Shanghai, the mainland's financial and port hub, registered less than expected economic growth of 3.1 per cent for the first three months of the year, sparking concerns it might miss the 9 per cent target for the year. Observers blamed the sluggish pace, only half of the country's 6.1 per cent average growth rate, on the city's exposure to external factors and rising industrial costs. They also warned of a protracted period ahead of slow growth after the city achieved double-digit growth above the national average in most of the past two decades. 'The figures are ugly and jaw-dropping on the first look,' said Pan Yingli, a professor at the Shanghai-based Jiaotong University. 'But on second thoughts, the below nationwide average results make sense given the fundamentals of Shanghai's economy. The city is sandwiched between pent-up overseas demand and its own deep-rooted inherent troubles.' Shanghai's economy has not shown signs of picking up from last year's 9.7 per cent growth, which snapped a 16-year streak of double-digit advances. Its first-quarter growth was also slower than in other regional economies, such as 5.8 per cent in Guangdong and 6.1 per cent in Beijing. Crippled by plunging orders, the city's industrial output shrank for a second quarter, posting an 8.1 per cent decline from January through March. The volume of its import and export trade plummeted 26.3 per cent year on year to US$55.2 billion while contractual foreign direct investment also fell 8.9 per cent. 'Foreign enterprises and export-oriented industries play a bigger role in Shanghai's economy than most other mainland provinces,' said Lu Ming, a professor at Fudan University. 'Rising operational costs are driving the manufacturing sector, once an important component of the local economy, away to other parts of China, if not other countries.' Shanghai, the first mainland city to break the US$10,000 mark in gross domestic product per capita, has become a less favourable destination for manufacturers because of rising labour costs and vanishing preferential tax policies. In February, leading chipmaker Intel announced it would shift its assembly and testing facilities from Shanghai to Chengdu, affecting more than 2,000 jobs. Washing machine giant Whirlpool closed a factory in Shanghai earlier this month, laying off 600 workers. 'It's unfortunate this inevitable transformation coincides with the global economic crisis,' said Professor Pan. 'With this double whammy challenge expected to continue at least in the near term, I think the slow growth rate would sustain itself for at least a few years.' In a move to strengthen its economy, Shanghai, endorsed by the central government, announced last month its ambition to transform itself into a regional financial and shipping hub by 2020. The municipal government promised to liberalise 'advanced service industries'.