Shanghai has managed to achieve moderate economic expansion in the first half despite mixed fiscal results in a number of areas.

While the inflation rate accelerated in the city and investment decreased, the export growth rate remained stable to keep the books well in the black.

Cai Xuchu, chief economist and spokesman for the Shanghai Statistics Bureau, said the city's economy may grow faster in the second half after inflation eases and investment recovers gradually.

Shanghai's gross domestic product rose 10.3 percent in the first half to 653 billion yuan (US$95.61 billion), easing from 13.3 percent last year. The rate was slightly lower than the national GDP growth of 10.4 percent in the first half, an extremely rare occurrence.

Since 1992, Shanghai's economic growth has exceeded the national level except for the first half of 2005 when it was 0.2 percentage point lower than the country's.

"As an international city, Shanghai is more vulnerable to the influences of overseas economic fluctuations," said Cai. "The bad performance in the securities market and a sluggish property market also contributed to the slowed expansion in the city's output."

He said the stock market had made no contribution to the city's economy, while the property sector dragged down the rate by 0.4 percentage point in the first half.

The city's Consumer Price Index, the main gauge of inflation, stayed at 7.1 percent through June, picking up 5.3 percentage points from a year earlier. The national level in the first half was 7.9 percent.

Shanghai's fixed-asset investment increased just 2.3 percent in the first six months, down 7.3 percentage points from the same period last year due to slower infrastructure and real-estate development. To put this in perspective, the corresponding national figure was 26.3 percent.

However, the champagne corks can be popped in the export sector, which expanded 25.1 percent to US$80.4 billion in the first half, up 5 percentage points from a year earlier. It managed to maintain strong growth despite weaker external demand.

"Shanghai has been making continuous efforts to improve its industrial structure and develop more value-added products," Cai said. "It is also trying hard to explore emerging markets so the city is not so badly affected by the poor global trade environment."

The city's retail sales gained 16.7 percent to 220 billion yuan in the first half and the disposable income for Shanghai residents jumped 13.3 percent to 13,912 yuan.

(Shanghai Daily July 25, 2008)