80% Foreigners Have Left Shanghai, FDI Falls for 12th Consecutive Month
Summary
TLDRThe script discusses the decline in commercial activity at Shanghai Pudong Airport and the broader impact of decreasing foreign enterprises in Shanghai. It highlights the closure of businesses, the reduction in foreign investment, and the challenges faced by the Chinese economy, including the withdrawal of foreign capital and the effects on local consumption and job markets. The narrative also touches on China's efforts to attract foreign investment amidst these economic shifts.
Takeaways
- 📉 The commercial situation at Shanghai Pong Airport is bleak with many businesses closed and a significant decrease in foreign presence.
- 🏬 The closure of the bar and the jewelry store, along with the lack of commercial activity, indicates a downturn in the airport's economy.
- 😔 A woman laments the emptiness of airports post-pandemic, noting a particularly noticeable absence of foreigners in Shanghai.
- 📉 The number of foreign enterprises in Shanghai is decreasing, which is causing a ripple effect on the city's development and economy.
- 🛫 Many foreign companies are relocating, sometimes without notice, contributing to Shanghai's development bottleneck.
- 🌐 The current international environment is unfavorable, affecting not only the number of foreign enterprises but also personal lives and luxury consumption in Shanghai.
- 📊 Data shows a sharp decline in foreign direct investment (FDI) in China, reflecting a trend of foreign capital withdrawing and impacting the country's economy.
- 🏢 The closure of City Shop, a high-end supermarket popular among foreigners, highlights the struggles of businesses catering to this demographic.
- 🏙️ International communities in Shanghai that were once bustling with foreigners are now seeing their numbers dwindle.
- 📚 The decline in foreign population is also evident in the reduced number of students in international schools and decreased housing rentals.
- 🏦 Western financial institutions are reducing their presence in China, with some experiencing significant layoffs and others closing physical stores.
Q & A
What is the current situation at Shanghai Pudong Airport according to the script?
-The script describes the situation at Shanghai Pudong Airport as bleak, with many businesses closed, including a bar and a jewelry store. The airport is also noted to have very few foreigners compared to the past, making it feel empty and desolate.
How has the pandemic affected the presence of foreigners in Shanghai, as mentioned in the script?
-The script indicates that since the pandemic, there has been a significant decrease in the number of foreigners in Shanghai, especially at the airport, which used to be bustling with international travelers.
What impact has the decrease in foreign enterprises in Shanghai had on the city, according to the script?
-The script suggests that the decrease in foreign enterprises has led to a development bottleneck for Shanghai, with more tourists but fewer foreign workers. This has affected personal lives, tax revenue, and luxury consumption in the city.
What are some of the consequences of the decline in foreign direct investment (FDI) in China mentioned in the script?
-The script mentions that the decline in FDI reflects a decrease in foreign confidence in China's economy, affects the competitiveness of Chinese enterprises, and has a significant impact on Shanghai's consumer market.
How has the spending behavior of Chinese people been influenced by the decrease in foreign influence, as described in the script?
-The script notes that the spending habits introduced by foreigners, which influenced many Chinese to spend more boldly, are disappearing. Now, Chinese people are more focused on saving rather than spending, which impacts Shanghai's consumption market.
What evidence is there of a decline in the foreign population in Shanghai, as per the script?
-The script provides evidence such as a sharp decline in the number of registered students in international schools and a significant drop in housing rental data in areas where foreigners used to live.
What is the trend of foreign capital withdrawing from China, as indicated by the script?
-The script indicates a trend of foreign capital withdrawing from China, with a year-on-year decrease in the actual use of foreign capital and a continuous decline in FDI for 12 consecutive months.
How did the closure of City Shop, a high-end supermarket in Shanghai, reflect the current economic situation, according to the script?
-The closure of City Shop, which targeted high-end consumers and primarily sold imported goods, is seen as a reflection of the downturn in Shanghai's consumer market and the decrease in the number of affluent foreign consumers.
What is the significance of the withdrawal of foreign companies like Microsoft from having physical stores in China, as mentioned in the script?
-The script suggests that the withdrawal of companies like Microsoft from physical stores in China is part of a broader trend of foreign companies reducing their presence in the country, which may be due to strategic adjustments, declining profitability, or other market factors.
What challenges are Western financial institutions facing in China, as described in the script?
-The script describes challenges such as weak deal activity, pressure on costs and revenues, layoffs, and a slowdown in capital market activity due to a weak economy, particularly the real estate slump, and increasing geopolitical tensions between China and the US.
What measures has the Chinese government taken to counter the slowdown in foreign investment, according to the script?
