The glory of the past is gone. Shanghai in Economic Freefall: 6 Unusual Phenomena Reported

It's all covered in today's China Truths. The glory of the past is gone. Shanghai's economy deteriorates. Six unusual phenomena reported. Since the beginning of this year, abnormal phenomena unlike those in the past have repeatedly appeared in Shanghai, resonating widely on social media. Recently, six abnormal phenomena in Shanghai have once again circulated on social media. Six more abnormal phenomena were reported in Shanghai. First, business in most physical stores is declining. In many shopping malls, there are more salespeople than customers, and salespeople are often seen live-streaming in the store to sell goods. Second, many office buildings and office parks in Shanghai are now vacant. As long as you are willing to rent, you can avoid paying rent for a few months, only needing to cover property fees and utilities. Third, the number of takeout couriers and online ride-hailing drivers continues to rise, but their incomes are decreasing. Even more concerning, there are sometimes queues for people applying for these jobs. Fourth, many landlords have revealed that it is now difficult to rent out their properties. Without voluntarily lowering the rent, no one is interested. Fifth, the government has obviously released a lot of liquidity, hoping people will spend and invest more. However, most people are not only refraining from spending, but are also saving as much as possible in banks. Sixth, many business owners are now avoiding loans for expansion, instead switching between banks to replace previous high-interest loans with lower-interest ones to cut costs. Ten strange phenomena have appeared in Shanghai. In the past, Shanghai was the economic center of the country, with one-third of the country's income coming from Shanghai. Shanghainese and even people across the country were proud of it. Since 2024, many people have posted on social media saying, now Shanghai's economic strength has gradually weakened. The manufacturing industry has almost been evacuated. Shanghai has lost a lot of people all at once, and the economy has collapsed. The current Shanghai is not what it used to be. There are at least 10 strange phenomena in Shanghai. These abnormal phenomena did not exist in the past. In March of this year, C. Yuwen, a financial writer who has lived in Shanghai for more than 10 years, posted a video on his Weibo and WeChat account, Rampage Duan Gongzi, to list the top 10 strange phenomena that occurred in Shanghai this year. However, the Weibo account Rampage Mr. Duan was banned soon after. First, white-collar workers have begun to bring their own meals. Duan Yuwen said that there used to be a Japanese food shop downstairs from his company, which sold set meals for 40 or 50 yuan, but it couldn't sell this year and has closed. Many people carry a bag with them to work and bring rice with them. They heat it up in the microwave at the company at noon and then eat it. Second, no one in the group discusses job-hopping. In the previous group of friends, everyone often had heated discussions about job-hopping, salary increases and changing jobs. This year, he didn't see a single message. On the contrary, people often say, don't call me for any activities this year, or I have to work more overtime this year to keep my job. Third, second-hand houses cannot be sold anymore. In February this year, only 6,800 second-hand houses were sold in Shanghai, with the average transaction price being 38,633 yuan per square meter. The transaction price dropped 9% from the previous month. Fourth, shopping malls in downtown Shanghai are also closing. Take Suji Ahoy in Shanghai as an example. This is the core business district of Shanghai. 30 years after its opening, Pacific Department Store, once one of the few high-end shopping malls in Shanghai, has also closed its doors. Fifth, office rents are free. A friend engaged in the leasing business in Shanghai told him that in many office parks now, as long as you pay property fees and water and electricity bills, the office rent is basically free. Not only in Shanghai, but also in Beijing's commercial office market, a similar situation has occurred. Sixth, it is very convenient to take a taxi, and luxury cars are also available. Even during rush hour, taxi orders are received within seconds. This was unimaginable before. You typically had to make an appointment and queue up. But now orders are received very quickly, and you can often get luxury cars at cheap prices. Seventh, food delivery is extremely fast. He believes there may be two reasons. Either few people are ordering takeout, resulting in fewer orders, or there are too many takeout workers, many of whom are unemployed and have taken up food delivery, making deliveries very fast even during peak periods. Eighth, more loan calls are received each day than before. Last year, he received one to two loan calls a day. This year, after the new year, the number has at least quadrupled. With eight to nine calls a day. Ninth, there is practically no discussion about traveling abroad. Tenth, there are fewer and fewer foreigners. In the past, foreigners were all over the streets of Shanghai. At its peak, there were more than one million foreigners in Shanghai. But now, even on the Bund and pedestrian streets, there are very few foreigners. There are two reasons. First, working from home in 2022 disillusioned many foreigners. Second, there is less investment from foreign companies, and many foreigners have withdrawn. Shanghai is an international metropolis. Since the 1990s, with the influx of foreign capital, more and more foreigners have come to work in China. Nowadays, even on the streets of Nanjing Road, there are not many foreigners, especially white people. There are more black people than before. The above strange phenomena are a true