Without World Expo, investment pace slows in Shanghai
Shanghai has started to feel the pinch of slowing infrastructure construction following the 2010 World Expo, threatening the city's role as the mainland's growth engine.
Fixed-asset investment between January and June was 197.6 billion yuan (HK$238.76 billion), a drop of 5.8 per cent from a year earlier. This is the first time since 1999 the city has reported a decline in fixed-asset investment, according to Cai Xuchu, chief economist of the Shanghai Statistics Bureau.
'The decline was a result of a capital crunch after the World Expo,' Cai said yesterday. 'A drop in investments does have a negative impact on the economy.'
The city government spent US$95 billion on infrastructure, including the metro rail network, in the two years before the six-month World Expo, according to real estate firm Jones Lang LaSalle.
Analysts said the scale and pace of infrastructure construction, a major component of fixed-asset investment, in Shanghai in the run-up to the expo was unprecedented.
Fixed-asset investment, along with exports and consumption, has long been the major driving force for the mainland economy.
In the first half, Shanghai's investment in infrastructure projects declined 31.3 per cent from a year ago to 46.7 billion yuan.
Cai said the slowdown could last up to three years.
Shanghai is grappling with difficulties in financing infrastructure construction. Shanghai Rainbow Investment Corp recently asked for an extension on its bank loans as it was unable to repay short-term loans of several hundred million yuan.
Rainbow Investment is a government-backed financing vehicle responsible for raising funds and overseeing the construction of a transport hub in the city.
The city's gross domestic product expanded by 8.4 per cent in the first six months, making it, according to Cai, one of the slowest-growing province-level regions in the country.
The city's year-on-year GDP growth in the same period last year was 12.7 per cent.
Shanghai's first-half GDP growth this year was 1.2 percentage points lower than the national figure.
'Shanghai's status as the country's economic locomotive is history,' said Xu Mingqi, a researcher at the Shanghai Academy of Social Sciences. 'The city's efforts to shift focus from manufacturing to services means its economy will be growing at a slower pace for many years.'
Shanghai is striving to transform itself into a global financial and shipping centre. Since 2009, its economic growth has lagged domestic rivals amid a slowdown of the manufacturing sector.
Last year, the city's GDP grew 9.9 per cent, compared with the national figure of 10.3 per cent.
Export growth, however, remained on a fast track in the first half. Outbound shipments rose 17.6 per cent to US$98.2 billion. Retail sales topped 2.1 trillion yuan, up 19.9 per cent from a year earlier.
8.4%
The percentage by which Shanghai's GDP expanded in the first six months of this year, against 12.7 per cent a year earlier
