Greetings from Shanghai. I’ve just arrived here from Hangzhou, the venue for this year’s Fortune Global 500 Summit, and will return tomorrow to Hong Kong. Herewith some very fleeting impressions of my sojourn in the Middle Kingdom.
I say fleeting because even though I have been in China for five weeks now, I have spent the vast majority of my time here trapped in hotels. China, holding fast to its zero-COVID policy, has closed its borders to nearly all foreign visitors. Those lucky enough to be granted a visa, vaccinated or not, are required to spend at least two weeks in a government-assigned quarantine hotel. In my case, that was a somewhat forlorn Holiday Inn Express with a view over a train station. Temperature checks twice a day, PCR tests every three days. My third week was ‘soft quarantine,’ where I was permitted to shift to a hotel of my own choosing and move around the city—as long as I downloaded the local government’s ‘health app’ and maintained a green code by reporting to a local hospital more times for additional testing. By that point, preparations for the Summit allowed for relatively little independent exploring.
Even so, I return to Hong Kong with a handful of gauzy takeaways. Among them:
- Shanghai and Hangzhou seem glitzier than ever. In Shanghai’s old French quarter, the shops along Huaihai Boulevard, one of the city’s main retail districts, were teeming, as were restaurants in trendy Xintiandi. Hangzhou, home to tech giant Alibaba, is utterly transformed since the last time I visited, choc-a-bloc with luxury boutiques, otherworldly architecture, and ultra-glam five-star hotels.
- The Alibaba campus, where I spent an hour last week visiting with CEO Daniel Zhang, is enormous and beautiful, set in the wetlands near the city’s famed West Lake. Before meeting with Zhang, I got a tour of the company museum, which features a dramatic Socialist Realism-style oil painting of Jack Ma and other co-founders atop the Great Wall, as well as a vast whimsical ink-brush mural depicting tech sages such as Steve Jobs, Mark Zuckerberg, and Bill Gates set in a traditional Chinese village. Zhang himself is almost nothing like his predecessor. He promised I could ask anything and remained affable and unfazed even as questions became more pointed. (In case you missed it, you can catch some video highlights of that conversation and Nicholas Gordon’s write-up of the full exchange here.)
- On Monday, the night before the summit, I was invited, along with a half-dozen senior executives from foreign Global 500 companies, to join a reception at the Zhejiang province Great Hall of the People Hotel with high-powered group of local officials, including the provincial party secretary, governor, and mayor of Hangzhou. Party Secretary Yuan Jiajun, who speaks perfect English and has a PhD in aerospace engineering, made an eloquent pitch for China’s new policy focus on “common prosperity,” reminding us that the phrase originated with Deng Xiaoping and was a culmination of the former Chinese leader’s economic reform agenda rather than a departure from it. He stressed that China remains staunchly pro-markets, and that global businesses would always be welcome in Zhejiang. China’s common prosperity agenda, he argued, would be good for businesses because it aimed to provide greater security to middle class consumers and, in that respect, broadly resembled aims of many Western democracies.
- From that meeting, I dashed across town the Hangzhou Park Hyatt to join the second half of Fortune’s first “China Investors Night.” That session, which included a group of more than 50 high-powered Chinese investors and fund managers, was off-the-record so I can’t quote specifics. But I can say that the general sentiment was one of optimism. Nearly everyone agreed there are still ample investment opportunities in China; participants scoffed at the suggestion that China stocks or Chinese startups have been rendered “uninvestable” by the party’s new emphasis on common prosperity or this year’s regulatory crackdown.
- Speakers at the Summit itself were similarly upbeat. There was a good deal of discussion about supply chain shocks, rising energy prices, and the slight recent weakening in consumer sentiment. But they seemed remarkably untroubled by issues that dominate Western investors’ China agenda, including the regulatory crackdown, continued tension in the U.S.-China trade relationship, the global sell-off in China shares trading on Wall Street, or even the prospect that a lingering pandemic might keep China’s borders closed to foreign travelers well into next year.
In his newsletter this week, Matthews Asia strategist Andy Rothman makes the case for why Western investors shouldn’t be alarmed by China’s regulatory crackdown or common prosperity push. The gist of his argument is that China’s leaders are pragmatists; if the economy starts to slow, they’ll back off.
One thing about which many Summit participants did express concern—privately not publicly—was the chaos in China’s property sector, particularly the recent slump in housing sales. Investors and executives alike worried the housing slump is dampening consumer sentiment and that regulators will have difficulty restoring that confidence. Former Morgan Stanley Asia chairman Stephen Roach, whom I interviewed virtually for the Summit, argues those concerns are overblown. Arthur Kroeber, managing director of Gavkal Dragonomics, an independent economic research firm, tells the New York Times he thinks property woes could have a significant negative impact on China’s growth for the next two quarters.