portrayal of current Shanghai society. Various economic data from China indicate that the mainland economy is in a serious recession. Recently, the leader of the Chinese Communist Party personally visited Shanghai, China's largest financial center, during a tour of the South, which underscored the severity of the crisis. During Xi Jinping's inspection tour of Shanghai, foreign media reported that the China International Capital Corporation, CICC, strictly prohibited analysts from criticizing the Chinese economy, raising doubts about whether Xi had a realistic understanding of the current economic situation in Shanghai and China as a whole. Lao Man, a famous financial analyst from China Finance, published an article titled, How Disastrous Is Shanghai's Economy?, which has once again been widely circulated on the internet. The article analyzed the current state of the Chinese economy and argued that Shanghai's economy was stagnant. Shanghai netizens commented, Shanghai's current situation is heartbreaking and helpless. The real economy is struggling, large companies are laying off employees, factories are reducing overtime, and more and more people are working part-time as deliverymen or DD drivers. Another netizen added, All sectors are cutting salaries and laying off employees. Few are expanding. Even some large-scale recruitments or hiring quotas have been canceled. At the end of last year, the article, How Bad Is Shanghai's Economy?, published by Lao Man, was once again widely circulated online, pointing out that Shanghai's economy has become stagnant. Immediately after that, the leader of the Communist Party of China rushed to Shanghai for inspection, highlighting that Shanghai's economy is indeed on the verge of collapse. Xie Tian, a professor at the Aiken School of Business at the University of South Carolina, said, The Yangtze River Delta and the Pearl River Delta have always been the engines driving China's economy. Particularly, Shanghai is China's financial center and the primary hub for opening up to the outside world. If Shanghai, which has the best economy and conditions, is in such a state, the situation in China as a whole is worrying. Economist and political commentator Li Henking stated, The most important engine of economic development is finally stalling. If Shanghai's economy, which significantly drives China's overall economy, is stalling, this reflects the dire state of China's economic development. Recently, many Shanghainese have said that Shanghai's former prosperity is gradually fading, leading to consumption downgrades across the country. A Shanghai netizen remarked, Now everyone's consumption has been downgraded, but more and more people around me are saving money. Why? Because everyone senses risk. When money is easy to make, you can spend it freely, knowing you can earn more. But now it's really hard to make money and our situation has not improved. Xie Tian commented, Xi Jinping visited Shanghai hoping for a revitalization, but now it seems that he may have no way to restart Shanghai's economy. He further noted, China's economy has essentially regressed 20 years, returning to the pre-WTO situation in 2001. Experts pointed out that China's severe economic recession stems from the CCP's party-controlled economy, which has now formed a vicious cycle and is difficult to reverse. Li Hengking said, Xi has been emphasizing that the party leads everything, and he has no intention of making large-scale adjustments. If he were to do so, it would mean relying on the market economy and the rule of law, which would establish a civil society, something that the Communist Party cannot tolerate. Therefore, the chances of China's economy or Shanghai's economy reviving are diminishing, leading to a situation that is difficult to reverse. In the days ahead, all resources in the financial sector will be prioritized to extend the life of local debts, which will inevitably mean that the financial industry will lose liquidity and die as a whole. At the same time, foreign financial institutions will leave China without hesitation. For Shanghai's economy, this is unbearable. For provinces in the central and western regions that are highly dependent on Shanghai's fiscal transfer payments, this will undoubtedly be a significant blow, making it more difficult for them to borrow money. This is a tragic, vicious cycle. Over 50 banks collapse in China this year, scholars, rapid spread of financial risk. According to the Financial Times, which is overseen by the People's Bank of China, at least 50 small and medium-sized banks have closed down since the start of the year. The vast majority of these were rural banks with the exception of one city commercial bank, Corla Bank. In specific instances, several mergers and acquisitions have taken place. In April, the Nanyue Bank in Guangdong took over the Nanyue Village and Town Bank. In June, the Dunguan Rural Commercial Bank merged with two other rural banks and the Liaoning Rural Commercial Bank absorbed 36 rural small and medium-sized banking institutions. More recently, in July, the Huaibei Rural Commercial Bank took over the debts and credits of the Anhui Suishi Rural Commercial Bank, the Dunguan Bank bought the Dunguan Chang'an Village and Township Bank, and the Xinjiang Bank merged with Corla Bank. Experts have commented on the situation. Lu Qunxiang, a chief banking analyst, pointed out that these banks struggle with insufficient profits, poor asset quality, and limited capital replenishment, and financial authorities are supportive of these mergers and restructurings. Xuehong Yan, deputy director of the Shuntou Financial Research Institute, explained that many of China's rural small and medium-sized banks are legal entities lacking in talent and scale, facing high market competition and operational risks. The news of these closures has sparked discussion