-The script mentions that the Chinese government has introduced measures such as expanding market access to allow greater foreign participation in sectors like banking, insurance, and healthcare, and has emphasized improving efforts to attract and utilize foreign investment.
Outlines
😔 Decline in Foreign Presence at Shanghai International Airport
The script discusses the stark emptiness of Shanghai Pudong Airport, once bustling with foreigners and commercial activity. The closure of businesses like a bar and a jewelry store, along with the reduced number of foreign enterprises in Shanghai, has led to a significant decrease in foreign visitors. The pandemic's aftermath and the relocation of foreign companies have exacerbated this situation. The narrator notes the broader implications for Shanghai's economy, including impacts on personal lives, tax revenue, and luxury consumption. The script also mentions the shrinking presence of foreigners in international communities and the decline in foreign direct investment (FDI) in China, reflecting a nationwide trend.
🛒 Closure of High-End Supermarkets and Retail Brands in Shanghai
This paragraph details the closure of City Shop, a high-end supermarket chain in Shanghai known for its imported goods, due to continuous financial losses. The decline in the foreign population and their spending power is suggested as a contributing factor. The closure is indicative of a larger trend, with other retail brands also shutting down stores in Shanghai. The script paints a picture of a desolate commercial landscape, with malls deserted and businesses closed. It also touches on the impact of these closures on Shanghai's consumer market and the economy at large.
📉 Foreign Investment and Business Exodus from China
The script addresses the ongoing exodus of foreign businesses from China, with examples such as Microsoft closing its physical stores and Western financial institutions reducing their presence or halting expansion plans. Layoffs in the investment banking sector are highlighted, with reasons cited including weak deal activity, cost pressures, and a challenging economic environment. Geopolitical tensions and regulatory reforms are also discussed as factors influencing this trend. Despite Chinese government efforts to attract foreign investment, multinational companies express concerns over China's growth prospects and policy environment.
🏛 China's Economic Challenges and Proposed Solutions
The final paragraph delves into the economic challenges faced by China, including an economic downturn, high debt levels, and the impact of trade tariffs. It also discusses the effects of a strong US dollar and recent domestic policies perceived as unfriendly to foreigners. Economist David Hong suggests measures such as tax reductions for private enterprises and a shift in focus to the real economy. He emphasizes the importance of improving social welfare to reduce the social burden on the population. The script concludes with a warning that without addressing these issues, China's economic situation could deteriorate further.
Mindmap
Keywords
💡Commercial Activity
💡Foreign Enterprises
💡Openness
💡International Environment
💡Tax Revenue
💡Luxury Consumption
💡International Communities
💡Foreign Direct Investment (FDI)
💡Economic Cycles
💡Consumer Market
💡Investment Banking
Highlights
Shanghai Pong Airport's commercial situation is bleak with many businesses closed, affecting the local economy.
Decrease in foreign enterprises in Shanghai leading to fewer foreigners and a decline in luxury consumption.
Shanghai's development faces a bottleneck as it transitions from openness to internal circulation.
The number of foreign enterprises in Shanghai is decreasing, impacting the city's economic growth and job market.
International communities in Shanghai are seeing a decline in foreign residents, affecting spending habits and the local market.
Data shows a significant year-on-year decrease in foreign direct investment (FDI) in China, reflecting a trend of foreign capital withdrawal.
China's Ministry of Commerce remains optimistic despite the decline in FDI, citing historical highs and stable foreign investment expectations.
The closure of City Shop, a high-end supermarket in Shanghai, signifies the downturn in the consumer market and the impact of fewer foreigners.
Several well-known retail brands have closed stores in Shanghai, contributing to the overall economic downturn.
Microsoft's closure of physical stores in China reflects a strategic shift and the challenges of maintaining profitability.
Western financial institutions in China face significant layoffs and a decline in investment banking activities.
China's efforts to attract foreign investment include easing market access and improving the business environment.
Despite policy reforms, multinational companies express fatigue and concerns over China's long-term growth prospects.
Chinese economists suggest measures such as tax reductions and a focus on the real economy to overcome economic challenges.
The economic downturn in China is affecting not only domestic but also international economic cycles.
The withdrawal of foreign enterprises has a significant impact on Shanghai's consumer market and the overall economy.
The real situation in Shanghai's commercial areas shows a sharp decline in business activity and consumer spending.
