the data. In March, foreigninvestors channeled US$1.3 billion into the city, a whopping 46percent gain.
In the first quarter, foreign investment increased 29.2 percent toUS$3.3 billion, making it among the best performers among China'sprovinces and municipalities. Based on such encouraging signs, the Shanghai government releasedan ambitious target for foreign investment of at least US$10billion a year between now and 2015. It is forecasting that 150multinational companies will locate new regional headquarters inthe city, adding to the 370 already here. Shanghai also unveiled a grand blueprint to try to channelinvestment into areas it considers key to its economicrestructuring: information technology, high-end machinery,biotechnology, alternative energy, advanced industrial materials,environmental protection, green vehicles, finance, logistics andtourism.
Unfortunately for Shanghai, these are some of the same sectors thatother countries have placed high on the priority list of their owneconomic development. India is strong in information technology. Germany is a veteran inmanufacturing machinery. France is good at developing new energyproducts, and the US is virtually advanced in everything.
Whyshould investors choose Shanghai instead of anywhere else? Gateway to inland Well, one reason comes to mind. Shanghai can serve as an efficientgateway to the inland Chinese market with its vast untappedpotential. The city has traditionally been a starting point forforeign companies wanting to do business in China. It enjoyed a good reputation among foreign investors for thetransparency of its commercial laws and regulations, for its largepool of skilled labor, for its convenient transportation and forits educational and medical amenities. On a more personal level, Shanghai people are renowned for theirhospitality toward foreigners, and many can speak English,Japanese, French, Russia or Spanish.
I heard of cases from friends in the Shanghai Commission ofCommerce where multinational companies have returned to Shanghaiafter enduring less-than-favorable experiences in inland cities.They had left Shanghai in search of cheaper production costs butfound that such price advantages come at other, sometimesintangible, costs. One simple example. A foreigner taking a standard taxi ride is muchless likely to be overcharged in Shanghai than in other cities. Infar-flung places like the northeastern city of Harbin, there aretales of cabbies dumping passengers who won't pay more. It's nice to rest on laurels but also dangerous.
In the five years to 2011, Shanghai attracted US$46.7 billion inforeign investment, roughly US$9.3 billion on average each year.From that perspective, the goals set for the current Five-Year Planthrough 2015 look a bit overly ambitious. To realize its goals, thecity needs to work harder to make itself an even more attractivemagnet for investment. It is striving to do that. Ambitious plans Municipal officials are undertaking ambitious plans to reshapeunderdeveloped areas into major projects such as the HongqiaoBusiness Zone, the Pudong post-Expo Business Cluster, the NorthBund area and Lingang New City. Shanghai is also working hard to recast itself into a globalfinancial center.
Nothing attracts money like a money center. Theplanned International Board in Shanghai, which will allow foreigncompanies to list in yuan-denominated shares, will certainly be asource of further capital incentive. Programs allowing foreignfunds to invest in yuan-denominated assets have been expanded, andnew futures and derivatives markets will provide diversifiedchannels of investment. Foreign investors are being invited to join in the growth ofventure capital, equity investment, financial leasing, financialguarantee and other programs. Which all brings us back to Disneyland.
It was a coup for the cityto get the first Disney theme park on the mainland. Constructionthere and development around the site have been a big shot in thearm for capital inflows. But what happens next? As the late Walt Disney once said: "All our dreams can come true,if we have the courage to pursue them.". I am a professional writer from Network Switches, which contains a great deal of information about sunflower seeds nutrition , chocolate sunflower seeds, welcome to visit!
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