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UPDATED: March 10, 2009 Web Exclusive
Shanghai Shows Confidence in Its Economy
A top banking regulator is optimistic about Shanghai's economic resilience

Shanghai, a manufacturing hub in China and a world financial center, has come into focus since the city vowed a 9-percent economic growth rate for 2009 earlier this year. Is this goal achievable for the city in the face of chilly economic headwinds? How much will it benefit from the national programs to revitalize 10 backbone industries? On the sidelines of the second session of the 11th Chinese People's Political Consultative Conference (CPPCC), Yan Qingmin, a CPPCC member and Director of the Shanghai Bureau of the China Banking Regulatory Commission, sat down with Beijing Review to share his opinions on these issues. Edited excerpts follow:

Beijing Review: What do you think of the national economic strategy featured in Premier Wen Jiabao's work report that emphasizes both economic growth and structural rebalancing?

Yan Qingmin:

I think the strategy fits well with our current economic situation. It's an accepted fact that sustainable prosperity is based on a sustainable growth model. The economic slowdown awakened us to many structural problems that were glossed over during boom times. Now it's imperative to right those imbalances and seek healthier growth.

Shanghai's economy saw a sharp slowdown in the latter half of 2008, and its export growth even dipped into negative territory in November. Do you think the target of 9-percent growth will be hard to achieve?

I have strong confidence that Shanghai can meet the target. Despite a sharp contraction in the export sector, the city has two advantages to rely on as economic driving forces. The first is a solid manufacturing industry that accounts for around 48 percent of the city's economy. The second is a relatively fluid and stable financial system that can ensure funding for industrial production. We also have a variety of instruments to stimulate growth, such as export rebates and tax leverages.

The government is adding incentives for commercial banks to increase lending as part of its efforts to stimulate the economy. But with the credit boom may come higher market risks. Do you think banks should be cautious about extending financing?

We encourage commercial banks to finance the construction projects that help expand domestic demand. Moreover, many government-backed infrastructure projects bring high profitability and low risk. But the banks themselves and we regulators should also keep a close watch on market changes to ward off the risk of bad loans.

How much do you think Shanghai will benefit from the national programs to revitalize the 10 backbone sectors?

The revitalization programs are a long-anticipated boon for the industries of Shanghai, including the steel, automobile, information technology and petrochemical industries. A batch of our pillar enterprises like the Shanghai Baosteel Group (Baosteel) and Shanghai Automobile Industry Corp. will be the biggest beneficiaries.

As the programs requested, we also support mergers and acquisitions to help consolidate those industries and expect the enterprises to extend their reach beyond Shanghai.

Have Shanghai's preparations for the 2010 World Expo been affected by the economic downturn?

The preparations for the World Expo have been largely unaffected by the economic slowdown. The real concern is that many Western countries, facing severe recession at home, may cut their budgets for the exhibition or shorten their stay in Shanghai. But I believe Shanghai will also give support to them.

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