Transcripts
sh look at the current commercial
situation at Shanghai pong airport it's
so Bleak I couldn't find a single place
to eat the shop selling local
Specialties is open but the bar next to
it is closed this jewelry store has been
closed for a long time too further ahead
apart from the restrooms there's no
commercial activity everything is
blocked off in the past Shanghai
International Airport was full of
foreigners making it feel like being
abroad now there are very few foreigners
the entire area is empty and desolate
this woman lamented that ever since the
pandemic ended every time she travels
abroad she finds the airports empty this
year she feels that there are even fewer
foreigners in Shanghai the Doan blogger
big teacher in Shanghai also mentioned
recently that there are fewer and fewer
foreign Enterprises in Shanghai which
will have many subsequent impacts on the
city the number of foreign Enterprises
in Shanghai is indeed decreasing
shanghai's development relied on
openness and the influx of foreign
Enterprises however now see more
tourists but fewer foreign workers many
foreign companies are relocating with
some informing their employees that they
can take their families with them most
companies leave without any notice
offering no opportunity to stay
therefore Shanghai is now facing a
development bottleneck it must turn into
internal circulation instead of the
previous openness the current
International environment is unfavorable
and foreign Enterprises are struggling
leading to a decrease in the numbers in
Shanghai
this affects ordinary people who
previously benefited from working in
foreign Enterprises now with fewer
foreign Enterprises personal lives are
impacted and shanghai's tax revenue and
luxury consumption are also affected
this situation poses a significant risk
to shanghai's Future this blogger also
noted that in many so-called
International communities in Shanghai
such as KUB and leany Yang were
foreigners used to gather their numbers
are now dwindling new international
communities have even fewer foreigners
the spending habits introduced by
foreigners which influenced many Chinese
are now disappearing Now Chinese people
are more focused on saving rather than
spending boldly under foreign influence
this greatly impacts shanghai's
consumption Market some Shanghai nens
discovered that the number of registered
students in international schools and
housing rental data show a sharp decline
in the foreign population possibly
exceeding 80% in areas where foreigners
used to live there are visibly fewer
foreigners especially westerners from
Europe and America this phenomenon is
not only seen in Shanghai but also in
other major cities and economically
strong second tier cities the main
reason for this is the withdrawal of
many foreign Enterprises and investment
companies leading foreign managers and
technicians from Europe and America to
return home the reduction in the number
of foreigners in Shanghai reflects the
trend of foreign Capital withdrawing
from China and China's ability to
attract foreign direct investment FDI
continuously declining mining this trend
is evident in the data according to the
latest data from the ministry of
Commerce the actual use of foreign
Capital Nationwide from January to may
this year was
42.5 billion yen a year-on-year decrease
of
28.2% the figure is worse than the 27.9%
decline in April continuing the downward
Trend since June 2023 foreign direct
investment or FDI is seen by the Chinese
authorities as a reflection of foreign
confidence in China
the world's second largest economy the
FDI is also a means to enhance the
competitiveness of Chinese Enterprises
however FDI has been declining for 12
consecutive months highlighting the
challenges the CCP faces in attracting
overseas investment in response to the
situation the Chinese Ministry of
Commerce remains stubbornly optimistic
they stated that the main reason for the
worsening decline is the high comparison
base from the previous year and the
actual state of foreign investment
remains at a historically high level
they also claimed that currently foreign
investment expectations and confidence
are generally stable according to Sun
Guang a professor at the department of
international fairs and business at
nanua University there are several
reasons for the continuous decline in
FDI in China over the past 12 months
firstly China's domestic demand Market
is continuously shrinking secondly there
are issues with the treatment of foreign
businesses by the CCP thirdly
geopolitical and economic factors such
as the reorganization of Supply chains
play a role Sun emphasized that foreign
investment has been crucial in bringing
new technologies to China and creating
vast employment opportunities for
Chinese people the withdrawal of these
foreign businesses further aggravates
the economic situation affecting both
domestic and international economic
Cycles as sun and the previous blogger
mentioned the withdrawal of foreign
Enterprises has had a significant impact
on shanghai's consumer Market on April
16th of this year City shop one of the
largest food import and daily Goods
supermarket in Shanghai and the yansa
river Delta Region suddenly announced a
complete cessation of operations founded
in the 1990s this high-end Supermarket
specializing in imported goods closed
all its stores due to continuous losses
in a statement City shop revealed that
they had been struggling to operate in
recent years and despite various
self-help measures they could not
sustain the business the company decided
to dissolve and will address remaining
debt issues through legal means although
the closure seemed sudden there were
earlier signs some customers noted that
during the new year period City shop
stores were almost empty indicating a
bleak situation others believe that the
decrease in the number of foreigners
