Shanghai Commercial History - Essay Example

? Shanghai Existence and development Shanghai exposure to the world is relatively recent, but the has a trading history stretching over a thousand years. Its good location at the confluence of East China and Yangzi, and near the Grand Canal were the most attractive features that made it a distribution point for rice, silk, and cotton from the region during the Song Dynasty. The initial foundation of the city was around the tenth century, near the Suzhou. The city had a small population of about 12,000 people predominantly agriculturalists (O’Sullivan, 2008). After conquering of Kaifeng, Shanghai became home to many refugees, the population of the city growing to 250,000. The city’s economic history began in the thirteenth century through cotton manufacturing and production. The production of Cotton and textile were the city’s economic backbone of city’s economy through to the nineteenth century. The economic development of Shanghai continued to grow after the construction of dikes, canals, and real estate development by private investors during the Song Dynasty. The city would have developed earlier in the fifteenth century, but the Ming Dynasty placed restrictions on trade in efforts to guard the city against Wokou. The dynasty was also responsible for the construction of the city’s wall. Part of the reasons that were encouraging rapid grow in Shanghai was the inclusion of the city as a treaty port in the Treaty of Nanjing of 1842. Around mid nineteenth century, the city of Shanghai was an established regional trade point, which attracted the Great Britain’s interest in the land. After victory in the First opium war, Britain began efforts to acquire land in the region, managing to obtain both trading rights and 140 acres on the riverbank to the north of the Chinese city. France and America were the next invaders around the city, with France settling in the western part of the town (later called the French Concession), and the American establishing themselves to the north of Suzhou Creek in 1863 (combining with the British settlement to be the International Settlement). These foreign communities were trading on opium in exchange to the goods they had come with. They had their own rules apart from the Chinese. During the Taiping uprising between 1850 and 1864, the international communities stepped in to contain the revolt throughout the city and the entire country. Their interest was Shanghai’s fortune, and this led to further development of the city’s infrastructure, including buildings in the foreigners’ style, telephones in 1881, electricity the year that followed, and running water in 1884. Shanghai defeat in the Sino-Japanese War was a leading factor for the establishment of the 1895 Japanese Concession, with manufacturing rights. Soon, the city had a diverse set of foreigners, from the White Russians to the Iraqi Jews (O’Sullivan, 2008). In accordance with the theory of existence and origin of cities, Shanghai developed from a self-sufficient household to innovative development by the foreign settlers. The influx of diverse communities decorated the city, making it a cosmopolitan location in China. It is set to eclipse its rival Hong Kong in the near future. Growth The growth of Shanghai was slow in the Ming Dynasty due to the trade restrictions. It began re-establishing inter-state trade in the Song Dynasty, and that is when it began to grow and develop rapidly. The major growth factor of Shanghai was its strategic position in the Grand Canal and the intersection of the East China Sea, as well as the Yangzi confluence (O’Sullivan, 2008). This was a good exposure point for development of a trade center, considering that at the time, the main means of long-distance travel was water transport. Another important growth aspect was the incorporation of the city as a treaty port with four other cities, including Xiamen, Fuzhou, Linbou, and Canton. The treaty ports were part of the 1842 Treaty of Nanjing between the Great Britain and China. The treaty permitted the British merchants to trade in all the five treaty ports with whom they wished. Before then, the merchants were restricted to engage in trade only in Canton. The treaty was an opening of the China to the world. Foreign traders, especially from Britain, were allowed to trade freely with the Chinese people. The main interest of the foreigners was opium. In exchange for the opium, British business merchants exchanged their cheap machine-made products from the west. This was a reason for the collapse of the Chinese economy. The treaty also was a welcoming gesture to other foreigners with interest in the opium trade. France and American traders also settled in Shanghai. French traders were on the western parts and Americans on the northern part near the Suzhou Creek. The Japanese were the next foreigners, winning the Sino-Japanese War and acquiring manufacturing rights in Shanghai (O’Sullivan, 2008). The result was a division of Shanghai into the Japanese Concession, the French Concession, and the International settlement. The three foreign divisions began establishing industries for cotton and silk manufacture, led by Japan. This also led to infrastructure development of the city, with introduction of pipe water, electricity, and telephones. By early twentieth century, Shanghai was producing more than 40% of China’s manufacturing output, generated close to 50% of the nation’s electricity output (which was double what industrial cities in British), and was a store to between 50 and 60 percent of cotton spindles in 1910 to 1930. From record, Shanghai was boosting of 34% of Foreign Direct Investment (FDI), 67% of the FDI being on manufacturing in 1931. In addition, the city had more than 47% of the national financial capital in 1936. Progressing towards the 1930s, production in the Shanghai industries was turning from labor-intensive consumer products to more capital-intensive products. Agricultural needs led to manufacture of fertilizers, and power driven machines like rice millers, and water pumps. The construction of the canals, dikes, and real estates by the foreign merchants was also a development factor. There was a vast cheap labor market, both from the Chinese and other immigrants like the White Russians who were taking refuge at the city. The factors that led to the rapid development of Shanghai were economic opening by the 1842 Treaty of Nanjing, the strategic coastal location of the city, and large market size of the foreigners, which enhanced urbanization and infrastructure in the region. Spatial growth of the city Spatial growth of cities is often