Glitter gone, but Shanghai seeks to keep pace with the new China

On autumn nights, people swarm along the waterfront -- once called the Bund, now called Zhongshan Road. Vegetable peddlers, fish vendors, old women with bound feet, young women wearing lipstick, and foreigners of all descriptions jostle on sidewalks at the intersection of Nanjing Road and the Bund -- where the once-magnificent Peace Hotel still stands sentinel. Until the communists took power in 1949, Shanghai was the glittering center of China's banking community and the home of a national stock exchange and numerous financial houses. Huge fortunes were made and lost in the city's board rooms and gambling dens.

Today the glitter of Shanghai, a sprawling urban area jammed with 12 million people, is history.

But the city is still an industrial powerhouse and China's biggest market for consumer items. Shanghai produces 16 percent of China's manufactured goods and contributes 12 percent of the country's gross national product. The port of Shanghai handles 40 percent of China's total shipping and is one of the 10 busiest ports in the world.

Since China's door reopened in 1978, some 1,000 Western businessmen, bankers, and diplomats have taken up residence in the former ``Paris of the East.'' The city has attracted more than $1 billion in foreign investment, primarily in 119 joint ventures with such leading Western companies as Foxboro, Squibb, Volkswagen, and Pilkington Glass. Seventeen banks have opened representative offices here, and four more have full-fledged branches.

On paper, Shanghai should be China's most eligible city to handle foreign trade and investment.

But in the decades since 1949, particularly during the 10-year turmoil of the Cultural Revolution that began in 1966, development ground to a halt. ``That is a time we prefer to forget,'' says Kong Fanping, a descendant of Confucius who is on the faculty of the Shanghai Institute of Technical Physics. ``It is better to concern ourselves with the present.''

Shanghai's present is also fraught with problems. Lack of housing heads the list. In 36 years, the city's population has doubled, and its decaying housing -- which covers 80 percent of the city's area -- cannot accommodate newcomers.

Traffic and port congestion here at the mouth of the Yangtze River are also serious problems. Bicycles on city streets have multiplied from 200,000 in 1949 to 2.3 million. This past summer, when 180 ships lay at anchor, authorities called in 300 People's Liberation Army soldiers and 100 trucks to help unload the cargoes. The port jam has helped cut the city's exports from $1.5 billion worth in 1980 to $1.2 billion last year.

Peking is concerned that Shanghai has not responded to the four modernizations as quickly as Canton, which boasts more joint ventures. Central-government officials were dismayed last year by Shanghai's 9.7 percent rise in gross industrial output, which trailed the nation's 13.6 percent average increase and lagged neighboring Zhejiang Province's 24.3 percent rise.

To help better the port city's economic performance, Peking this past July replaced Wang Baohan, Shanghai's popular mayor, with Jiang Zemin, former minister of electronics industries.

Nevertheless, Peking is partly to blame for Shanghai's slow start. More than 90 percent of Shanghai's revenues pour into central-government coffers, but only 13 percent of that total returns to Shanghai to help pay for its development. The central government has promised to increase that giveback to 23.2 percent.

Despite its difficulties, Shanghai would like to surpass the economic performance of the rest of China, particularly rival Canton. Some 270 million square feet of housing is slated to be built in the next five years to increase the average living space of each Shanghainese from 52 to 76 square feet. A nine-mile-long subway and at least one alternate port are also planned.

If Shanghai cannot live up to Peking's expectations, Western diplomats say, the central government may have to reconsider the way it is trying to adapt the four modernizations to China's big cities. A failure on Shanghai's part to revitalize itself into an industrial and commercial center by 1990 would damage not just the credibility of the government's new policies but, more important, the national economy.

But despite its problems and Peking's criticism, Shanghai's future looks reasonably bright. ``The management problems are solvable,'' an American diplomat notes. ``The infrastructure problems will take longer to solve, but most of them can be corrected, too.''