Expo's history, now what's the future? (2)

08:39, February 22, 2011      

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For global investors to invest in yuan products, they need financial instruments that are safe, stable and easily sold. At present, China offers them none of the above, according to Sun. Clearly, a market with limited foreign investment, no matter how large its volumes, can hardly be called a global center.

Over time China may relax its grip on financial services regulation. The country initiated a pilot program allowing the yuan to be used in some cross-border trading and is expected to expand the program to allow companies to do some overseas deals in yuan. But there have been no signs that changes to the controlled currency-exchange mechanism are imminent. Shanghai is left cooling its heels.

Sluggish reform

Last year, the value of Shanghai's financial sector expanded 4.9 percent from 2009 to 193.1 billion yuan, according to the local statistics bureau. The pace slowed 20 percentage points from a year earlier due to sluggish financial reform and the bleak performance of the Shanghai Stock Exchange.

Transactions on the exchange dropped 12 percent last year to 30.43 trillion yuan, and the Shanghai Composite Index had the ignominious distinction of ranking among the worst-performing in the world.

The broader services sector in Shanghai reported 5 percent growth in 2010, to 961.8 billion yuan, but that performance fell short of the overall economic growth rate of 9.9 percent and largely reflected the visitor benefits from the Expo.

In Shanghai's Five-Year Plan from this year, city officials have laid out three major projects they consider strategic to economic growth: the Hongqiao Business Park, the redevelopment of the World Expo site and the forthcoming Disneyland in Pudong.

Yes, Haibao, the iconic blue mascot of the World Expo has stepped aside to make way for Mickey Mouse. Shanghai will build a Disneyland theme park in Pudong as early as 2015. But maybe it's too early to be euphoric even about that.

One only has to look at Hong Kong to see the possible pitfalls. The Hong Kong government, which heavily subsidized the construction of a Disneyland park there, is still reeling from what turned into a white elephant.

Hong Kong Disneyland reported a loss of HK$718 million (US$92.3 million) last year. Though narrower than the loss in 2009, the figures didn't do much to cheer up a government expecting big returns on its investment.

That's prompted Tu Haiming, a political adviser and boss of a Hong Kong-based property firm, to express concern that Shanghai should be careful not to follow in Hong Kong's footsteps.

He has suggested that the Shanghai city government negotiate with the Walt Disney Co for a bigger slice of income that goes beyond just ticket sales.

Shanghai should try to secure a share of profits in corollary Disney-controlled businesses such as product sales, park hotel revenue and TV channel earnings.

Like most hangovers after a gala party, the post-Expo doldrums require Shanghai to pull itself together and move forward. Its underlying strengths as one of China's premier cities make that process possible.

Shanghai's infrastructure for the service industry is among the best in the nation and its foundations in green technology and other vanguards of the future are rock solid.

Maybe it's all a matter of re-energizing public spirit to remind everyone that Shanghai, once it sets its sights on something, can prove to be an unstoppable force.

Source: Shanghai Daily
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