Qingdao has been praised for a decade-long tourism boom and glittering economic growth, but the city's top official warns of a looming crisis caused by a lack of innovation, poor management and rising production costs. The warning by Qingdao Communist Party secretary Du Shicheng comes despite the city setting an ambitious goal to almost double its gross domestic product in the next five years and become a new economic powerhouse. Mr Du said the city, which has a population of 7.5 million, could face a losing battle in the competition with other affluent coastal cities if it failed to transform itself from a construction-oriented economy into an innovative one. 'Although the scale of Qingdao's economy is rather big, we do not have much core and advanced homegrown technology. It is quite risky and it could be hard for an open city like Qingdao [to sustain its economy].' His remarks contrast with the optimism of local officials, who have been busy showing off the bright side of the city: decade-long, double-digit economic growth, beautiful sea views, well-preserved cultural heritage and some of the country's best known brands, such as Tsingtao Beer and Haier. The city's GDP rose to 270 billion yuan last year and grew by 17 per cent year on year in the first half of this year. It attracted more that 25 million tourists last year, including 684,000 from overseas. As the venue for the Olympic water-sport events for the 2008 Games, the growth of its economy and tourism sector are expected to accelerate, according to economic officials. However, Mr Du does not hesitate to pour cold water on the optimism. 'I think the biggest problem the city faces is the sanguine mood shared among cadres and residents, which tends to overlook the problems and risks we have yet to address.' He noted that although Qingdao boasted hundreds of hi-tech private enterprises, most did not have their own core technologies. The energy-starved city is also losing the competitive edge of having cheap labour and low land prices to many inland cities due to its rapidly growing economy and living standards. Mr Du, 56, has been Qingdao's top party official since 2002. He became the city's acting mayor in 2000 and its mayor in 2001 after having served as vice-governor of Shandong since 1995. Qingdao is Shandong's biggest economic centre and accounted for about 15 per cent of the province's economic output of more than 1 trillion yuan in the first half of the year. Like predecessor Yu Zhengsheng , who served as Qingdao party secretary between 1992 and 1997, Mr Du worked in Yantai, the third largest city in Shandong, before his Qingdao postings. Local people still talk favourably about Mr Yu, who developed the eastern part of the city a decade ago and decided to preserve its old quarters, building a foundation for today's development. Mr Du said another bottleneck hindering the rise of the city was the poor governing ability of local cadres. 'With growing public demand for democratic rights, our cadres' performance has lagged far behind the expectation of the people for democracy and the rule of law. 'It is very painful to see that when contingencies occur, the government often reverts to passivity because our cadres do not know how to properly handle people's concerns.' Despite soaring housing prices, a key source of public discontent, Mr Du denied the city's property sector showed signs of overheating. Prices have increased at double-digit rates since 2003 and the growth rate last year ranked second among 35 mainland cities. 'A property bubble does not exist here due to strict control of land supply,' he said, while noting that the Olympic factor had played a big role in the city's construction boom. He said more could be done to curb demand. 'A land supply shortage can more easily lead to problems, such as corruption, than oversupply. 'It is risky that we only tighten control on land without adopting taxation measures to discourage demand.' The city government had begun studying whether the property sector can continue to develop steadily after 2008. He said he was optimistic that the hosting of the Olympic regatta would continue to push the economy even after the Games. 'The Olympic factor has been pretty obvious in Qingdao's development in recent years. It has attracted worldwide attention for the city. 'In my opinion, it will play an even greater role in the five years after the 2008 Games if we can take the opportunity to achieve a breakthrough.' However, he cautioned that it remained to be seen whether the authorities could work out ways to make sure local people truly benefited from the event. 'Hosting the Olympics is surely a fortunate opportunity, but it does not necessarily bring good luck to every host city. It largely depends on how a city manages itself.'