contributed to the supermarket's
closure the number of foreigners has
decreased and they are not as wealthy as
before could this be a reason for City
shops closure this high-end Supermarket
which operated in Shanghai for nearly 30
years has shut down City shop targeted
high-end consumers and was one of the
most popular supermarkets among
foreigners in Shanghai they primarily
sold imported goods and food with stores
located in high-end areas like luad and
jingan Temple resulting in high rental
costs unlike Costco or Sam's Club which
can open in Suburban areas City shop
relied on its proximity to affluent
neighborhoods with fewer high-end forign
consumers in these areas City shop
couldn't sustain its business in fact
the closure of City shop is not an
isolated incident in recent years
several well-known retail brands have
closed their stores in Shanghai for
example the Taiwan based pacif paciific
Market store closed its last store in
Shanghai in May 2023 and the Hong Kong
based Paris spring department store has
closed multiple stores in recent years
even the Shanghai Base state-owned by
land group has closed some of its by
dongfang stores these closures affect
the overall downturn in shanghai's
consumer
Market let me show you the real Shanghai
that I captured in the commercial area
near my home most businesses have
already closed down there used to be a
very popular Barbie shop here where I
had to wait over 2 hours each time I
went now it's completely empty the malls
are almost deserted on weekends but the
subway is crowded on weekdays mostly
with young people looking for jobs
Starbucks and KFC are filled with young
people pretending to work even in the
lines for picking up kids from school I
see more and more young faces likely
parents instead of just elderly people a
friend of mine told me yesterday that
his company is moving they used to have
over 100 employees but now there are
only about 30 left so they are moving to
a smaller office to save on rent how did
the on busling in vibrant Shanghai
become like this this video resonated
with many people in Shanghai one user
commented last week I visited a startup
park it used to be packed with bustling
workspaces but now it's mostly empty
with only a few small companies left
another viewer said yesterday I went out
to eat with friends and visited several
malls all of which were eerily quiet
many long-standing shops were closed and
the atmosphere was very Bleak
Unfortunately The Exodus of foreign
companies continues on July 1st
Microsoft announced the closure of all
its physical authorized stores in China
retaining only its online store and
jd.com flagship store though official
after sales service points will remain
open according to Chinese media a
Microsoft spokesperson stated that the
company has decided to integrate its
Market channels in China customers can
still purchase products and receive
Services through Retail Partners and
Microsoft website an employee at a
Microsoft authorized store in Beijing
mentioned that foot traffic has been low
in recent years and that the store is
not very profitable some believe that
this move is part of Microsoft's Global
strategic adjustment of its surface
laptop sales and that Chinese consumer
recognition of surface has been
declining in fact Microsoft has been
closing its physical authorized stores
in China for years in 20120 there were
460 authorized stores and experience
zones in mainland China 4 years later L
only 51 stores remain with just seven
listed as Microsoft authorized stores
while the rest are mostly Xbox retail
experience stores and 3C electronic
sellers Microsoft is not alone since the
beginning of this year more Western
Financial companies including Fidelity
International Morgan Stanley and legal
in general have either significantly
reduced positions focused on the Chinese
market or sheld expansion plans
Executives head hunters and analysts
from foreign Financial firms say that
due to weak deal activity and pressure
on costs and revenues more companies are
expected to follow suit according to the
financial times on July 2nd Western
financial institutions in China's
Investment Banking sector have seen
their largest layoffs in years recent
annual reports indicate that in 20123
global investment Banks significantly
cut jobs in China out of the Seven
Chinese Securities divisions of major
Wall Street and European Banks five
reported losses or significant profit
declines with layoff rates reaching up
to 13%
the financial times noted that the
slowdown in Capital Market activity in
China is due to the weak economy
particularly the real estate slump and
increasing geopolitical tensions between
China and the US Han Ling director of
Asia group China said Western investment
banks are caught in a vicious cycle weak
deal flow means less investment onshore
capabilities which limits deal volume
growth he added when investment
opportunities in India southeast Asia
and the US look more promising some
investment Banks start losing patience
with the Chinese market the report
highlights that since the regulatory
policy reforms of 2020 International
Investment banks have been able to fully
control their Securities Companies in
China however these divisions account
for only a small portion of the bank's
Global profits in 2023 Global Banks cut
over 60,000 jobs due to a decline in
deals and IPOs significantly reducing
profits for security firms in the past
when other Global markets slowed the
Chinese market continued to grow
however since last year this trend has
changed JP Morgan CEO Jamie Diamond
recently stated that some of the bank's
investment operations in China have
fallen off a cliff since 2018
International Investment banks have
nearly consistently increased their
staff even during the pandemic in 2020
the reduction in staff was less than 3%
the report indicates that Morgan
