Shanghai is under pressure to chase industrial output growth as an increasing number of manufactures relocate facilities to other parts of the country, baulking at the city's higher land and labour costs.
Zhou Minhao, a deputy director of the Shanghai Commission of Economy and Information, told a media briefing yesterday that the city's industrial sectors, grappling with a global slowdown, would play a diminished role in the local economy that is already the slowest-growing among the nation's provincial-level regions.
'Manufacturing firms, both foreign-funded and homegrown, have increasingly sought to move out of Shanghai,' Zhou said. 'Some of the relocations were aimed at cutting costs while other companies were trying to get closer to the untapped markets.'
He didn't provide the number of relocations and the amount of investments withdrawn from Shanghai, known as the country's economic locomotive in previous decades.
Due to the limited supply of land for industrial use, Shanghai's manufacturing sectors slowed in the past years amid few fresh investments.
The city's industrial output grew 6.6 per cent from the previous year in 2011 and Zhou predicted the growth would slow to about 5 per cent between 2012 and 2015.
'The bleak outlook for the global economy is expected to further drag down the growth of local industrial companies,' Zhou said. 'A turnaround won't occur until the global economy recovers.'
In the first quarter of this year, the city's industrial output grew a scant 0.8 per cent from a year ago.
Exports by Shanghai's manufacturing sectors declined 5.5 per cent in the same period owing to the weaker external demand.
Shanghai has been striving to adjust its economic structure, shifting focus from the manufacturing industries to service sectors such as finance and shipping.
However, the efforts proved unsuccessful because the central government was wary of drastic liberalisations on the financial markets.
Since Shanghai unveiled its ambitions to become a global financial centre in 2009, few concrete steps have been taken to achieve the goal.