Shanghai vs. Beijing - A Headquarter Perspective

Shanghai or Beijing, where do you open your business? There’s always a debate among foreigners in China as to which city is better. Who’s got better transportation systems, better infrastructure, the best restaurants and bars? It’s usually Shanghai that comes to mind first. At the end of 2005 the city hosted 104 regional headquarters compared to Beijing’s 86. If you look at what types of businesses are opening in Beijing you might think differently though.

Beijing’s Finance Street is now home to major investment banks such as Goldman Sachs, UBS and JPMorgan. Why are these companies’ headquarters here and not in Shanghai, China’s supposed commercial capital? That’s because the feeling of some investors is that the way to predict the future of business in China is to watch and see what comes out of the Ministry of Finance. As most of the companies trading on the Chinese stock markets are state-owned, politics can still play a big role in determining stock prices. And since the Chinese government is in the process of reforming business laws to bring them in line with World Trade Organization standards, having the right contacts in the capital continues to be important.

Beijing has one other big advantage going for it: brainpower. Many of the country’s top universities are located in its capital providing a large pool of available recruits. And because of this, top international technology companies have set up shop in the city so they can develop products tailored especially for the Chinese market.

But let’s not forget about all of Shanghai’s benefits. It still has a strong manufacturing base for electronic components, a large port for easy worldwide delivery and a modern Western-style infrastructure. All these factors are big benefits to businesses. There is also a good support system of international schools in the city that helps to keep executives and their families in the area allowing for seasoned senior executives to stay in the country longer and help their China offices grow.

But in a country where things are still centrally planned, it makes sense for business to set up shop near the political players. So until Beijing gives up some control, we’re certain to see a lot more businesses choose Beijing over Shanghai as the base for their China headquarters.

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