Shanghai will slash about 400,000 workers from its state-owned enterprise payroll by the end of next year, marking the final stage of its decade-long industrial restructuring. Huang Qifan, director of the Shanghai Economic Commission said: 'More than a million workers left their posts between 1990 and 1998. In the next two years, we still need to shed more than 200,000 workers each year.' This will remove the 30 per cent of surplus workers in the state sector. The industrial workforce, including migrant workers, will then stand at about 3.6 million from five million a few years ago. 'These cuts will mean labour productivity, as measured by value-added per worker, will rise to 70,000 yuan (about HK$65,000) by 2000 from 20,000 in 1990,' he said. A hub of the country's centrally planned economy, Shanghai was forced to take the lead in restructuring it moribund state enterprises in the early 1990s after it was designated the 'dragon head' to help stimulate growth in the hinterland. Unlike the inner or northeastern provinces, it was able to proceed with the painful process as it was a favoured mainland destination for foreign investors who helped to create jobs for those who had been made redundant. Mr Huang said for this year, about 226,000 workers would lose their jobs due to restructuring, but these would be sent to re-employment training centres to equip them with new skills. However, he said only 60 per cent of these workers were expected to find new jobs, while the remaining 40 per cent would have to wait. 'By the end of the year, not more than 100,000 workers will remain in the re-employment centres,' he said. The latest round of cuts was smaller than last year's which threw 395,000 people into unemployment, although more than half have since been re-hired. Traditional industries such as textiles, metallurgy, measuring instruments, and consumer electrics have been among the biggest victims in the march towards industrial modernisation which has shifted the focus to capital-intensive and tertiary sectors such as telecommunications, car manufacturing, commerce and financial services. On the economy, Mr Huang said industrial output was up 11.6 per cent in the first four months; exports had risen 18 per cent, and contractual foreign investments had increased 12 per cent. 'The level of foreign investment this year will essentially match last year's,' he said. This is partly because Asia's recovery, expected to pick up in the second half, will see investments coming back from South Korea, Hong Kong and Taiwan. Meanwhile, Europe and the United States remain keen to invest in the city, Mr Huang said. 'We have also changed our methods of attracting foreign investment, and now we strongly welcome foreign investors to run wholly owned subsidiaries, buy state enterprises' excess capacity, and to expand their capital base.'