Shanghai 04
by The Economist

Also see:
Shanghai Real Estate
Shanghai Real Estate Market
Shanghai Real Estate for Sale

Whether you call them delusions of grandeur or visionary thinking, China's biggest city has plans that are nothing if not bold

APART from a dozen Chinese tourists posing for a photograph, the platform at the oval dome-covered Longyang Road Station is nearly empty as the world's fastest train pulls in. Minutes later, with all but a handful of its 500 seats unoccupied, the train glides off, levitating on an electromagnetic cushion that propels it with barely a judder to its top speed of 430kph (267mph). It takes just eight minutes to complete the journey to Pudong International Airport, an ultra-modern structure of glass and steel 30km (19 miles) away.

Considering the thrill of being on the world's first maglev train in commercial use—and the half an hour or more saved on the journey—it might seem odd that so few people are trying it out. Since daily services were launched on December 29th, about 1,000 tickets a day have been sold on weekdays (out of 12,000 available). At weekends, when novelty-seekers are out in greater numbers, the total still only rises to about 5,000, according to Song Xiaojun, general manager of Shanghai Maglev Transportation Development Co. If the arrival of maglev is a great boon to Shanghai's overburdened transportation system, few appear to be aware of it.

It is more than just a cautious approach to rolling out this new, German-supplied, technology that is keeping numbers down. While other countries, including Germany itself, have hesitated about adopting maglev because of the high cost and uncertain returns, Shanghai has happily poured $1.2 billion into its track—even though a glance at a map immediately suggests the risks involved. Longyang Road Station, the only stop apart from the airport, is on the city's eastern fringe, a considerable distance from most residential areas. A taxi ride between the airport and Longyang costs little more than the 75 yuan ($9) price of a maglev ticket and saves the hassle of a transfer.

Shanghai's gamble on maglev, in which seven big state-owned companies have a stake, reflects an approach to the city's development that places great store on massively expensive and commercially dicey projects. Since the early 1990s Shanghai has been driven by a desire to reclaim its pre-communist era status as a regional financial capital and a cosmopolitan haven for international capitalists eager to penetrate the Chinese market—that lavish but raffish world immortalised in Vicki Baum's novel, “Shanghai '37”. China's former prime minister, Zhu Rongji (who previously served as Shanghai's party chief and is normally known for his hard-headedness), strongly backed the maglev project when it got under way in 2000.

Cynics should perhaps beware. The city's “build it and they will come” mentality has, after all, paid off handsomely before. Many people scoffed when Shanghai announced plans in 1990 to develop what was then just an expanse of marshy land, villages and old factories into the city's new financial district. Today Pudong, as the area is called (and where the maglev is located), is a stunning conglomeration of soaring office towers and hi-tech factories (pictured above) that has attracted tens of billions of dollars in foreign investment. Last year, it is reckoned, it sucked in just under $6 billion, more than a tenth of the total for the entire country.

In the next few years, changes in Shanghai—whose GDP, according to the official figures, grew last year by a sizzling 11.8%—could be similarly dramatic. In September, the city is due to host China's first Formula One car-racing event. This has involved one of the biggest outlays of any Formula One venue in the world, with $310m being spent on a 5.5km circuit and related facilities now under construction on the western outskirts of the city.

The plan is to turn this into the centrepiece of a new “auto city” in which all aspects of the industry from manufacturing to sales will be concentrated. Yu Zhifei, deputy general manager of the track's developers, Shanghai International Circuit Co, admits that a lot of Chinese do not know what Formula One is and that many who do are sceptical about the track's ability to make money. But he says he is confident that the facility, with a seating capacity of 200,000, will turn a profit as Chinese consumers' new-found penchant for cars continues to grow apace.

The car craze is evident in the worsening congestion of Shanghai's streets. But to the maglev's operators, this is comforting. “Within a few years, it'll be very inconvenient to take the road to the airport,” enthuses Mr Song. And next year, he says, work should begin on extending the line another 7km to the site where the World Expo will be held in 2010 on the banks of the Huangpu River, much closer to the city centre. The hope is that it will become the main way to visit the fair, an event that lasts several months.

Shanghai's planners regard the World Expo as the city's greatest opportunity to show off its resurgent glory. Scepticism may abound about the ability of World Expos to generate profits. Hanover, site of the last such event in 2000, suffered a disappointing turnout. But Shanghai sees it as comparable to Beijing's hosting of the Olympic Games in 2008: an event that will fix the world's attention on the city's, and the country's, achievements. Compared to that, the $3 billion needed to build the facilities and relocate tens of thousands of residents to the outskirts is a trifle. And, anyway, by then the maglev's operators hope to be making a profit.