| Shanghai Expo’s impact on the Chinese economy |
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| Features | |
| Thursday, 17 June 2010 | |
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World Expos have a history of triggering economic advancements in their host cities and countries.
In 1933, Chicago performed an economic miracle, bringing America out of the Great Depression through a world fair. The 1970 Expo has turned the suburban Suita from a bamboo forest to a cosmopolitan city and made Osaka Japan’s second largest financial centre. The 1922 Expo established Seville’s status as the international exhibition centre in Spain, increasing its airport capacity from 1 million to 4 million and service industry proportion from 57% in 1990 to 63% in 1993.
Historical precedents have taught Shanghai a great deal. But with an investment of $42 billion, clearing a space of 5.28 square kilometres for 234 pavilions and projecting more than 70 million visitors, Shanghai simultaneously wants its Expo to be unprecedented in many ways.
Yet Shanghai’s lavish facelift is not just about pride. The Expo’s impact on the city’s reorganization, technology development, environmental awareness, industry remix and infrastructural upgrading will reorient Shanghai’s status in China and lead the country into an optimistic new focus.
Shanghai – a rebirth
Shanghai’s economic development has already entered into a bottleneck period. Since 2000, its double digit growth rate has been sustained by significantly inflated property prices, cumulating anxiety over an asset bubble that is about to burst. Its 20 million population is hitting the maximum of what the city’s resources may tolerate and its growth has become increasingly unsustainable after the credit crunch.
Therefore, hosting the Expo became Shanghai’s perfect opportunity to increase the economy’s reliance on service and high-tech industries and energy efficient ways of development. The Shanghai government has invested heavily in new fields of focus, including new material, aviation, biological medicine and communication technology and shifted undesired industries totalling $4.4 billion in output to other cities.
Shanghai’s officials are estimating the ratio between Expo revenue and revenue received from related industries to be 1:9. During the Expo’s preparation years, it will result an annual 30% increase in growth on the Shanghai economy will be 30%, and in 2010 more than 50%.
Much of the investment has gone towards upgrading the city’s infrastructure, including roads, bridges, tunnels and airport terminals. Its newly constructed six metro lines add to a total of 420 kilometres, more than the target it sat for 2010 in 2002. A total of $586 million has also gone into digging a 3 kilometre tunnel underneath the city’s riverside promenade, the Bund. These transportation expansions, which would have taken 20 years without the Expo, will together alleviate congestion and air pollution, two of the city’s most serious problems.
During the construction process, many polluting factories will be removed, including the 45 year old Jiangnan Shipyard, one of Shanghai’s biggest industrial polluters. With an investment of more than $2.3 billion, the shipyard will be relocated 30 kilometres away offshore to Changxing Island and become the world’s largest shipbuilder.
When the Expo ends in October, many of the pavilions will be demolished, making way for eco-friendly offices, retail spaces and residential areas. Many other energy efficiency measures have been implemented. The 30,000 square meter solar panel on the roof of the Chinese Pavilion is the world’s largest solar panel. More than 1000 renewable energy cars have been used in Shanghai, which will expand further after the Expo. The Chinese pavilion, the performance arts centre and the city’s designated zones are all using energy efficient LED for lighting, which is the first time that LEDs are used with such high concentration in a Chinese city.
A 2009 UN Environment Program assessment found that for the first time the city made economic development without increasing air pollutants in this decade. It also praised Shanghai for reducing its reliance on coal to 51% of its energy needs in 2007, compared to 64% in 2001.
Looking into the future, the facelift on both banks of the Huangpu River will receive planning advantages. The Shanghai government will implement its “two centres” policy, meaning that land west of the river will be developed into high-end dwellings; land east of the river will develop into a mixture of commercial and residential properties because many constructions will not be removed, and the greenery on its riverbank can be turned into parks.
Shanghai’s next biggest task will be a new aviation project, the Commercial Aircraft Corp. of China, Comac. Established in 2008 to produce a Chinese-made competitor to Boeing and Airbus, the Shanghai designed and built aircraft will be commercially available from 2016. It plans to build 2,000 planes before 2018 and grab a 10% share of the midsize narrow-body world market.
Shanghai’s Expo, China’s Economic Olympics
Although an anachronistic event like the Expo may generate less excitement compared to the Olympics, its host city will nevertheless ripe an economic benefit 3.49 times of what the Olympics brought to Beijing.
The Olympic Games’ main source of income is television broadcast revenue, but Expo requires its audience to view it directly. Television viewing is a direct cost, but Expo visits will create demands for related industries including tourism, catering and transport. The Olympics lasted 17 days only, but Expo will last 6 months and expecting an audience of 70 million, ten times that of the Olympics.
Expo’s multiplier effect on the economy will result from both expenditure and revenue of the project. Expenditure will consist of $26.4 billion on site construction and $15.5 on operation over the 6 months duration. Revenue will consist of the $8.8 billion ticket sales and an additional $16.4 billion tourism cost (calculated upon the assumption that 70% of the 70 million visitors are tourists, each staying for three days and living on the $100 Shanghai daily consumption rate.)
Injections into the economy from both expenditure and revenue will stimulate more than 30 service industries including tourism, communication, insurance, entertainment, media, marketing and advertising. Trickledown effect will be realised in nearby regions that have partnered up with Shanghai to create Expo themed tourism routes, including Suzhou, Anhui, Jiangxi and Wuxi.
Production will also be increased across the country as that 31 provinces and cities have erected their own pavilions, and many businesses have sponsored Expo by providing facilities including translation, entertainment, delivery, cleaning, food and drink and souvenirs.
Is Expo making a profit?
Concerns have been raised over the profitability of Expo as a commercial project. Although 380,000 visitors each day are needed to reach the 70 million target figure, the daily average in May only amounted to 200,000. Despite the optimism of 20,000 starred hotel rooms being added to accommodate Expo tourists, many high-end hotels are currently operating under capacity.
The Expo’s cost has also been questioned. Although the official budget is only $42 billion, the China Economic Daily reported that the real cost can be $58 billion once all the costs for construction, the rail lines and the airport terminal are factored in, not to consider the cost of relocating 18,000 citizens.
However, it is important to remember that the Expo is not about short term profits for China, but national pride and long term economic developments. Secondly, the seriousness which China has devoted to Expo is matched by many other countries and companies, eager to tap into China’s large consumer market. For example, the modest $2 million Iceland Pavilion is funded completely by private businesses, as that the government could not fund the project after the economic crisis.
Although relocation has always been an ethical problem in China, the relocation prior to the Expo has received little criticism and the original plan of relocating 28,000 households was reduced to 18,000 in 2007, reducing the cost by more than a third.
To solve the problem of expensive hotel rooms, the Shanghai government has also trained 700 local families to offer bed and breakfast accommodation, which is unprecedented in Shanghai, but making it more like a global city.
The Shanghai government is attempting to cover the $26.4 billion construction cost with Expo bonds and the $15.5 billion operating cost with tickets and corporate sponsorship. But it has also acknowledged a gap between expenditure and revenue which has to be filled when it sells off the site to commercial developers after the Expo ends.
But no matter what the statistics show, Expo would have doubtlessly prepared Shanghai for its new stage of development and paved the way for China to become a developed economy.
Cecily Liu |
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