Perspectives on Shanghai

Today's five notable reads, marking the first day of the lifting of the lockdown in Shanghai:

New stimulus in Shanghai as lockdown finally ends - Barron's

The Shanghai government on Sunday released a lengthy policy document announcing 50 new measures to restart its economy, which was devastated by the two-month closure of the financial metropolis amid China’s worst wave of infections.

The vast majority of the 50 measures are directly aimed at boosting production, and most of those aimed at boosting consumption are either too small to matter much or do so indirectly (and inefficiently), so that they don’t rebalance demand.

Comment: We are finally free in Shanghai (for the most part/not really), and this seemed to excite the markets early in the week. But only time will tell whether zero Covid policy is sustainable. It probably won't be. The impact of stimulus measures on growth will be slow and consumption will only strengthen if virus concerns wane and restrictions continue to ease. China's GDP estimates have already been downgraded by many, UBS cut to 3% last week (China's official estimate is 5.5%). That said, China is the only country cutting interest rates and pumping stimulus to boost the economy. The US and Europe are raising interest rates and tightening liquidity. It begs the question whether now is a good time to invest in China. If you were owning Chinese stocks 12 months ago, now is probably not the time to be selling. Thinking long term, you can buy an economy that will grow at say 4% real GDP over the next 10 years, on a P/E of about 10, that seems pretty attractive. In the short term, confidence still seems low. Nobody is fully confident that there won't be ongoing restrictions in the months ahead. The lockdown has done a lot of damage and there still needs to be incentives put in place for more people to get vaccinated.

How Shanghai can win back the confidence of foreign capital - Ginger River Review

The development of Shanghai shapes not just China's economy, but also the global supply chain.

In the last 17 years, Shanghai has seen a continuous increase in foreign direct investment. However, in the span of 40 years, the amount of foreign investment declined at least four or five times. A trace would be found for every decline, because foreign investors are highly sensitive.

Comment: An interesting piece for anyone interested in the recent history of the development of Shanghai's foreign investment, starting from the establishment of the Shanghai Foreign Investment Commission in 1988. China has long understood the importance of foreign investment in its most important metropolis. Officials would be wise to learn from the lessons of the past. Although today's troubles probably trump those of the recent past in terms of attracting, and keeping foreign investment, Shanghai certainly won't want to lose its status as a global business centre.

Shanghai retailers prepare for shopping spree as Covid restrictions ease - FT

Chinese social media users have vowed to go on spending sprees after lockdown, with one list of restaurants, labelled the “Shanghai revenge eating and drinking playbook”, going viral.

Another user, Yilian Fengyue Xian, said she had bought four cups of bubble tea in what she called “revenge bubble tea drinking”.

Comment: Expat social media users have vowed to drink themselves silly after lockdown.

China Plans for Years of Covid Zero Strategy With Tests on Every Corner - Bloomberg

“It will only make Covid Zero last longer in China,” said Huang Yanzhong, a senior fellow for global health at the New York-based Council on Foreign Relations. “The immunity gap will remain, which makes living with the virus even more unlikely.”

Comment: Every three days, residents here in Shanghai will need to get a covid test at one of the thousands of stations planted around the city if we want to get on the metro or even step into a shopping mall. I waited two hours for mine today. This is going to become an inescapable part of everyday life for God knows how long.

Xi calls for advancing study of Chinese civilization - Xinhua

On Friday afternoon, Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, presided over the 39th group study session of the Political Bureau of the CPC Central Committee to further a national research project on tracing the origins of Chinese civilization.

Chinese civilization is extensive and profound, and has a long history stretching back to antiquity. It is the cultural identity of the Chinese nation, the foundation of the contemporary Chinese culture, the cultural bond holding all Chinese around the globe together, and it is the treasure trove inspiring cultural innovation, Xi stressed.

Over the long course of history, the Chinese nation, with perseverance and determination, has endured hardships and traveled extensively and has ventured a course of development different from other civilizations. We should gain an in-depth knowledge of Chinese civilization's development over more than 5,000 years and extend research into its history, so that all members of the Party and society at large will develop a keener awareness of our history, build up cultural confidence, adhere to the path of socialism with Chinese characteristics, and work together to build a socialist modern country in all respects and realize the rejuvenation of the Chinese nation, Xi noted.

Comment: To be fair, we could all do more to understand the history of Chinese civilisation. Chinese citizens included. To that end, I would recommend reading John Keay's China: A History. From it comes a pertinent passage:

Nearer to home the Koreans, Vietnamese and Mongolians, not to mention non-Chinese peoples currently within China's borders such as those of Tibet, Xinjiang and the south, would certainly contest China's neighbourly credentials. But the hostility has usually been reciprocal. Across one of the longest and least defensible land frontiers in the world, China (as defined at any given moment) confronted formidable foes. The catalogue of nomadic and semi-nomadic peoples who menaced the settled regions of China's north and west may seem inexhaustible and included confederations of the most martial peoples in Asian history - Xiongnu, Turkic, Tibetan, Muslim, Mongol and Manchu. To this list could be added later seaborne intruders - the European powers in the nineteenth century and Japanese imperialists in the twentieth. Though no amount of provocation can excuse the recent oppression of, for instance, Tibet, it is a matter of record that the Chinese people have suffered far more militarily from outsiders, and been obliged to stomach far more culturally and economically from them, than outsiders ever have from China. If the idea of the Great Wall as a purely defensive bastion has usually found such favour, it is because it fits so well with this perception. But as what follows may suggest, when history is at its most obliging, the history-writer needs be at his most wary.