Shanghai's manufacturing sector faces greater difficulties to recover because it is more export-oriented compared with other cities and areas, an official of the Shanghai Development and Reform Commission said yesterday.

"Shanghai manufacturers are more dependant on exports, thus they suffer deeper from the deteriorating external demand," Zhou Bo, director of the commission which serves as the city's top economic planning agency, said in a report to the city's lawmakers. "Also, investment in manufacturing has been at a low level in recent years, which leads to a sluggish growth at present."

Shanghai's industrial production halted its seven-month losing streak in June and increased 2.1 percent from a year earlier to 198 billion yuan (US$28.9 billion) last month, according to the Shanghai Statistics Bureau.

But the exports of industrial products dropped 13.4 percent to 54.8 billion yuan last month, down a further 5 percentage points from a month earlier.

In the first half of this year, Shanghai's industrial output fell 5.1 percent annually, the second worst performer after Shanxi Province which shrank 17.4 percent due to the closure of many of its coal mines.

Meanwhile, the declining producer prices in the city mirrored the weak demand from manufacturers, which depressed the outlook for the sector's growth.

The Producer Price Index, the main gauge of factory-gate inflation, fell 8.5 percent last month, down further from the 8 percent decline in June, the bureau said yesterday.

To deal with the difficulties in the manufacturing sector, Zhou said Shanghai will boost financial support for small and medium enterprises and help them find local buyers to counter the loss in the foreign markets.

(Shanghai Daily August 21, 2009)