an association with developed countries. The spatial growth characters include the transformation of the use of land from rural to urban. Employment and population growth in all production sectors was fast increasing in the suburbs and outskirts, while decreasing in the city except for the tertiary levels. Employment in primary sector was declining in all the sections of the region. Secondary sector employment grew fast in the suburbs and outskirts, surpassing the total growth rate of population and employment. At the same time, the secondary sector in the city was declining rapidly than the total employment and population growth. The tertiary sector was recording an all sections high growth rate, shooting rapidly past the secondary sector rates (O’Sullivan, 2008). The highest growth of the tertiary sector was on insurance, finance, and real estate. In summary, economic growth was much higher in the areas around the city, some estimated 15.4 km from the city’s center (fig 1, table 1). The perpetual growth of the city was led by the industries (set up by the foreign settlers and pressurized by the growing population). The other leaders were the secondary sector, then the tertiary, and the population at last. The spatial growth of Shanghai and the increasing population concentration within the city contributed heavily to urbanization. In regards to the question of leading factor in spatial growth, the consistent increase in the population density of Shanghai was the significant reason. The increasing population in Shanghai meant that people encroached on rural agricultural land for settlement. These settlements later gave rise to industries, thus the transformation of land use from urban to rural (fig 1a &b). China’s Urbanization Process China’s urbanization process is a prime example for study of effects of the urbanization process. Economists argue that China’s urbanization process lags behind its general economic development. The slow urbanization process began restriction by Chinese authority since the 1945. The authorities feared that most of the economic benefits were on the foreigners’ side, leading to the relocation of most of industries from the coastal boundaries to the inner regions of the countries. The structural problems in china’s economy, (characterized by the huge income gaps between the urban and rural populations, and the declining share of Chinese GDP consumption) are often said to be the results of the slow urbanization process. There are three stages to understand the urbanization process of China (fig 2). First stage is to relate the GDP growth and the urbanization process. When a nation has a per capita income below 1,600 dollars, the relationship between GDP growth and urbanization is loose. If the per capita income goes past 1,600 dollars but below 25,000 dollars, the urbanization process is increases significantly in relation to growth of the GDP. Per capita income exceeding 25,000 slows down the rate of urbanization due to the enormous GDP growth. The second stage is to understand that China’s urbanization has been relative equal to those of other countries economies. The countries per capita income is between the 1,600 and 25,000 dollars mark, meaning it is consistent with urbanization level. Nevertheless, the country’s GDP has been rising rapidly in the past decade, which will automatically result to the “natural force” mechanism for China’s urbanization process. Lastly, evaluation of the correlation between the GDP growth and urbanization reveals that the country’s urbanization at specific levels of the per capita income is slow as compared to the other countries despite their consistency in GDP. In summary, this is to say that China’s per capita income and urbanization chart is parallel to the comparison countries, but below with a difference of 11-12%. Some of reasons that may explain the difference include the government’s control of the per capita income through gap regression on some economic variables like the per capita income of arable land, population density, and population size, and the earlier socialist economies. Despite the control of the variables, the country is more than 2% below the other countries of comparison. Therefore, other factors contribute to the slow urbanization process. They include the government’s control of population like the domicile control (hukou) system, and the grain self-sufficiency policies that aim to preserve arable land for agricultural purposes instead of urbanization (O’Sullivan, 2008). The result of the slow urbanization process in China is that it has become one of the highest urban primacy rates, with 26 provinces under that category. The variations in the urban primacy levels lie in the fact that the urbanization policies prevent large cities from developing, giving way for the development of medium and small cities, mainly in the eastern parts that have low urban primacy. The decentralization of industries enhanced the urban primacy in the western internal provinces. Shanghai’s rank Shanghai is number 30 in the big cities list by Mercer. The city’s rank is not appropriate in my personal opinion. Recent researches indicate that Shanghai has had significant economic growth in the past decade. It is among the fastest growing cities in the world. In the ranking of Shanghai, important factors to consider would be the political and economical status of the city. Since the settlement of the foreigners after the Treaty of Nanjing in 1842, Shanghai has been considerably free from the mainland. The foreigners had the benefit of exercising their own laws. Currently, not much has changed. The city has a cosmopolitan population that enhances its political setting. It is also important to note that during the civil wars in China ending in mid 1900s did not affect Shanghai. The political stability of the city has been good. Political stability affects the economic stability of a region, as well as the foreign potential investment. Considering the economic status of Shanghai, the city should have been a bit higher in the chart. The city has been experiencing a 10% economic growth for 15 consecutive years! Considering the small portion of about 0.06% of Chinese land, Shanghai contributes to 12.5% of the total revenues of the country. In addition, the city is accounts for more than 25% of the country’s export, 10% of its cargo output, and 8.3% of the country’s gross value in industrial output. The earlier introductions of financial market system, which continue to grow with time, ensure that the city has a mature financial system. The influential Lujiazui Trade and Financial centre is becoming one