SHANGHAI people seem universally convinced that their city is China's premier business centre.

　　But a recent list of "China's Top 10 Business Cities" - produced by the Chinese edition of Forbes magazine - challenges this widely held assumption.

　　On the list, Shanghai only takes the fourth place among China's business hubs. The top three are Hangzhou and Ningbo, both of East China's Zhejiang Province, and Dalian of Northeast China's Liaoning Province.

　　This result, described as "unconventional" by the Oriental Morning Post, has generated much discussion in local media.

　　The 2004 White Paper, co-edited by the American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai, said Shanghai was China's most dynamic, fast-paced, business-friendly metropolis based on a number of economic and social indicators. In 2003, the city's GDP jumped 11.8 per cent, and the per capita GDP topped US$5,000. So why didn't Shanghai make it to the top of the Forbes list?

　　The Forbes article explains: "Shanghai is the dragon head of the Yangtze River Delta and the city producing the largest GDP in the country. But the rocketing price of real estate and the constant traffic congestion, as well as the excessive population, detract from Shanghai's status as a business city."

　　Over-regulated?

　　Zhu Lianqing, director of the Commercial Research Centre at the Shanghai Academy of Social Sciences, takes the list's results as good news, as it may serve as a "warning and nudge" to the city government, investors and proud Shanghai residents.

　　"Large absolute values such as GDP, average income and population are not always the most meaningful indicators when it comes to appraising a good business hub," the expert said. "For a long time, the city government has been a very powerful one, which has meant its administration has been too strict and rigid.

　　"Shanghai is a very highly regulated business environment. It is not regulated by the market, however, but by the government administration. That's why it can't compete with the other smaller cities mentioned by Forbes."

　　But other experts suggested the list was unbalanced and failed to adequately capture Shanghai's advantages.

　　"This list mainly targets private enterprises," said Zhou Peng, editor-in-chief of the Chinese edition of Forbes magazine. "But other indices such as the talent pool and transportation resources are also important to the strategy of international corporations."

　　Hangzhou, with its active private economy, topped the list. In that city, 98 per cent of enterprises are private, with more than 80,000 such businesses playing the main role in Hangzhou's economy.

　　"The Forbes list of the top 10 business cities seems unbalanced. They put too much emphasis on the private economy, instead of measuring the comprehensive capabilities of Shanghai," said Hua Min, director of the World Economy Research Institute of Fudan University.

　　Hua acknowledged that Shanghai was a comparatively regulated market, making it a difficult place for primary capital accumulation. "That's why those who want to launch businesses, especially small-scale private enterprises, can find it almost impossible to take advantage of gaps in the policy framework," he added.

　　"Compared with smaller cities in the country, the threshold for successful investment in Shanghai is much higher. The strict policy environment can make Shanghai less attractive to some investors. It is just like the old saying: there won't be many fish in very clean water."

　　Urban squeeze

　　In its comments on the list, Forbes said the rapid increase in real-estate prices and daily traffic congestion were the main factors depressing Shanghai's ranking.

　　"The price of real estate is a very important index when evaluating the investment environment in a city," Zhu said.

　　"The high price of real estate leads directly to high business costs. This is definitely a problem in Shanghai," agreed Hua. When it comes to attractive business costs, Shanghai is listed in 176th place.

　　The annual increase in office rents in Shanghai was 9.7 per cent - the sharpest rise in Asia, according to statistics from Cushman & Wakefield, a leading property-management company.

　　Similar problems also exist in Beijing, ranked sixth this time, and Guangzhou of South China's Guangdong Province, also among the top 10. On the same business-cost ranking, Beijing was 191st in the country, with Guangzhou in 186th place.

　　"I know some foreign investors have moved out of Shanghai for this reason," Hua said.

　　"The rising price of real estate should be attributed both to market demand and government policy," Zhu said. "The government has a responsibility to adjust the price of housing."

　　Another quality of business issue highlighted by the Forbes list was the worsening traffic congestion, a factor also noted in the 2004 White Paper.

　　"Private vehicle sales grew by 80 per cent in each of the past two years, and commuting around the city takes an increasing amount of time, something that may influence future investment decisions by multinational companies," the 2004 White Paper said.

　　Regional giant

　　Among the top three cities on the list, the first two (Hangzhou and Ningbo) are both located in the Yangtze River Delta, where Shanghai is considered the regional centre. Among the top 10, seven cities are located in this area.

　　"I think the surging business in this region would have been impossible without Shanghai, which functions as the economic dragon head," Hua said. "Shanghai, as a port and bridge between the outside world and East China, contributes a lot to the economy."

　　On the list, the number of cities in the Yangtze River Delta far exceeds the number in the Zhujiang River Delta of Guangdong Province, widely considered competitors in China.

　　Zhou Peng said the gap was mainly due to the different market position of the two regions.

　　The businesses in the Zhujiang River Delta mainly target foreign trade. Affected by the relatively sluggish international economy of recent years, the development in this region has slowed to some extent.

　　The economy in the Yangtze River Delta, in contrast, mainly faces inwards towards the domestic market. Over the past few years, the rapid development of China has been the fastest in the world, with especially beneficial consequences for the Yangtze River Delta region.

　　By Xu Xiaomin