The rivalry between China’s two largest cities has been ongoing for decades. In the view of many people, Beijing is traditional and culture-oriented, whereas Shanghai is a modern, cosmopolitan city, with a strong focus on business. Over the next decade both are keen to be foremost in the minds of the Global Population, but for very different reasons.
The recently released Global Cities Index 2014 by A. T. Kearney placed Beijing and Shanghai at 8th and 18th place respectively for most globalized city. This news was received with mild surprise, especially in Shanghai, as it contradicts the stereotype of many within China that Shanghai is the Mainland’s most international city and thwarts the city on this point of pride. Nevertheless, the question remains: has Beijing ousted Shanghai from its traditional position - the most outward-looking city in Mainland China? Is Beijing not only holding the monopoly over the political power, but also in the commercial sphere?
The Global City Index is based on five factors: business activity, human capital, information exchange, cultural experience and political engagement. Interestingly, what propelled Beijing into the Top 10 for the first time was not political engagement or cultural experience, but the increase in broadband subscribers, museums, international schools and most importantly - business activity. With the rise of Chinese companies, the level of enterprise activity has reached that of New York, Paris or Tokyo. Out of 89 Chinese companies on Forbes Fortune Global 500 list, 48 are headquartered in Beijing whilst only 8 are from Shanghai.
Although these companies are vital to the city’s economy, employing around 25% of the cities population and accounting for 60% of the city’s tax revenue, they do little to really make Beijing more global. Rapid expansion and increasing international importance of the country’s SOEs and private companies cannot be denied, but in reality the majority of these corporations are focused on the domestic market and often do not have a presence outside the country.
Shanghai conversely beat Beijing in the human capital sphere, as it has a larger foreign-born population. Unofficial statistics put the number of foreigners in Shanghai and Beijing at approximately 300 thousand and 200 thousand respectively. Moreover, Shanghai has been the top destination of FDI in China for years, and landed the 6thplace on the Xinhua-Dow Jones International Financial Centers Development Index, successfully leaving Beijing behind in both measurements. In addition, Shanghai is the world’s busiest port by cargo tonnage and container traffic.
Shanghai’s internationalization started nearly 200 years ago, giving it an early lead over Beijing when China was forced to open the city to foreign trade. This was later augmented by the opening of British, French and American concessions. In the 1930’s, Shanghai was a bustling, cosmopolitan and quickly developing city, “The Paris of the East”, with an ever-expanding foreign population. However after the revolution the spotlight was turned to Beijing as the focus of China's political and cultural power.
Even the cities’ spirits reflect the traditional roles they have played in the past. A stroll in a Beijing hutong will provide scenes more likely to appear in tightly-knit rural communities, whereas central Shanghai is a jungle of steel, concrete and glass, packed with the offices of international corporations.
A Norwegian student living in Shanghai, previously residing in Beijing, mentioned Beijing is still the epitome of traditional China for her. However, Shanghai is a bustling city with opportunities one could only dream of (in Beijing). The capital, in her opinion, sometimes feels as if it never expected to be a huge global city. According to her, people in Shanghai are more money-oriented and just love the coolness of the city. The city will never be satisfied with what it has and will constantly try to improve and modernise itself.
Shanghai is now taking the next step in its development with the recently established Shanghai Free Trade Zone. Regarded as China’s most significant attempt at deeper economic liberalization since Deng Xiaoping’s era, the FTZ will give foreign companies a lot more freedom and space to develop business operations not permitted elsewhere in the country.
The zone was launched last year amid lingering uncertainties, but there are plans to lift remaining currency trading restrictions, allow duty-free imports and open some of the industries for both full foreign ownership and general operations (Microsoft and Sony are both planning to launch their Xbox and Play Station consoles here). If the project succeeds, it will be a major boost for the city’s economy and internationalization, since even more foreign companies, especially in the financial sector, will choose the city as their gateway to China.
Beijing, on the contrary, has its own development plans, revolving around more integration with Tianjin and Hebei province as a whole. Due to air pollution, population density and the lack of economic development in the latter, the central and local governments are mulling over the concept of combining Beijing, Tianjin and Hebei province in certain respects. Although the full plan has yet to been unveiled, and speculations prevail, the Capital will probably see some of its industries and educational institutions being reallocated to the surrounding areas.
All in all, both cities are important global metropolises. China’s continuing rise and increased importance will continue to attract people and companies from around the world to both of them. However, Shanghai should remain the most cosmopolitan and international city in Mainland Chinais evolving at an almost unprecedented rate, it has a larger international population, greater FDI, a higher number of foreign companies and one of the largest container ports in the world. Furthermore, the Free Trade Zone will only deepen the city’s status as forward looking. Meanwhile Beijing, will continue to attract those looking for a deeper connection to the roots of Chinese power, international businesses seeking synergies with SOEs and those involved with China's burgeoning tech & telecoms entrepreneurs.