I don’t know who’s right. But on my drive back and forth between Shanghai and Hangzhou, I couldn’t help notice the scores and scores of residential complexes under construction. Whizzing past those structures tonight, I recalled the old joke that if China has a national bird, it must be the crane.
That rings as true as ever—but it seemed to me on this trip that an awful lot of those cranes aren’t actually moving.
More Eastworld news below.
Clay Chandler
clay.chandler@fortune.com
EASTWORLD NEWS
Evergrande sale fail
China’s indebted and defaulting property developer, Evergrande Group, resumed trading on the Hong Kong stock exchange Thursday after an attempt to offload $2.6 billion in assets to Hopson Development fell through. Evergrande halted trading at the start of the month, while it negotiated a sale of its property services unit. Evergrande’s share price plummeted 10.5% Thursday, after trading resumed. Fortune
Caixin out
Beijing cut China’s Caixin Media from the government’s list of news outlets that can be circulated by third party platforms, such as Sina or Toutiao—aggregators that many Chinese use to consume news. Caixin is one of China’s most outspoken news groups and often publishes criticisms of officials, but the group’s circulation will be limited now that it is no longer on Beijing’s approved list. Earlier this month, Beijing also proposed a ban on private funding in media groups, which would undermine the country’s remaining independent media. Bloomberg
Ma on tour
Jack Ma, the founder of e-commerce giant Alibaba, emerged in Hong Kong last week after months spent outside public view, bringing some relief to the group’s share price, which bounded on news of the sighting. The normally bombastic magnate retreated from public outings last November, after Chinese regulators cracked down on Ma and his fintech group, Ant Financial. Beijing has also reportedly pressured Ma to divest of his media assets, such as the Hong Kong-based South China Morning Post. According to the Post, Ma is now on a “study tour” of agricultural regions in Spain—his first reported overseas trip since November last year. Reuters
Squid Game, part 2
Minyoung Kim, Netflix’s chief content executive for Asia and the one responsible for bringing the platform its runaway success Squid Game, hopes to double down on investment in the peninsula’s entertainment industry. Netflix has boosted its investment in Korea every year since its arrival there in 2016 and expects to pump $500 million into Korean creations this year—70% of its total spend from 2016 to 2020. “The K-wave is a huge moment of national pride and we’re proud to be part of it,” Kim says. Fortune
MARKETS AND MOVERS
Supermax — On Wednesday, the U.S. Customs and Border Protection (CBP) issued an order effectively prohibiting the import of all products made by Malaysia’s Supermax Corporation, which manufacturers rubber gloves. The CBP said it implemented the ban based on “information that reasonably indicates their use of forced labor in manufacturing operations.” Supermax’s share price has dropped 11% since the announcement.
GoTo —Indonesia’s largest private tech group GoTo—formed from a merger between GoJek and Tokopedia in June—raised $400 million from the Abu Dhabi Investment Authority, bolstering the company’s books ahead of an IPO planned for Indonesia in 2022.
Korea exports — Shipments out of South Korea grew 36.1% in the first twenty days of October compared to the same period last year, the country’s customs office said Thursday. Export sales to China, Korea’s largest trading partner, surged 30.9%. Strong export growth suggests consumer demand for goods remains strong, even as snagged supply chains delay deliveries and increase costs.
Foxconn — The chairman of Taiwan’s Foxconn said Wednesday that the group would build electric vehicle factories in Europe, India and either South or North America by 2024, as the iPhone supplier expands into the booming EV segment. Foxconn wants its nascent EV business to be worth $35 billion in five years.
Uppity property — Property shares were the best performers among stocks held in Shanghai and Shenzhen on Wednesday, rallying on remarks made by government officials and regulators, who said risks in the property sector are controllable.
Sinic default — It’s not all good news for China’s real estate industry. Property developer Sinic defaulted on a $250 million note on Monday, as contagion from Evergrande’s slow-moving collapse spreads. Sinic is a much smaller developer than Evergrande, ranking 41st in the country, while Evergrande is 3rd. Still, Sinic’s default comes weeks after another Chinese developer, Fantasia, missed bond payments, too.
FINAL FIGURE
1 billion
India delivered its billionth vaccine on Thursday, but the country has only fully vaccinated 30% of its adult population. A total 74% of India’s adults have received one dose of vaccine, but hundreds of millions of Indians remain unvaccinated. Children under 18 aren’t eligible for vaccination in India. Off the back of a devastating second wave of infections, which many blame on the government, Modi’s administration is now racing to completely vaccinate its adult population.
