Shanghai's economy may never return to pre-lockdown
Yesterday, some foreign friends asked me whether Shanghai had reopened. My answer to them is that the Shanghai Government procrastinates. The government’s boring, tedious press release yesterday can be summarized by three words: starting to reopen. That is, the public transportation will be starting to function next week, and the whole month of June will be spent on the starting of the reopening.
Note that I used the future continuous tense (e.g., will be starting) instead of the future simple tense (e.g., will start). Verbs like start and open are rarely used in continuous tenses, since these actions usually finish within seconds. There are, nonetheless, cases where continuous tenses were used, including Brexit. If a girl, for instance, says goodbye to everyone at a party and then proceeds to stick around, then we say that she is brexiting.
Just like the UK, for whom it takes several years to exit the Europe Union, it is now the Shanghai Government’s turn to procrastinate. They probably believe that the economy will return to pre-lockdown as soon as they fully reopen Shanghai. Since they have the control, they are not eager to reopen Shanghai. I would like, however, to remind them of the alternative possibility that the harm of the lockdown may be irreversible.
In this post, I will try to argue that Shanghai’s economy may never return to pre-lockdown. To support my claim, I will list an international factor and a domestic factor. Internationally, Biden’s new strategy with ASEAN is siphoning the supply chain out of China. Multinational corporates are sending orders to other countries to fill the emptiness left by Shanghai’s lockdown. Domestically, the work ethics of the supply chain workers, I predict, will deteriorate. They will no longer be content with the laughable salary, and they will turn to riskier trades, such as food brokers and drug dealers.
These two factors are both beyond the government’s control: They can neither shut down other countries’ supply chain nor improve people’s work ethics. Consequently, China’s industrial sector will be outcompeted by their foreign rivals. Even though the agriculture sector and the service sector could self-repair, China’s economy will suffer from the permanent damage to the industrial sector.
The orders are gone
Shanghai’s lockdown has a heavy toll on the global supply chain. Numerous freight ships wander outside the Shanghai harbor. Companies such as Tesla and Apple are heavily affected, whose stock prices plummeted.
This situation pushed multinational companies to look elsewhere, namely in Southeast Asia. Meanwhile, Biden is working closely with the state leaders thereof to help them establish a scaled domestic supply chain. This trend implies the shift of production epicenter from China to Southeast Asia.
Some Chinese scholars may optimistically believe that China can easily nullify Biden’s strategy by reopening the country and woo back multinational companies with its mature production ecosystem. I, however, am not sure about it.
Biden’s investment in Southeast Asia, I believe, is a long-term strategy, not a sudden emotional impulse. No country will base its long-term strategy on other countries’ short-term policies. Even if China now made a 180-degree turn with a new short-term policy, it is already too late. The moment the Biden government made the decision, China’s fate was pretty sealed.
In the next few years, China will have to compete with Southeast Asia for the title of the True World Factory. Both players have their respective advantages. Southeast Asia’s supply chain will be environment-friendly, and the labor price will be lower thanks to the relatively low real estate price. China’s supply chain will be more economic because of the environmental and human-right ignorance, and made-in-China is an established reputation.
Although both players have their trump cards, I believe Southeast Asia will eventually win the battle, for two reasons. Firstly, environmental-friendly lifestyle is the trend. People may not care about Uyghur in Xinjiang, but they do care about climate change. People buying from China will get shamed on social media and will thus have difficulties in finding partners. Secondly, the US can give Southeast Asia subsidies to keep their products affordable. Though China can do the same and start a price war, the US has the upper hand thanks to the dollar supremacy.
Gradually, China’s outdated supply chain will be replaced with Southeast Asia’s next-generation supply chain. I used the word replace because there will not be a coexistence.
The work ethics are gone
In addition to the international factor drawing orders out of China, China’s supply chain will also dissolve within. Chinese workers used to be known as the most hardworking creatures. This property may no longer be valid after this lockdown.
Many Chinese move from the countryside to big cities, such as Shanghai, in search of a better life. Most of them enter factories for their inadequate education and become the blood of the supply chain. They work their asses off to have a home here or send salary back to their parents back at home at the very least.
Two elements have been supporting their kamikaze work ethics. One is short videos and live-streaming, such as Douyin (the Chinese version of TikTok). This entertainment provides them with instantaneous, all-weather, free dopamine supply, which helps them bear the dim, crowded, smelly workshop. The other is the meal delivery system, such as Meituan. This system is like Chaplin’s feeding machine, which frees workers from the chore of preparing food.
This meal delivery system worked wonderfully until this lockdown, during which most delivery services are frozen. Workers in Shanghai suddenly found that they had to order raw food rather than cooked meals. They even had to learn to cook, while most of them didn’t even have a cooker at home! Their peaceful, mechanic lifestyle is disrupted, which would make them question the meaning of life.
In the meantime, the food shortage and the skyrocketing food price enabled speculation. By becoming food brokers, some workers made a fortune that they could not otherwise imagine before the lockdown. Hardworking didn’t compensate them, but speculation did. Nothing is better at compromising the work ethics.
In addition to food brokers, drug dealers will also become a promising job. The central government recently enacted a policy discouraging hospitals from using imported devices. An imported drug shortage is understandably on the horizon.
Although dealers and brokers have always been existing in China, this lockdown became an excellent textbook for the working class. Now, everyone has the motivation to become a broker or dealer.
The gone orders and work ethics foreshadow the demise of China’s supply chain. Workers will lose their jobs, and brick-and-mortar factories will be demolished.
Jobless people will be wandering in the cities, and the crime rate will skyrocket. Eventually, people will have to leave big cities, and the 2nd edition of the Down to the Countryside Movement will unveil.
Some people will travel to Vietnam for work, Vietnamese men will buy Chinese girls as wife.