Tertiary sector growth gives the right impetus for Shanghai's economic future

Despite Shanghai's overall economic slowdown, the city's services industry managed to achieve an annual growth of 10.6 percent in 2015, according to the latest official data.

The city's total output value exceeded 2.49 trillion yuan ($380 billion), with a year-on-year growth of 6.9 percent, 0.1 percent higher than figures in the first three quarters and 0.1 percent lower compared to the previous year, according to a report released by Shanghai Municipal Statistics Bureau.

In particular, the tertiary industry experienced growth of 10.6 percent with a total value-added output of 1.69 trillion yuan, accounting for 67.8 percent of the city's total output value, up 3 percentage points year-on-year.

"The rapid growth of the tertiary industry is a major driver of the city's economic growth, which is moving ahead gradually along with the more in-depth structural transformation of the city," said Tang Huihao, the bureau's chief economist.

Reforms taking in the China (Shanghai) Pilot Free Trade Zone have also had a certain effect, as the statistics showed.

A series of measures and policies have been released in the FTZ, which has attracted foreign direct investment accounting for 67 percent of the city's total－$58.9 billion, a year-on-year surge of 86.5 percent. Contracts in the service sector in the zone last year were worth $54.5 billion, a yearly jump of 95.7 percent.

"The ongoing opening of various services activities in the zone highlights the rising importance of the services sector in the city's economy," said Xu Bin, a professor of economics and finance at China Europe International Business School.

Furthermore, the total amount of renminbi settlements on cross-border transactions increased three-fold on a yearly basis. The volume of direct overseas investment also rose 2.8 times.

About 45 multinational companies launched their regional headquarters in the city in 2015.

In the meantime, building a scientific and technological innovation hub has been a major focus of the city since early 2015. Currently, the number of multinational corporations' research and development centers in Shanghai accounts for nearly a quarter of the total number in the country.

The proportion of Shanghai's investment in research and development in its GDP has also risen from 3.6 percent in 2014 to the current 3.7 percent, reaching the level of developed economies.

"Construction of a technological innovation center will enhance the city with faster growth, which is already on the way to establishing an international economic center, a financial center, a trade center and a shipping center," said Yu Lei, a researcher with the Shanghai Academy of Social Sciences.

The statistics also pointed to the worsening situation of industrial enterprises in the city. The value-added industrial output of large enterprises with an annual turnover of at least 20 million yuan exceeded 3.1 trillion yuan, a 0.8 percent decline from a year ago. The total value of exported goods was more than 756 billion yuan, down 1.6 percent year-on-year.

Overall, Shanghai is in the process of upgrading its industrial structure to achieve stable economic growth in the next year.

"Economic development is expected to result in a gradual growth of 6.5 to 7 percent in 2016, with more work taking place on transforming the city into a scientific and technological hub with global influence," said Tang.