of the economic powerhouses in the whole of Asia. Mercer uses ten categories to rank cities, which is enough to determine a city’s performance. However, three other ingredients enhance the performance of a city. They are inclusiveness, resilience, and authenticity. These three factors will enable the economists to assess the investment opportunities provision, and the influence the cities have on the political elite and the global leaders in business. Considering these factors, the rank of the city might climb up the ladder, probably to number 18 (fig 3). Policy Proposal Shanghai has been on consistent development due to the favorable policies set by the central government in the city. Overtime, policies to improve the economic and social status have been successful, leaving one part of the city unattended: investment in the institutional and physical infrastructure. To improve the livability of the city, a policy that caters for the infrastructure of the city is necessary. The policy will lay guidelines on the design and implement methodologies to improve the infrastructure of the city to match that those of economic giants like New York and London. Below is a detailed discussion on the individual elements of the proposal. Physical infrastructure construction and safe land use The rapid development and the lack of consistent repair of the infrastructure have resulted to durability problems. The recommendation of the policy would be to increase the allocation on maintenance activities of the city. According to the five-year development plan, Shanghai is planning to allocate 70 percent of its infrastructure to its rural districts, while the remaining portion goes to the urban districts. An estimated one trillion USD are to in the infrastructure department. These financial allocations to the urban cities should be directed to the renovation of dilapidating infrastructure. The renovation and development of the infrastructure will equip the city with strong communication and distribution systems. The importance of infrastructure has been evident from developed cities like London and New York, which boosts of state-of-the-art transport and communication networks. The issues of environment have also been lagging behind the development of the country. The local government should design and implement environmental initiatives like adoption of clean technology and restoration of hazardous industrial sites. The city also faces risks of future shortages in the energy field. The city has an efficient electronic train system, the Shanghai Maglev train. Nevertheless, the electric type of energy may soon become scarce considering the current population growth. The urbanization plans, strategically designed to urbanize 85% of the regions in the city, will need another source of energy to prosper. A recommendation to the local government would be to harness wind as the alternative source of energy. The coastal positioning of the city provides the city with a perfect angle for the harnessing process of natural phenomena. An example of the wind harvesting is the Eco-express way, a transportation system that will incorporate harnessing both solar and wind energy, with charging stations for the vehicles at regular intervals. The Eco-express way project will also enhance the production of “green” cars. The current public transport system is a source of air pollution. The rapid growth of the city has been causing immense pollution of environment in the city. Pollution is one of the factors that influence the city’s poor rank. The public system will also reduce the problem of traffic jam in the city, which holds the record for being the worst in the world. According to the ministry of Construction in China, the country losses more than 250 billion RMB, a 2% portion of the country’s GDP (O’Sullivan, 2008). Evidently, the traffic in Shanghai costs the city many resources. Apart from the implementation of an efficient public transportation system, the local government should revise the policies that regulate environmental conservation within the urban districts. This will include imposing new regulations on the inception of new technology. The local government should establish scientific planning that adopts a demand management approach to determine the efficiency of the technology. In this regard, the local authority should ensure that all its engineers are current with the latest renovation and technological development. Some of the most severe infrastructural problems facing the city may be simply be a matter of renovation, saving the huge costs of new projects. Research institutions and enhance capital investment in commercializing technology The local government should invest in advanced technological industries. A prime example is the recent involvement in biomedicine research, which has boosted the economic growth of the city. Another essential field is the information industry, a sure growth engine with proven record in several cities. The local government should increase the financial support to local investors wishing to venture into their capital investment that will enable the commercialization of the new technology. These efforts will enable Shanghai to emerge as a top technological environment, an enormous contribution to the economy of any city. In conclusion, the policy may require a huge financial support (an estimate of one trillion dollars), but the investment is worthwhile. Considering the impact of reducing the traffic jam, which is a quarter of the proposed financial support, the policy proposal is viable. Appendices City 1949 1957 Total area increased % Peking (National capital) Shanghai Tientsin Sian Chengchow 60 80 61 13 5.23 240 116 97 65 52 180 36 36 52 46.77 300 45 59 400 894 Table1: Spatial expansion of selected Chinese cities 1949-57 (km2) Fig 1a: Spatial growth in Shanghai between 1979-1989, and 1b: 1989-2001.( Hai, P. M. & Yamagichi, Y. Characterizing the Urban Growth of Hanoi, Nagoya and Shanghai City Using Remote Sensing and Spatial Metrics. Retrieved on November 29, 2011, from http://ir.nul.nagoya-u.ac.jp/jspui/bitstream/2237/12105/1/IGARSS.pdf) Fig 2: Showing the urbanization level of China from 1985(Green. Urbanization in China. Retrieved on November 29, 2011, from http://www.energy-green.net/blog/articles/green-development/urbanization-in-china.html ) Fig3: Showing the three other important factors of livability in a city. (Melreese. Encountering Urbanization. Retrieved on November 29, 2011, from http://encounteringurbanization.wordpress.com/tag/liveability/) Reference O’Sullivan, A. (2008). Urban Economics. New York: McGraw-Hill/Irwin. Read More