Reforms pay off as growth gathers pace
LED by a surge in its industrial production, Shanghai’s gross domestic product posted a 7-percent growth in the first three quarters of 2017 — a pace last seen in 2015, when economy was boosted by stocks and property market.
The growth this year was largely the result of Shanghai’s efforts to develop the free trade zone and the center for technological innovation.
Also, Shanghai persisted in improving quality and efficiency with innovation and put the supply side reforms into effect as well.
The manufacturing industry picked up in the 9-month period after a period of slump, while the industrial and services industries are developing in a more balanced way.
Value-added industrial output in Shanghai increased by 8.1 percent in the first three quarters from the same period last year. The city’s services output rose 6.6 percent, contributing 69 percent of the local GDP.
The main business income of industrial enterprises above designated scale in Shanghai rose by 12.4 percent from January to August from the same period of last year, with the total profit rising by 15.7 percent.
“The rapid development of industrial companies can be attributed to four reasons. High industrial concentration came with high profits; structural optimization helped to make the demand more resilient; the present distribution patterns are beneficial to companies that help lower the cost and raise the profit rate; capacity utilization rate rose which helped in speeding up the capital turnover,” said Xie Yaxuan, chief macro-economic analyst with China Merchants Securities.
The number of industrial companies declined while the industrial concentration rose due to supply side reforms, helping to turnaround their businesses after years in red.
Demand improved as consumption was steady while external demand margin also rose, offsetting the depressed investment. The producer price index and the Purchase Management Index both rose in the first three quarters, according to the data from Wind Information, a financial information provider.
Indicators showed that the cost rate of industrial companies kept declining while profit rate continued to rise due to policies and measures including tax abatement, encouraging innovation and entrepreneurship, and emphasizing the development of real economy.
The increase of capacity utilization raised the velocity of turnover of capital, which can also help improve the companies’ profits, the China Merchants Securities’ report noted.
Meanwhile, the emerging industry is also playing an increasingly bigger role in the growth process. New energy automobile sector posted a year-on-year 27.9 percent gain, the information technology of the new generation increased by 12.3 percent and the biological medicals was up 9.2 percent.
The large-scale scientific facilities in the Zhangjiang High Tech Park in Pudong serve as a cradle for major scientific and technological development. Basic scientific facilities such as the Shanghai Synchrotron Radiation Facility and the National Center for Protein Science Shanghai will be developed further even as more research centers come up in the near future.
“Shanghai is actively promoting innovation and transformation to reach the target of becoming a global center of science and innovation,” said Gao Qian, director of the Economic Development Department of the Development Research Center of the Shanghai Municipality. “The prosperous economic patterns is like a hundred flowers in bloom and will be improved step by step.”
The reforms helped to stimulate the market vitality. Institutional innovation helps the market to implement the innovative process.
Taking the development of the FTZ as reference, districts in Shanghai have made efforts to streamline administration and delegate power to the lower levels. The increasingly optimized business environment is being transformed into real productivity.
“Both the transformation and upgrading of the service industry and the reinforcement of the integrated management of various regions requires a group of efficient market regulatory enforcers,” Yu Xiaohong, director of the Xuhui market supervision bureau.
The development of financial industry also played an important role in the economic growth. The value-added output of the financial industry grew by 11.0 percent in the first three quarters from the same period last year, according to the Shanghai Statistics Bureau.
Shanghai is accelerating the development of the cross-border interbank payment system and clearing center for the yuan. Foreign institutions and companies are also issuing bonds in Shanghai’s financial markets.
“Shanghai will expand the financial openness and cooperation, relax restrictions on overseas financial institutions, and speed up construction of the Belt &Road investment and financing center as well as a global yuan financial service center,” said Zheng Yang, director of Shanghai Financial Service Office.