1.Macro-economic Indices At the very beginning of last century, Shanghai was the biggest industrial city in China and the financial center in the Fareast. In the 1990s, taking the opportunity of the development and opening-up of Pudong, Shanghai deepened the economic reform process and expanded opening-up, which have made great achievements. From 1998 through 2002, total GDP and per capita disposable income increased by two digitals. By 2002, the GDP of Shanghai had reached USD65 billion with per capita GDP standing at about USD5000. According to our expectation, by 2007, our per capita GDP will be USD7500. At the same time, the rate of unemployment will be below 3%-5% and the ratio of inflation below 2%-4%.
   Shanghai’s infrastructure input in 2002 amounted to RMB58.3 billion, which accounted for 27% of Shanghai’s total fixed assets input and was much higher than that in other major Chinese cities. In the past 5 years, the average increasing rate for infrastructure input was 11% while the major fields fell within urban construction, transportation, post and telecommunications and public facilities construction.
  
  
   2.Industrial Development
   Shanghai used to be an industrial center and have a very solid industry base. In recent years, the tertiary industry has developed rapidly, with annual increasing rate at 12% and took up 51% of the GDP of Shanghai in 2002. Compared with other major foreign investment cities, Shanghai puts its priorities in industrial and service sectors. Six key industries (IT, motor, petrochemicals, fine chemicals, complete set of equipment, biopharmaceuticals) realized 58% of the total industrial output while the four primary sectors in the tertiary industry (finance and insurance, real estate, transportations, post and telecommunication, wholesale and retailing) achieved 62% of the total output in this industry, in which finance occupies 21%, staying first.
   Shanghai boasts obvious advantages in many industrial fields and strong capability in processing. In the next five years, Shanghai will take measures to develop its secondary and tertiary industries under the direction of the policy of “Same Priority in the Secondary and Tertiary Industries”, mainly focusing on IT, finance, trade and commerce, motors, real estate, complete set of equipment, cultivating new industries such as biopharmaceuticals, modern logistics, new materials, environmental protection and simultaneously developing fine steels, petrochemicals and fine petrochemicals. The added value of the six pillar industries will have reached 60% of the total GDP by 2005. IT will see a fastest growth rate of 21% annually. Finance will be core industry, accounting for 18% of total GDP. As for commerce, we will encourage chain operation and information management. What’s more, 2010 Expo will bring enormous opportunities for complete set of equipment.
   Focusing on the upgrade of industrial and commercial structure, Shanghai will fully promote four centers, which are respectively located in the north, south, east, and west part of Shanghai. The north will become the base for fine steels while the east IT base, west part as the comprehensive motor base and south part mechanical base. Those will bring a lot of investment opportunities. For example, by 2005, the total input will reach RMB160 billion in east part as IT base, RMB100 billion for south part as mechanical base.
  