Stanley's China division experienced its
first loss since 2019 with the annual
report describing China's economic
environment as challenging JP Morgan's
joint venture in China saw profits Fall
by 55% although its staff reduction in
China was less severe compared to
competitors Deutsche Bank and Goldman
Sachs in China also faced their lowest
profits since 2018 Goldman Sachs China
Securities division with 500 employees
cut its Workforce by 26% to 370 a
significant drop from its 2021 goal of
expanding to 600 employees Additionally
the fund company fil plans to cut 16 out
of its 120 member China team according
to a Reuters report on April 22nd an
internal document revealed that the
company expects its losses in China to
increase from $41 million us last year
to $45 million this year the document
issued earlier this year stated that fil
Staffing plans for the next four to 5
years are significantly reduced compared
to the business plan set in 2022 the
financial times reported that the
performance of investment banking
divisions might not reflect the full
picture of foreign Banks operations in
China some banks have other divisions in
China and generate Revenue through
relationships established via their
Mainland operations with income recorded
in Hong Kong or elsewhere however the
2023 data starkly contrasts with 2021 a
record year for Global investment Banks
where six out of seven Banks profited
from their operations in mainland China
US Secretary of Commerce Gina Rondo
noted last year that American
businessmen told her that China was
becoming unsuitable for investment amid
ongoing geopolitical tensions Beijing is
intensifying efforts to attract more
foreign investment to rejuvenate the
domestic economy according to Chinese
State media on July 2nd Chinese Vice
Premier H fun chaired a symposium on
foreign investment work in Beijing on
July 1st he emphasized improving efforts
to attract and utilize foreign
investment hly fun called for further
easing Market access and continuously
building a worldclass class business
environment that is Market oriented
law-based and internationalized he
stressed equal support for domestic and
foreign Enterprises to participate in
large-scale equipment upgrades
government procurement and bidding he
also instructed provinces with
significant foreign investment to
shoulder responsibility and play a
bigger role intensifying precise
investment with promotion efforts and
actively explore new areas and models
for attracting investment in line with
the new situation on July 1st hly fun
met with Swiss Federal counselor and
minister of economic Affairs and
research gee parlan and the head of the
Japanese Association for the promotion
of international trade Yohi Kono along
with a visiting Japanese business
delegation H fun congratulated the
Japanese Association for the promotion
of international trade on its 70th
anniversary and expressed hope that the
association would continue to act as a
bridge promoting China Japan friendship
and the stability of global industrial
and Supply chains hully Fong reaffirmed
China's commitment to high level opening
up and welcomed further Japanese
investment and cooperation in China
ironically on June 24th an incident in
Su Joo involving the stabbing of a
Japanese national and the death of a
Chinese woman has reportedly prompted
many Japanese companies to prepare to
leave China in fact on March 19th this
year the Chinese State Council announced
new measures to counter the slowdown in
foreign investment including expanding
Market access to allow greater foreign
participation in banking insurance and
Healthcare sectors last August the
Chinese government also introduced a 24o
action plan aimed at improving the
environment for foreign investment
however these policies appear to have
little effect many multinational company
Executives have expressed fatigue over
China's promises and growing concerns
about China's long-term growth prospects
have led to significant changes in the
risk reward assessments for investing in
China various signs indicate that
China's appeal to Western Financial
companies is gradually waning overseas
Chinese economists David Hong analyzed
the reasons for the continuous decline
in foreign direct investment in China he
identified several key factors the first
is the economic downturn China is
currently facing significant economic
downward pressure with overall high debt
levels this has led to declining
investment returns and profitability
making short and medium-term Investments
less attractive second are trade tariffs
following the trade War tariffs on
Chinese Goods exported to Europe and the
United States have increased making the
overall export Outlook bleach
third a strong US dollar and
geopolitical conflicts have caused
significant amount of hot money to flow
back to the United States fourth recent
Chinese domestic policies including tax
inspections and regulations affecting
foreigners have been perceived as
unfriendly leading to some foreign
investors withdrawing their Investments
David Hong believes that for China to
overcome its economic difficulties
several measures need to be taken
including tax reductions he said there
should be significant tax reductions for
private Enterprises the real estate
sector and other businesses he said in
terms of manufacturing the focus should
shift from speculative sectors like new
energy and new materials to the real
economy even in traditional Industries
like refrigerators color TVs and
Furniture in terms of social welfare
it's crucial to improve areas like
health insurance Social Security and
livelihood support and reduce the social
burden on the population and address
issues like aging and low birth rates
juang concluded that without addressing
these issues the economic situation
would become even more challenging
[Music]
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