Shanghai’s economic output decreased 13.7% from a year earlier in the second quarter, and fell 5.7% in the first six months to CNY1.94 trillion. Industrial production and foreign trade recovered in June with a year-on-year growth of 15.8% and 9.6% respectively. In the first half, the three leading manufacturing industries – integrated circuits, artificial intelligence and bio-medicine – together contributed CNY180.551 billion to GDP, up 4.3% from a year earlier. Output of the IC sector rose 13.3% while that of AI soared 14.7%. Actually used foreign investment increased by 0.2%. The city also attracted 26 new regional headquarters and 10 new foreign research and development centers of transnational enterprises in the first six months. The per capita disposable income of residents in the first half fell 3.4% from the same period last year to CNY38,996.
“This reveals to us that the most important thing for a city’s economy is to ensure mobility and smooth flow of people, capital, goods and information, just like a human circulatory system. We are in a market economy, an open one, which means all policies affecting mobility, and unexpected incidents such as pandemics, will have a large impact on the economy in the short term,” the Shanghai Daily comments. Unlike other international metropolises such as New York and Hong Kong, about one quarter of Shanghai's GDP comes from the manufacturing sector, which cushioned the blow. The situation would be way more severe if the city had placed all bets on the service sector.
Manufacturing is not as fragile as services, and many industries can operate in a closed loop. Automation has also enabled many industries to replace human labor with robots, which is undoubtedly a big trend in the future. For the services industry to recover as soon as possible, the most important thing is to improve the capacities for pandemic surveillance, epidemiological investigations and nucleic acid tests.
Shanghai was also lucky that a large volume of transactions was carried out online and services could keep running with only a small number of staff on site when hit by a pandemic outbreak or a lockdown. According to the Shanghai Daily the biggest enemy of economic recovery and stability in the second half of the year is uncertainty. Shanghai’s top priority should be to create a scientific, transparent and predictable policy environment, which is important for households, investors, entrepreneurs and businesses. Restrictive practices and redundant measures should be scrapped as soon as possible. Policies should be made clear to reduce uncertainty. Shanghai, with the most developed economy in China, should lead the country in innovations in all fields and take the lead in making use of the blow of the pandemic to substantially reduce government intervention and follow more closely the rules of the market. The city should allow and encourage the independent choices of market players, while the government’s task should be to improve the policy environment, to eliminate all kinds of uncertainties, and to offer institutional support for fair market access and fair competition, effectively protecting the rights and interests of market players, according to Professor Zhang Jun, quoted in the Shanghai Daily.
Beijing reported a 0.7% year-on-year GDP increase in the first six months to CNY1.94 trillion, now equalling that of Shanghai. The industrial added value dropped 15.3% on a yearly basis in the first six months. Beijing’s GDP reported a year-on-year increase of 4.8% in the first quarter and a 2.9% drop in the second quarter. The digital economy achieved an added value of CNY838.13 billion, an increase of 4.1% year-on-year at current prices, accounting for 43.3% of the city’s GDP. The investment in the high-tech industry kept a rapid growth with a year-on-year increase of 78.1% in the capital during the period, driven by projects in sectors including integrated circuits, medicine and healthcare.
