Shanghai’s economy will expand 6 per cent in 2023 amid wave of foreign investment in post-Covid era, economist predicts

Shanghai will be the top beneficiary of a recovery when the pandemic eases in the second quarter of 2023, says economic adviser to local government
The city’s economy shrank 13.7 per cent in the second quarter as business activity came to a standstill amid a citywide lockdown in April and May

China's border reopening

Daniel Renin Shanghai

Published: 8:27pm, 29 Dec 2022

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Shanghai’s economy, battered by a two-month citywide lockdown earlier this year, will grow at a clip in 2023 as China’s exit from its zero-Covid policy ushers in a wave of foreign capital to the mainland’s commercial capital, according to an economic adviser to the local government.

The city’s gross domestic product (GDP) will expand at least 6 per cent next year, beating the estimated 5 per cent growth nationwide, said Xu Mingqi, a researcher at the Shanghai Academy of Social Sciences.

It would be the first time Shanghai’s GDP growth has outpaced the national economy since 2019. The services sector will be the major growth driver benefiting from the country’s decision to live with the coronavirus.

“A reopening of the Chinese economy is set to create opportunities for foreign investors,” Xu told a media briefing on Wednesday. “In the services and hi-tech sectors, an influx of foreign direct investment can be expected in the post-Covid era.”

He predicted that Shanghai, as a gateway for foreign capital to enter the mainland, will be the top beneficiary of an economic recovery when the pandemic eases in the second quarter of 2023.

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Shanghai Disneyland reopens as China eases strict zero-Covid restrictions

Shanghai’s economy shrank by an annual 13.7 per cent in the second quarter as business activity came to a standstill amid a citywide lockdown in April and May.

From January to September, the city’s GDP contracted by 1.4 per cent from a year earlier.

“The low base this year paves the way for high growth in 2023 [for Shanghai],” said Gao Shen, an independent analyst in Shanghai. “Aside from the growth figure, it is more important that we see a construction spree of new manufacturing projects.”

Xu said Shanghai’s efforts to buoy its biomedicine sector in recent years could encourage pharmaceutical companies to invest more in Pudong’s Zhangjiang hi-tech zone and the Waigaoqiao free-trade zone.

“The Covid-19 pandemic enhanced people’s awareness of health, and thereby boosted the life science industry,” he said. “Taking a long view, Shanghai needs to lure more investment to spur its hi-tech and innovative sectors.”

Shanghai, long viewed as the mainland’s economic locomotive, is home to Tesla’s Gigafactory 3, the carmaker’s largest production hub worldwide, Shanghai Disney Resort, and Commercial Aircraft Corp of China (Comac), a manufacturer of large commercial jets.

The country’s most developed metropolis, with a population of 25 million people, has been striving to transform itself into a global financial centre on par with New York, London and Hong Kong.

At the beginning of this year Shanghai set itself a growth target of 5.5 per cent for 2022, but that goal was quickly put out of reach by Covid-19 lockdown.

On December 7, China’s cabinet published a 10-point guideline pledging to relax pandemic curbs by, for example, dropping mass testing, health codes and centralised quarantine requirements for most cases.

The National Health Commission announced on Monday evening that Beijing will reopen borders and abandon quarantine for travellers from January 8.

China International Capital Corp said in a report on Tuesday that the country’s reopening would result in surging infections across the mainland and disrupt sales and production across sectors in the short term.

Production and commercial activities are likely to rebound in the second quarter when the pandemic eases, Xu said.