Destination report: Shanghai

Shanghai continues to be China’s busiest hub for corporate travel, and the decision to create the country’s first free trade zone is only likely to enhance this position. Rob Gill reports

Strolling along the leafy boulevards of Shanghai’s French district, known locally as a ‘concession’, it’s easy to forget that you are in the modern heart of China’s most populous city. But turn the corner and you are soon back among the skyscrapers in the bustling melting pot of the country’s most important business travel destination.

For all the talk of China’s secondary cities, such as Chengdu, Wuhan, Chongqing and so on, Shanghai’s importance as a trading hub remains paramount. Given its reputation as mainland China’s most cosmopolitan city, it’s not surprising that the government chose Shanghai for the creation of the country’s first ‘free trade zone’ (FTZ), which is a grand experiment to relax some of its stringent rules on foreign investment.

The zone covers an area of 29sq km on the eastern side of the city where the Yangtse river flows into the East China Sea. But this being China, there are plenty of caveats to genuine free trade. For a start, foreign investors within the zone will only have access to 18 specified industries, such as finance, shipping, travel agencies, healthcare and law. Investing in other sectors, including news organisations and internet cafes is prohibited.

SIGNIFICANT EFFECTS

Will this bold move of setting up the FTZ herald a significant period of foreign investment in the city, and more widely across China if the pilot project is extended to other areas? 

If the Shanghai experiment goes well and the Chinese authorities don’t get cold feet, the impact on business travel to China is likely to be significant. The value of business travel to China is already forecast to reach US$300 billion in 2023, up from an estimated US$145 billion in 2013, according to research by the World Travel and Tourism Council (WTTC).

When the project was unveiled in September, there was chatter that the ‘great firewall of China’ would be lifted in the city to allow access to currently banned websites such as Twitter, Facebook and The New York Times. This now appears not to be the case – although it’s difficult to find a definitive answer. These websites are still inaccessible across the city – although they can be used through Blackberry networks and virtual private networks (VPNs), which disguise the user’s location.

International banks, such as Deutsche Bank, Citibank, and HSBC, will be among the first to set up branches in the FTZ. More than 1,400 firms have registered their interest since the zone was officially opened on September 29, 2013.

The development will bolster Shanghai’s importance as the key corporate travel destination in China, with many in the industry believing it will help the city eventually supplant Hong Kong and Singapore as the most important business hub in the Far East.

COMPETITIVE ADVANTAGE
Teresa Yuen is general manager of travel management company Swire Travel China, part of the Globalstar network. She says the impact of the zone will “spread beyond the city itself” and would “further strengthen Shanghai’s competitive advantage in attracting large corporations compared to other large mainland cities”. She adds: “Competition between Shanghai, Hong Kong and Singapore will no doubt heat up when the FTZ matures.” 

Kim Ran Frost Fuglsang, ATPI’s regional managing director for Singapore, Hong Kong and Shanghai, agrees about the potential impact of the development: “Corruption is being dealt with by the authorities with a firm hand, which will reinforce the city’s image as a reliable and stable place to do business.”

But ACTE’s Asia regional director Benson Tang believes it may take some time before the FTZ really takes off. He adds: “This free trade zone is still a piece of undeveloped land, just like the Pudong area of Shanghai 20 years ago, which was just a marshland with no development. In the short-term, the zone might not be a big challenge to well-established international financial hubs such as Hong Kong or Singapore.”

Like all China’s major cities, Shanghai is undergoing a constant renewal of its already impressive infrastructure. The historic Puxi area west of the Huangpu river – opposite the iconic Pudong skyline – is set to become more of a hub for business travellers with new developments such as the Kerry Centre with its offices and high-end shops, as well as the extensive conference facilities in the neighbouring 60-floor Shangri-La Jing’an.

Other plans include the reconstruction and expansion of the World Expo site and the continued upgrading of the main international airport. 

REAPING BENEFITS
Will buyers have to pay higher hotel rates with the anticipated rise in corporate travellers? Yates Fei, general manager for HRG China, thinks that although the hotel industry “will reap benefits”, rates are likely to “remain extremely competitive” due to the continued opening of new properties.

Cultural differences and the etiquette of doing business in China can also become a significant hurdle for businesses looking to move into the world’s most populated country. ACTE’s Benson Tang organises events for global travel managers to understand the “complexity” of doing business in China. “Unless travel managers are really experienced and learn locally with us, they can’t understand the market well enough,” says Tang. “Don’t underestimate the complexity in China. Something very simple in your country, can be so different and complicated in China – such as credit cards, where the limits are very small due to foreign exchange restrictions.”

This is why doing business in China always carries risk – projects such as the free trade zone could disappear with one bureaucratic edict from Beijing. You can see it in the way the city’s parks are arranged – sub-divided into lots of little sections to prevent any chance of hundreds of people gathering together. Even in a cosmopolitan hub, such as Shanghai, there is a palpable sense of state control. 

TRADING WITH CHINA
The importance of China as a trading partner with the UK has been illustrated by Prime Minister David Cameron, Chancellor George Osborne and London Mayor Boris Johnson all making trade visits to China last year. Cameron even delayed Osborne’s autumn statement by one day to allow him to go to China.

Meanwhile, Transport Minister Patrick McLoughlin is due to start negotiations in early 2014 on increasing the number of UK-China flights under the bilateral agreement, which currently limits each country’s airlines to a total of 31 return flights per week.

Currently, British Airways and Virgin Atlantic fly daily to Shanghai, while BA also has a daily service to Beijing and started a new route in September 2013 to Chengdu, the capital of the south-western province of Sichuan – but nobody thinks this is enough to drive a successful relationship with China.

Obtaining visas to China remains a major problem with business travellers forced to fill in a convoluted form. Esther Jones, senior team leader at FCM Travel Solutions, says: “Visas take a minimum of three to four days, so this means that no late travel can be booked.”  

 

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