HAVE IMPORTED PRODUCER SERVICES IMPROVED MANUFACTURING IN SHANGHAI?

Abstract

Imported producer services play a vital role in the continued development of the industrialized economies. Countries like the U.S., UK, Japan, Germany, etc., utilize imported scientific research to help domestic manufacturing. Most developing nations are in the early stages of adopting this strategy, China is no exception. Among the four mega metropolitans (Beijing, Shanghai, Tianjin and Chongqing) in China, Shanghai is the most advanced in the area of producer services; however, still lacking significantly behind Hong Kong and Singapore. The objective of this study is to examine whether imported producer services have been able to improve the manufacturing in Shanghai. We employ the input-output method to measure the effects of imported producer services on Shanghai manufacturing. Our findings are disappointing. Though Shanghai’s imported producer services continue to rise, the high-end knowledge-based producer services are severely lacking; and, to make matters worse, the trend is downwards and thus the gap with its advanced neighboring economies is ever widening. If Shanghai is to achieve the lofty goal of becoming an international financial service hub, there remains much work to be done. The Shanghai government, indeed the Chinese government, needs to take more conservative actions towards achieving this objective rather than just to pay lip service.