online, with netizens expressing concerns. This is a sign of banks collapsing. The hidden dangers are clearly visible. You can imagine how terrifying the current economic crisis is. And look at how messy things are now. Even banks can't keep going. Chinese government data shows a continuous decline in mainland banking institutions, totaling 4,490 by the end of 2023. This marks the second year of reductions. The China Financial Stability Report 2023 from the People's Bank of China classifies 337 of these as high-risk, all small and medium-sized, with combined assets of 6.63 trillion yuan, about 924.18 billion dollars. Associate Professor Zhang Hongyuan warns that the risk of chain collapses among small and medium-sized financial institutions in China is very serious. These institutions are facing mounting pressure, and the spread of financial risks due to bank failures can happen rapidly in China's financial environment. The Economist reports that the rate at which Chinese banks are disappearing is unprecedented, even surpassing the worst of the savings and loan crises. Many small banks are heavily exposed to the troubled real estate sector, with some reporting up to 40% of their loans as non-performing. The Economist predicts that the Chinese government will accelerate the consolidation of small banks through mergers and acquisitions. However, S&P Global estimates that completing this process could take as long as a decade. China launches new campaign, tens of thousands of financial organizations to be affected. On August 14, Chinese regulatory bodies, including the China Banking and Insurance Regulatory Commission, the Securities Regulatory Commission, and the State Administration for Market Regulation, issued a comprehensive notice outlining a robust plan for the next three years. This plan is set to deepen the cleanup and reorganization of local financial organizations and escalation in efforts compared to previous measures. The notice details specific prohibitions on new entities, stringent regulations over cross-provincial operations, and mandates a reduction in the total number of local financial organizations along with the removal of non-compliant institutions. The restructuring targets local financial entities involved in commercial factoring, financing leasing, microloan companies, pawn shops, and guarantees. It also specifies rules for managing and cleaning up gold and pseudo-gold exchanges. According to statistics, China houses over 30,000 local financial organizations with microloan companies, financing guarantee companies, pawn shops, financing leasing companies, and commercial factoring companies being the most common. Experts view the intensified crackdown as the CCP's strategic response to mitigate financial crises. Columnist Wang, he has discussed the state of these local financial entities, pointing out their disorderly evolution which exacerbates the current financial crisis, thereby justifying the CCP's increased regulatory scrutiny. The CCP has made preventing systemic financial risks a top priority in recent years, part of which involves shutting down gold exchanges across various regions to reset the industry. U.S.-based economist Li Hingcheng comments on the CCP's policy dilemma, choosing the lesser of two evils by closing operations to prevent greater threats to regime stability. He warns that the hasty closure of these operations could lead to untraceability and a larger financial explosion. The CCP's National Financial and Development Laboratory acknowledged in June that internal governance issues within local financial institutions and organizations are significant sources of local financial risk. Taiwanese economist Huang Shih-tsung said that the overall state of China's finances, from the central to local governments, including the banking system, which he described as being in poor condition. He said that the CCP's policy is to prevent the formation of new companies by local governments, which in the past might have established numerous entities to attract investment. Analysts argue that the CCP's reorganization of local financial organizations addresses minor issues and overlooks the root causes of financial instability. Despite China's financial assets exceeding 400 trillion yuan, about $55.8 trillion USD, with more than 90% in bank assets dominated by state-owned banks, the CCP refrains from direct intervention against these banks, focusing instead on regulating internet finance and reorganizing local finance. As China faces deteriorating economic conditions, with ongoing real estate failures and rising bank bad debts, a larger-scale financial crisis seems imminent. The CCP is deliberating the financial stability law, aiming to mitigate financial risks by establishing funds to aid troubled banks, insurance companies, securities firms, and other financial institutions. Wang He said that over 90% of the financial assets and liabilities in China are held by the banking system, a fact well known within the CCP. However, the CCP shifts focus to the chaos in local finance as its primary target for crackdowns, intending to significantly reduce the number of local financial institutions. Multiple sources indicate that with the directive to not increase the total number of local financial organizations, the focus for the next three years will be on enhancing the regulation of existing organizations and eliminating non-compliant ones. A financial institution head in Guangdong revealed that while the region currently hosts 7,000 local financial organizations, this number is expected to decrease to about 5,000 in the forthcoming phase. Please share your thoughts in the comments section below. We will keep reporting on the COVID surge in China, so don't forget to subscribe to our channel and turn on the notification bell to get the latest videos. And thank you for tuning in.