Shanghai's "reboot": changes and no changes in "China's first economic city
By Yang Qifei, Dan Zhongkui,
June 02, 2022 07:32 Source: National Business Daily
(Responsible Editor: Zhu Xiaohang)
On June 1, along with the clock striking zero, the Bund Landscape Avenue ushered in long-lost visitors. Many people came here specifically to take pictures with the city's landmarks and take a closer look at this familiar yet unfamiliar city.
From March 28, when Shanghai announced the closure of the Huangpu River in batches, to June 1, when the city entered a phase of full restoration of normal production and living order, the most populous and economically powerful mega-city in China pressed the "pause button" for 65 days. And, many people have been in a state of closure and control before, home time will be longer.
Early on the 1st, the Shanghai Municipal Party Committee and Municipal Government issued a "letter of thanks to the people of the city", saying that they would do their utmost to promote the full restoration of normal production and living order, and "do their utmost to get back the time delayed and the losses caused by the epidemic".
In the first four months of this year, Shanghai saw an unprecedented decline in industry, investment and consumption. In particular, the total output value of industry fell by 12.5% year-on-year, while investment in fixed assets and total retail sales of consumer goods fell by 11.3% and 14.2% respectively.
In April, the main economic figures were almost "cut": the total output value of industry fell by 61.5% year-on-year, the total retail sales of consumer goods fell by 48.3% year-on-year, and total imports and exports fell by 36.5% year-on-year.
After this epidemic, some say that it is time for Shanghai to make changes and to resolve the impact of the highly concentrated model by decentralising urban functions and relocating industries; others say that Shanghai will remain the same Shanghai, with an irreplaceable position as the country's largest economic, industrial, financial, foreign trade and shipping centre.
Looking at the past two months from several angles, from the details of economic development to the personal feelings of individuals, some changes have already taken place. But what remains the same is that Shanghai is still the "trump card".
Gravitational force
Shanghai has seen an orderly resumption of work and production, but the "trauma" and subsequent impact on industry has not yet completely dissipated.
The Shanghai Bureau of Statistics showed that the total industrial output value of Shanghai in April was only 128.617 billion yuan, down 60% year-on-year. Among them, the two pillar industries - automobile manufacturing and computer, communication and other electronic equipment manufacturing output value fell by 70.9% and 62.8% respectively.
Automobile production, in particular, reached only 53,500 units in April, a 76% plunge from March. Among them, Tesla's Shanghai super factory produced only 10,800 cars, with output falling by 80% compared to the previous month.
Wind data show that the number of listed companies in the automotive industry chain with offices in Shanghai is 51, accounting for 7.24% of the total, with total revenue of 158.79 billion yuan, accounting for nearly 20%, all ranking first in the country. In terms of components, Bosch, ZF, Magna and other top 10 global auto parts groups, nine of them have their China headquarters in Shanghai, and there are also a large number of key component suppliers located in and around Shanghai.
It is for this reason that Peng's founder, He Xiaopeng, once worriedly exclaimed in mid-April that if work did not resume in Shanghai, all the country's car factories might have to stop production in May.
A glimpse of the whole picture. In addition to the automotive industry, Shanghai also occupies an unshakable position in the fields of integrated circuits, biomedicine and artificial intelligence, which have a sustainable impact on the development of related industries in the Yangtze River Delta and the country as a whole.
Affected by the epidemic in Shanghai, Suzhou, also a major manufacturing city, saw a 0.5% year-on-year drop in the growth rate of gross industrial output value from January to April, a drop of 10.1 percentage points from the first quarter. Meanwhile, the total industrial output value of Wuxi, Nantong, Hefei, Ningbo, Nanjing, Hangzhou and other Yangtze River Delta cities all fell by varying degrees.
The Yangtze River Delta was certainly not the only one affected. Lu Zhengwei, chief economist at Industrial Bank, in his article "Who has been affected by the Shanghai epidemic? in which he points out that Jilin, Zhejiang, Beijing, Shanxi and Liaoning spend a higher proportion of their total output on intermediate goods in Shanghai, indicating that these regions are more dependent on Shanghai's demand. In particular, Jilin's residential services output is used in Shanghai at a rate of 46.2%, while Zhejiang's non-metallic mineral products industry uses intermediate goods in Shanghai at a rate of 28.5% of total output, indicating a high degree of dependence.
