CHINA ECONOMIC REVIEW recently conducted a survey to gauge reader attitudes toward Shanghai as a business and financial center.
The survey had three parts: "Shanghai’s business environment," "The Expo’s effect on Shanghai" and "Shanghai as a financial center." The survey was sent by email to 13,313 people; 339 clicked to start the survey and 106 finished it, giving it a 9% margin of error, based on 95% certainty, or 8% margin of error, based on 90% certainty.
Survey participants came from a range of sectors including manufacturing, energy, and consumer industries. About three-quarters of respondents have head offices located in Shanghai, though their primary markets are split among Shanghai, China ex-Shanghai and other.
Shanghai’s business environment
To gauge perceptions of Shanghai as a business center, participants answered questions on the strengths and weaknesses of Shanghai as a business center and how these factors will affect future development of the city.
Participants rated Shanghai according to five business criteria – geographical location, infrastructure, tax structure, bureaucracy, and cultural factors – from one, "weak," to five, "strong". Overall, the response was positive: almost 89% of those surveyed responded that Shanghai’s geographical location was a strong or fairly strong advantage for the city, and the city’s infrastructure was viewed as strong by over 41%. The tax structure and bureaucracy of Shanghai were not as highly rated; these areas are viewed as average by 40% and 39%, respectively, of those surveyed.
When asked to what degree regulation, talent pool, government economic policy, home-office relations and cultural issues have been a challenge for their businesses, responses were less enthusiastic. On a scale from one to five, with one indicating "little challenge" and five "great challenge," more than a third of respondents gave Shanghai’s current regulations and talent pool a four, indicating they are a significant challenge. Home-office relations, cultural issues and government economic policy were most frequently rated as an average-size challenge.
Participants also were asked to rate – again on a scale of one, a "small threat" to five, a "great threat" – to what degree property and other asset volatility, government economic policy, insufficient/poor infrastructure, inefficient bureaucracy and poor governance threaten Shanghai’s prospects for growth. More than half of respondents gave property and other asset volatility, government economic policy, pollution and inefficient bureaucracy a four or five, indicating that they are viewed as sizeable threats to Shanghai’s growth prospects.
Despite these issues, the participants’ overall views of Shanghai are positive. When given the choice between agreeing and disagreeing, the majority of those surveyed agreed with the statement that Shanghai’s business environment compares favorably with other international cities. Additionally more than three-quarters of those surveyed said the city had changed for the better since their arrival.
The Expo’s impact
Although more than half of respondents reported that their companies would not be directly involved in the Expo, more than 70% expect their business to benefit either directly or indirectly from the Expo. When asked to indicate the degree to which the Expo will benefit Shanghai, almost half of responses indicated that infrastructure, global awareness and the city’s tourism industry would "greatly benefit" from hosting the 2010 World Expo. Fewer than 6% of respondents believe that Shanghai will not benefit at all from hosting the Expo.
Shanghai as a financial center
Despite the forthcoming benefits of the Expo and the emergence of Shanghai as an economic hub, when given the option to disagree or agree with the statement that Shanghai will replace Hong Kong as an Asian Financial Center, the majority of respondents disagreed. However, Shanghai was chosen by approximately half of those surveyed as the "most important" city in terms of decision-making on financial center development in China.
Opinions on whether Shanghai’s regulatory framework is developing quickly enough to keep the city attractive as an investment target were inconclusive. Almost 40% agreed that it is developing at a fast-enough pace, while just over 30% disagreed and another 30% declined to respond.
Respondents saw the lack of currency convertibility and international focus in policy making, little regulator transparency, and a limited number of financial instruments as significant barriers to Shanghai establishing itself as a global financial center. Lack of currency convertibility and lack of regulatory transparency are the areas of biggest concern; these issues are regarded as a "great concern" by 54% and 44% of respondents, respectively, and as a "fairly great concern" by 23% and 29%, respectively.
To streamline rules guiding foreign investments in Shanghai, almost half of those surveyed suggested that improving professional service standards and environmental improvements would be "very important." Additionally, respondents viewed clarifying and improving enforcement of existing rules as more important than implementing new rules.