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A World Bank report released over the weekend suggests Shanghai and Hangzhou have the best investment climates among 23 major cities on China's mainland.
The report, which bank officials released at an investment forum in Hunan Province on Saturday, ranked the cities in six categories.
Shanghai and Hangzhou were the only two cities to earn spots in the top category.
Surprisingly, Beijing and Shenzhen were placed in the fourth category, behind such lesser-known towns as Jiangmen, a city of 3.8 million in Guangdong Province and Changchun, capital of Jilin Province.
To rank the cities, the bank surveyed managers from 2,000 companies about the city where they operate. They were asked to rate their city's infrastructure, availability to obtain financial services and human resources among other things.
The World Bank put together its first report on China's investment environment last December, when it surveyed 1,500 companies in the cities of Shanghai, Beijing, Guangzhou, Tianjin and Chengdu.
This year it added 18 more cities, including Hangzhou, Shenzhen, Zhengzhou, Changsha and Wuhan. Suzhou was not included in the list.
The World Bank said most of the newly added cities are located in the central and western parts of China to better reflect the investment climate in different regions across the country.
Shanghai's biggest failing, according to the report, was in the area of infrastructure.
The survey found that companies in Shanghai lost up to 0.2 percent of their turnover due to power rationing and delays in transportation.
Many local companies were forced to change their schedules or shut down for periods this summer due to power problems caused by an extended heat wave.
Beijing lost points due to its congested traffic and lack of a flexible labor force.
But it was praised for its financial services, beating out all other cities in that category, the Beijing Morning Post reported, citing David Dollar, director of development policy for the World Bank, who spoke at the forum in Hunan on Saturday.
Speaking as a whole, China boasts a healthy investment environment. However, it's also suffering from some evident weaknesses, especially in the financial sector, the report said.
Dollar said his team was surprised to find highly efficient and active companies in China are unable to get bank loans.
They were also surprised to learn that about 10 to 15 percent of the firms surveyed said they have to pay commissions to the banks to obtain loans.
Changsha, a city in central China, scored well in this area with 80 percent of the companies surveyed saying they are able to get bank loans. The figure is less than 50 percent in some cities.
But Changsha, like many central cities, boasts little foreign investment. Only about 10 percent of the companies in the city have any overseas funding.
That puts Changsha at a great disadvantage to cities like Shanghai and Guangzhou where more than one-third of the companies are foreign-invested, the report said.
(Shanghai Daily November 17, 2003)
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