When multinational companies (MNCs) picked a site for their Asian headquarters in the 1990s, it was usually a toss-up between Hong Kong and Singapore given their vast local talent pool and business-friendly infrastructure.

So quite a few eyebrows were raised when Alcatel became the first multinational in January 2000 to establish its Asia-Pacific headquarters in Shanghai instead of Hong Kong, Singapore or Sydney.

Today, the French communications firm can congratulate itself for its foresight.

And in January, after combining with Lucent in one of the largest mergers in the telecoms industry, it launched its new Asia-Pacific headquarters in Shanghai. Singapore was home to Lucent's regional headquarters.

By the end of last year, 154 MNCs had set up regional headquarters in Shanghai and 181 in Beijing.

"The fact that so many other multinational companies have decided to establish their regional headquarters in Shanghai over the last six years serves as a strong reference point and justification for Alcatel and Alcatel-Lucent's ground-breaking decision," says Frederic Rose, president of Alcatel-Lucent, Asia Pacific.

A rush by a growing number of MNCs to set up regional hubs on the Chinese mainland has created its own nomenclature in China "Headquarters Economy". And it has become a buzzword, topping the agenda of Shanghai and Beijing municipal governments.

The "Headquarters Economy" is a strong catalyst for a service boom and infrastructure improvement. Some experts estimate that a skyscraper of a multinational's regional headquarters could produce higher economic growth than an industrial park, as it could help boost a number of related service industries such as finance, accounting, consulting, hotels and catering.

The service industry, or the tertiary sector, now contributes nearly 70 percent to Beijing's gross domestic product (GDP), 17 percent more than 10 years ago.

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