The Shanghainese often say their city is 20 or 30 years ahead of the rest of China. As well as the vertiginous skyscrapers, Shanghai has a relatively well-developed social welfare system, some high-end companies, and tends to pay more attention to the well-being of its residents than other cities.
But if the rest of China only reaches Shanghai’s current level in two decades’ time, then we are all doomed.
Because in reality Shanghai is failing to move up the value chain. Right now, according to Chi Hong, the deputy director general of the Shanghai Municipal Government and Reform Commission, the city is still in a "late industrialization" phase. Which is a polite way of saying that for all the talk of Shanghai becoming Asia’s financial capital and a modern city, it is still a big grimy old manufacturing town.
According to Mr Chi, the rate of return on hi-tech investments in Shanghai is very low. "Usually high technology means high risk and his return," he said. "But this is not the case in Shanghai. Here, companies generate 5.94 yuan of profit for every 100 yuan they spend in low cost industrial investment, but only 1.3 yuan for high technology investment".
He said the government was working hard to fix the situation, but did not reveal what was causing it. Perhaps the high cost of offices and space in Shanghai is to blame. Perhaps it is because there is not enough genuine talent to feed into creative industries. That would push up wage costs. The reason that Mr Chi gave was that the so-called "high technology" industry in Shanghai is actually just made up of component manufacturing businesses and electronics sweatshops.
It seems odd, with all the government help, that Shanghainese hi-tech firms cannot turn in higher profits, but until they do, it would be difficult to say the city is moving rapidly up the value chain.
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