In addition to this, production in Beijing, Xinjiang, Zhejiang, Ningxia and Hainan were more dependent on inputs from Shanghai, with inputs from Shanghai accounting for 4.3%, 4.2% and 3.5% of the technical services, transport equipment and sanitary social work industries in Beijing, and 5.1%, 3.2% and 3.1% of the transport equipment, metal smelting and instrumentation industries in Zhejiang respectively.
In the face of the uncertainty caused by the epidemic, Shanghai's appeal remains undiminished. At the beginning of May, Tesla confirmed that it would expand its Shanghai super factory, rather than building a "second factory" in another city as previously rumoured. This is certainly a "shot in the arm" for Shanghai.
Trends
In the face of the epidemic, consumption has also been hit hard.
On 19 March, Shanghai, recognised as the "City of Coffee", which has not yet entered into "silent" management, began to experience a coffee "ban". A temporary closure of a neighbourhood was temporarily lifted and a Shanghai resident, who could finally enter a supermarket, roared "I want to buy coffee" to the number one spot on Weibo. The connection between Shanghai and coffee became more apparent to the public.
According to a set of data before the epidemic, the number of boutique coffee shops in Shanghai reached 3,244, ranking first in the country. And the number of Shanghai coffee shops listed on the popular Dianping platform exceeded 7,200, providing an average of about 20 cups of coffee per person per year for Shanghaiites.
But the enthusiasm of Shanghai people has not saved the coffee shops from the shortage of beans and the inability to open their doors under the epidemic.
A study of nearly 40 coffee shop owners in Shanghai once found that they basically made zero income during the epidemic, losing as little as 100,000 and as much as two to three million. Those cafes located in the worst areas of the epidemic were almost disconnected from buyers due to their inability to participate in group purchases and takeaways; even if they participated in community group purchases and sold most of their coffee beans, they still could not make up for the losses of more than 100,000 RMB.
With restrictions on all fronts, sophisticated Shanghainese are forced to tire of counting their daily group purchases and the daily meals they are allocated. Their insatiable appetite for shopping is waiting for a moment to explode; and similar to the coffee shop owners, those in the life service industry who are still struggling to make ends meet are hoping for a return of "revenge spending".
As the control policies continue to ease, the "breaking point" seems to be emerging.
On May 1, the nodes and supplies of Shanghai's commercial outlets gradually resumed, with data from the Box Horse APP showing that the most searched-for commodities by Shanghai citizens shifted from meat and poultry, eggs and milk, convenience fast food and other necessities to improved commodities such as crayfish, coffee, flour and pet supplies. It is now busier than normal.
Some people have also analysed previous rounds of the epidemic, pointing out that some consumption may be lost and difficult to make up for, and that "restorative consumption" may also be slow to emerge, and the recovery effect may be limited.
But even so, Shanghai, which has always been a fashionable place, is once again setting new business "trends".
The people of Shanghai are "stocking up" in a competition to add fuel to the fire of the "popular" pre-prepared dishes. Figures show that in March, national sales of pre-prepared vegetables increased by more than 100% year-on-year, while Shanghai saw an increase of more than 250% in half a month. Businesses have been moving in response to the wind, and some industry insiders predict that a trillion-dollar market is about to open.
The wind is also blowing in the coffee industry. Some practitioners pointed out that through the epidemic, the demand for coffee in China is actually very strong, and many consumers have learned about coffee concentrate, a slightly niche coffee category in the past. After the end of the epidemic, consumers may continue the habit of stocking up, which will be good for portable coffee products, and the market will grow further.
Link
At the beginning of May, Miyu (a pseudonym), who lives in Sichuan, discovered that the cosmetics she had purchased online had not been delivered for almost a month. When she opened the shopping page, she was surprised to find that the Beijing-based shopping platform had a shipping warehouse in Shanghai. She shared her experience with a friend and found a bunch of "accomplices" waiting for delivery - whether it was luxury bags, imported furniture, eye drops or clothing, none of them had "escaped" the Shanghai epidemic. The impact of the epidemic.