   3.Foreign Direct Investment (FDI)
   I. Summary
   In 1991, China’s FDI only accounted for 20% of that in the United States, while in 2002 the FDI into China surpassed U.S. and China became the country most attractive to foreign capitals. In the past decade, the CAGR of China was as high as 25.4%, while that in U.S. was only 7.2%. Continuous growth of Chinese economy, the improving investment environment, competitive labor force and commitments made by China to WTO explain why FDI into China rises so greatly.
   During the past decade, the Shanghai’s FDI rapidly increased with a rate up to 36%, 10% higher than that in China as a whole. The increase rate in Shanghai has been the top one for many years. In 2002, Shanghai’s FDI accounted for 19.3% of total fixed assets input.
   II. Industrial Structure
   As of the end of 2002, foreign investment in the tertiary industry accounted for 46.5% of the total, while in China the figure is 32.7%. Real estate accounted for half of the tertiary industry, mainly from Hong Kong investors, while investment in other fields like finance, insurance, culture and media was relatively small due to entry restriction. In the second industry, more than 95% of the investment is in manufacturing industry and in particular, the labor-intensive and assembly companies used 60% of the total foreign capital in the secondary industry.
   III. Investment Modes
   In 1991, WFOEs only accounted for 24%, and during the past years, the proportion of WFOE increased very rapidly, reaching 70% in 2002.
   IV. Investment Sources
   As for the source of investment, by the end of 2002, capitals from Southeast Asia had accounted for 50% of the total. The rest was mainly from Latin American, Europe and North America, accounting for 19%, 15% and 13% respectively. As for the countries and regions, Hong Kong, Japan and U.S. are the top 3. By far, totally 103 countries and regions have invested in Shanghai.
   Different countries and regions have different features in investment in Shanghai, which can be described as:
   ( 1)Project scale: scale of the individual project (average) from EU is the top one, up to USD7.08 million, while Taiwan ranks the last with only USD1.1 million;
   ( 2) Leading fields: Hong Kong companies mainly invested in real estate, garment and textile, and trade, Japanese companies in automobile, semiconductor and precision instrument, U.S. companies in automobile, biomedicine, petrochemical and finance and retailing;
   (3)Entry time: Asia countries and regions entered Shanghai comparably earlier due to geographical and cultural reasons, while many big projects from western countries gradually entered only after 1996.
   V. Investment Returns
   Compared with those in Shanghai industrial enterprises, the main economic indexes such as Ratio of investment returns, labor production and per capita profit of the foreign invested companies in Shanghai are all about 30% higher.
   VI. New Features and Trend of FDI Utility in Shanghai
   With China’s accession to WTO, Shanghai’s attraction to foreign capital will be more and more stronger, and the investment in future will show new features and trends: 1. Industry structure, Shanghai will focus on high tech industry and foreign-oriented economy, and proportion of tertiary industry will be greater, at the mean time we will take concrete actions to encourage foreign investment in the 6-pillar industry. 2. Ways of investment. We welcome WFOEs and foreign holding companies within permitted fields, and encourage investors using new ways like M & A to involve in the reform and restructuring of state-owned companies. 3. As for investment strategy, we encourage the investment in regional headquarters, R&D centers and purchasing centers, and hope the foreign investment can be more systematic and of more globally strategic significance.
   VII. Economic Development Zones at different levels
   Shanghai has planned some specialized economic development zones of all kinds for foreign investors.
   Different development zones in Shanghai boast different features and preferential policies. Pudong New Area is the biggest development zone in Shanghai. Financial and trade Development Zones include Lujiazui Financial and Trade Zone and Hongqiao Economic and Technological Development Zone, Export Processing zones include Songjiang and Jinqiao Export Processing Zones. What’s more, the main industrial zones in the suburban area are: Jiading Industrial Zone, Baoshan Urban Industrial Zone, Chongming Industrial Zone, Qingpu Industrial Zone, Songjiang Industrial Zone, Xinzhuang Industry Park, Kangqiao Industrial Zone, Shanghai Comprehensive Industrial Zone and Jinshanzui Industrial Zone. A lot of world-famous companies have made investment in these zones.
  
  
   4.Urban Construction
   Starting from the beginning of 1990s, the city has focused its urban construction on the development of functional and hub infrastructures. Shanghai invested a total of more than RMB360 billion in its urban construction projects, representing an average annual growth of 30.7%, accounting for 23.1% of the fixed assets investment of the same period. Featuring massive investment, high speed and large scale, Shanghai's endeavor in upgrading local infrastructure facilities has not only changed the city's skyline, but also markedly improved its investment environment. Shanghai has become taller and more beautiful than ever before.
   Consisting of railways, interchanges, “three verticals and three horizontals” main roads, tunnels and bridges across Huangpu River, a modern, solid and multi-level traffic artery network has taken its shape and covers almost the whole urban area of the city. Magnetic levitation railway is pushed into trial use. Shanghai has made remarkable progress in pollution control and environment protection. The city achieved the phase goal of getting rid of black color and stinking odor for the main sectors of Suzhou Creek. The quality of the main water body of the Huangpu River had also improved. Efforts have been taken to plant more trees and grass in the city and as a result, Shanghai's green area has increased in the last few years, with green area making up 30% of the city's urban area. The city's environment has greatly improved. A lot of public facilities for electric power, water supply, drainage, flood prevention, gas, and telecommunication have been completed sequentially.