SHANGHAI: Rising costs have
not scared off foreign companies who still rank Shanghai as the best place to
invest in China, according to local authorities.
The municipal government's first "White Paper on the Environment for Foreign
Investment in Shanghai," released yesterday, claims despite the increasing costs
the city is still China's number one destination for foreign investment.
"It's true that Shanghai's raw materials and labour costs are higher than
elsewhere, but they are offset by better profits," said Liu Jinping,
vice-chairman of the Shanghai Foreign Investment Commission, which produced the
report.
Nearly 90 per cent of the 213 foreign companies polled for the paper said
Shanghai was their favourite investment destination on the Chinese mainland.
Speaking at a press conference to launch the report, Liu said Shanghai
attracted a record 4.72 billion yuan (US$590 million) in actual foreign
investment during the first seven months of the year.
"Foreign companies are seeing double-digit sales growth in Shanghai and
profits are growing at more than 20 per cent," said Liu.
According to the White Paper, in 2004, the most recent year for which figures
have been produced, the 422 Fortune 500 companies with bases in the Pudong New
Area each paid an average of 42.5 million yuan (US$5.3 million) in taxes, while
average net profits stood at 39 million yuan (US$4.87 million).
In the same year, average net profits for foreign companies in Pudong's
Jinqiao Export Processing Zone stood at 203 million yuan (US$25.37 million).
Between 1999 and 2005, foreign companies invested US$27.18 billion in
Shanghai, with an average annual increase of US$3.88 billion.
Foreign banks realized pre-tax profits of US$260 million in 2005, up 56.4 per
cent over the year before and accounting for 58.3 per cent of all profits by
foreign banks in China.
But at the same time as generating rising profits, foreign companies have
also been forced to contend with mounting costs.
According to the White Paper, the monthly salary for Shanghai employees rose
to 2,235 yuan (US$279.37) in 2005, around 26,800 yuan (US$3,350) per year, 9.9
per cent more than the year before.
The average annual income for human resources staff at a foreign company was
141,293 yuan (US$17,662) in 2005.
As staffing costs have risen so have rental prices, with leasing costs for
top-class offices growing 15 per cent year-on-year, the White Paper reported.
Last year, the city's average rental price was US$0.84 per square metre per
day, while in the Lujiazui business district in Pudong prices were more than
US$1 per square metre per day.
On Nanjing West Road, the city's main shopping and commercial street on the
western side of the Huangpu River, rents were US$1.04 per square metre per day.
"The growth of labour costs and rentals is a good thing because it means the
city is growing very quickly," Liu added. "What we can do now is improve
government services and improve the efficiency of land use."
Last year 1,020 energy-intensive and heavily-polluting plants were removed
from Shanghai's 11 districts, freeing up nearly 670 hectares of
land.
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