If it weren't for the epidemic, many people might not be so keenly aware of the importance of Shanghai in the national logistics system.
Two sets of data are available for reference.
According to a research report by CRE macro, Shanghai and the "package mail area" in which it is located, sells more and buys more. From the perspective of express business volume, in 2021, Zhejiang, Jiangsu and Shanghai together will account for almost 1/3 of the country's express business volume.
Another map of China's urban logistics, drawn by Tongji University's China Institute of Transport and others, shows Shanghai in the darkest colours, becoming the only region in the country with a competitiveness index of over 70.
According to the April data released by the State Post Bureau, the national express business volume fell by 11.9% year-on-year and revenue by 10.1%. The "negative externalities" of the Shanghai epidemic for express delivery are evident.
At sea, another kind of capacity "anxiety" is also weighing on the minds of the global transport industry.
Citing observations from VesselsValue, some media outlets pointed out that the number of ships of all types waiting in the waters around Shanghai was on the rise in March, with the number of ships at berth increasing by more than 70% year-on-year between March 1 and March 30. Although there was no previous serious congestion in the US and Western ports, the situation was not optimistic either - in terms of ship types, "the number of dry bulk carriers and tanker ships berthing increased significantly, while the number of container ships dropped".
Industry analysis suggests that this may be indicative of the fact that anxiety was once transmitted to shipping companies, leading them to make port-hopping adjustments to container ships. In fact, the shipping industry giant Maersk had also issued a prior warning that it needed to pay attention to the possible port congestion brought about by the impact of the epidemic in Shanghai. This, coupled with the queuing of container trucks in the port, has increased the "risk aversion" of shipping companies.
As the world's number one container throughput "transshipment point" for 12 consecutive years, Shanghai reacted quickly and in April, the Port of Shanghai launched a "land to water" service to solve the land transport congestion. Shipping companies left as quickly as they came back. Although traffic is still recovering, on 26 May, the Ministry of Transport revealed at a press conference that the daily container throughput at the port of Shanghai had risen to 95.3% of normal levels.
But in the aftermath of the epidemic, the quest to "spread the risk" is also advancing.
At the "Yangtze River Delta G60 Science and Technology Corridor Cross-border E-Commerce Industry Alliance Online Training Session" not long ago, Tian Hao, Secretary-General of the G60 Science and Technology Corridor Cross-border E-Commerce Industry Alliance and President of Hongqiao Free Trade City in Songjiang District, extended an invitation to the nine cities to strengthen cooperation with Suzhou, Jiaxing, Hangzhou, Xuancheng, Hefei and other nine cities to explore the establishment of The city hopes to strengthen cooperation with Suzhou, Jiaxing, Hangzhou, Xuancheng, Hefei and other nine cities to explore the establishment of a transit warehouse for import and export commodities at the Shanghai port to minimise the impact of the epidemic on import and export commodity trade.
The mentality of looking for a "backup" is also present in the trade companies affected by the shutdown of express delivery. After a month of shutting down the main warehouse in Shanghai, some companies started to set up sub-warehouses in various places, and opened sub-warehouses for direct shipments outside the main warehouse, so that "eggs cannot be put in the same basket".
Conclusion
It took hundreds of years of trials and tribulations to make Shanghai what it is today; what will it bring to Shanghai after this tough battle?
On May 29, Wu Qing, member of the Standing Committee of the Shanghai Municipal Committee and Executive Vice Mayor of Shanghai, introduced Shanghai's "50 measures to revitalise the economy", emphasising that the fundamentals of Shanghai's economic development remain unchanged, that Shanghai's position in the new development pattern remains unchanged, and that the long-term positive trend of Shanghai's economy remains unchanged.
The three "no changes" are the official response to the various concerns, speculations and questions surrounding Shanghai - Shanghai has not changed.
As the central node of the domestic cycle and the strategic link between the international and domestic cycles, Shanghai is connected to the Yangtze River Delta, to China and to the world.
Good luck to Shanghai.