80% Foreigners Have Left Shanghai, FDI Falls for 12th Consecutive Month

Summary

The 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

00:00

😔 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.

05:02

🛒 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.

10:03

📉 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.

15:04

🏛 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.

Keywords

💡Commercial Activity

Commercial activity refers to the exchange of goods and services between individuals and businesses. In the video's context, it highlights the lack of commercial activity at Shanghai Pudong Airport, indicating a decline in business operations and consumer spending, which is a key indicator of economic health.

💡Foreign Enterprises

Foreign enterprises are businesses that operate in a country other than their home country. The script discusses the decreasing number of foreign enterprises in Shanghai, which has implications for the city's economy and job market, as these businesses often bring new technologies and employment opportunities.

💡Openness

Openness in an economic context refers to a country's willingness to engage with the global economy through trade, investment, and the acceptance of foreign businesses. The video describes how Shanghai's development has historically relied on openness, but it is now facing a shift towards internal circulation due to a decrease in foreign investment.

💡International Environment

The international environment encompasses the global political, economic, and social conditions that affect a country's interactions with other nations. The script mentions that the current unfavorable international environment is contributing to the struggles of foreign enterprises in China and the decline in foreign direct investment.

💡Tax Revenue

Tax revenue is the income collected by governments from various forms of taxation. The video script indicates that the reduction in foreign enterprises is affecting Shanghai's tax revenue, which is crucial for funding public services and infrastructure.

💡Luxury Consumption

Luxury consumption refers to the purchase of high-end, non-essential goods and services. The script notes that the decline in the number of foreigners and foreign enterprises is impacting Shanghai's luxury consumption market, as these groups are often associated with higher spending power.

💡International Communities

International communities are areas where a significant number of expatriates and foreigners reside. The video describes how these communities in Shanghai, such as KUB and Lianyang, are experiencing a decrease in their foreign populations, affecting the local economy and cultural diversity.

💡Foreign Direct Investment (FDI)

Foreign direct investment is an investment made by a firm or individual in one country into business interests located in another country. The script discusses the decline in FDI in China, which is a concern for policymakers as it reflects foreign confidence in the economy and is a source of capital for development.

💡Economic Cycles

Economic cycles refer to the recurring periods of economic expansion and contraction. The video script suggests that the withdrawal of foreign businesses is affecting both domestic and international economic cycles, indicating a potential for broader economic impacts beyond the immediate loss of jobs or investment.

💡Consumer Market

The consumer market consists of individuals who purchase goods and services for personal use. The script describes the impact of the withdrawal of foreign enterprises on Shanghai's consumer market, with examples of supermarket closures and a general decline in consumer spending.

💡Investment Banking

Investment banking involves advising in matters related to creating, structuring, and raising capital. The video script mentions layoffs and reduced operations in Western financial companies' investment banking divisions in China, reflecting the broader economic challenges and reduced deal activity.

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]