Shanghai's manufacturing sector is growing much quicker than expected, with industrial output in the city forecast to hit a record 1 trillion yuan (US120 billion) this year, according to the Shanghai Economic Commission.

　　Shanghai's industrial output was valued at 848 billion yuan last year, but production has already topped 590 billion yuan during the first seven months of this year, a 26.7 percent increase from the same period in 2002.

　　The rapid growth comes at a time when the local government is shifting its focus back to manufacturing.

　　In the early 1990s, the city introduced a strategy called "three, two, one," meaning it would give top priority to the third industry, or service sector, and put less focus on the second and first industries - manufacturing and agriculture.

　　At the time, the government said it wanted the service sector to account for 70 percent of the city's GDP. Today the sector makes up about 48 percent of Shanghai's GDP.

　　Recently, however, the government has switched its focus back to manufacturing, building new industrial parks and aggressively courting foreign investment into the industry.

　　"The Shanghai government is fighting back to reverse declining productivity, aiming to make itself into a manufacturing center," said Zhang Jun, an economics professor at Fudan University.

　　The government has said it wants industrial production in the city to be worth 1.12 trillion yuan a year by 2005, a target it will easily reach if it maintains its current double-digit growth rate, the commission reported yesterday.

　　"The service industry used to be the major focus of development in Shanghai. But as the manufacturing sector may be better at increasing foreign investment and exports, that sector has regained strength," said Dai Qin, a property analyst for DTZ, a Hong Kong-based consulting company.

　　Last month, Shanghai's manufacturers realized value-added output of 23.2 billion yuan, a year-on-year increase of 20.8 percent, the Shanghai Statistics Bureau reported yesterday.

　　Industrial exports during the month rose 35 percent to hit 21.3 billion yuan, with computer manufactures accounting for more than 28 percent of those exports.

　　Analysts said that increased foreign investment and improved technology are two of the main engines behind the rapid growth of the city's manufacturing sector.

　　In August, output of new products increased 20.9 percent year on year to 12.9 billion yuan.

　　The automobile industry turned out 7.2 billion yuan worth of new products.

　　The auto sector is one of the manu-facturing industry's brightest stars, with sales soaring more than 90 percent year on year during the first half of 2003.

　　Despite the strong numbers, some remain skeptical of the city's plans to become China's top manufacturing center due to the city's high real estate and labor costs.

　　"Living standards and thus production costs in Shanghai are relatively higher than the rest of Yangtze River Delta," Professor Zhang said.

　　"The manufacturers of consumer products in the city may lose their competitive edge to counterparts in Zhejiang and Jiangsu provinces," Zhang said.

　　The city government is currently setting up industrial parks in suburban areas to make Shanghai more attractive to investors.