Challenges & Hope

Greetings as we approach the end of December!

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'Tis the season when it's customary to extend warm wishes to colleagues, associates, and friends around the world. It's also a time to reflect on our journey throughout the year. Despite the countless articles, stories, comments, and greetings you may have already come across, I hope you'll indulge in one more.

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Let's rewind to 2022. In March of that year, China's Covid zero policy began to falter as infections surged. Viruses, as ancient as life itself, possess a remarkable ability to traverse hosts, irrespective of political declarations.

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The gravity of the situation hit home when a friend living in Suzhou, ?a city adjacent to Shanghai, called me one afternoon. He worked in Shanghai, and due to Covid restrictions, found himself unable to cross the river back to Suzhou. I readily offered him shelter, even though the duration of his stay remained uncertain. He arrived a couple of hours later, and we hunkered down for what turned out to be two weeks. A temporary lockdown ensued in Shanghai before the extensive one began. During this period, we stocked up on canned goods and made the best of our situation.

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When the authorities tentatively started to reopen Shanghai about two weeks later, my friend seized the opportunity to visit his family in Guangzhou, South China. He warned me multiple times to leave, anticipating another lockdown, but I remained optimistic.

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A few days later, Shanghai was once again under lockdown, and this time I spent 72 days confined to my apartment. We were permitted daily outings for Covid testing in the parking garage and a limited 20-minute walk. Food delivery was virtually nonexistent during this period. However, resilience prevailed, and I managed to capture eerie pictures of Shanghai devoid of traffic and bustling streets.

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During the lockdown, money held little value, while food became the currency of choice. My stash of Coke Zero made me quite popular, and my upstairs neighbor seemingly had an endless supply of wines and liquors. My next-door neighbor contributed to my sustenance with her constant supply of chicken. By the end of those 72 days, I wasn't exactly thin; I had probably gained 15 kilograms.

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Fast forward to December 2022, when the Shanghai city government decided to close the city once again. This time, I witnessed healthcare workers sealing off our community entrance early one Monday morning. Initially, hundreds of residents gathered and defied the restrictions. Healthcare workers, dressed in their hazmat suits, attempted to enforce the lockdown but soon gave up. A police officer arrived but eventually left as well, signaling the end of China's Covid zero policy.

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By the end of December, it seemed that nearly everyone in China had been infected. Reports suggested that up to 80% of the population had contracted the virus. January 8 marked the official reopening, although no detailed explanation was provided by the government. There were no national announcements or speeches, leaving the populace to fend for themselves.

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However, this heralded a significant shift. By mid-January, people emerged from their homes, signaling that we had collectively survived. While many fell ill, the majority prevailed. The streets came alive again during the Spring Festival, with restaurants and shops reopening. There was a renewed sense of optimism and hope for the future.

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Yet, 2023 did not unfold as expected. Challenges loomed on multiple fronts, many of them self-inflicted. China faced a demographic crisis, with an aging population and a declining birth rate. The prospect of a population decline of up to 200 million in the next decade or so presented an unprecedented challenge.

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The real estate sector, already teetering, faced a reckoning. Property investments had become akin to a Ponzi scheme, eroding trust in the market. Solving this crisis extended beyond identifying problematic companies; it required addressing the grievances of ordinary citizens who had invested their savings with no returns.

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Local governments, heavily reliant on real estate revenue for decades, were left scrambling to replace lost income. With the property sector in decline and consumers opting to invest abroad, Beijing's resources were stretched thin.

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This predicament led to discussions about implementing comprehensive corporate tax programs, revenue-generating mechanisms, private taxes, and even a value-added tax system. While these measures might bolster government coffers, they risked discouraging consumerism and investment in a country previously known for low taxes and consumer-oriented policies.

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The magnitude of the challenge was underscored by the indefinite postponement of the five-year economic plenary meeting, a rare occurrence in China's history. This gathering, a cornerstone of government planning, was last canceled over four decades ago, signaling a lack of clear solutions.

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China's consensus-based decision-making process proved inefficient in times of crisis. Faced with limited options, the government must tackle problems step by step, anticipating costs, hardships, and unforeseen challenges.

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In 2022, many foreign friends, some with decades of experience in China, chose to depart, believing the "China miracle" had concluded. I found this notion premature and imprudent. With 1.4 billion people and an ever-evolving economic landscape, China continues to shape the world.

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The current challenges may mark a significant hurdle, but they are not the end of China's story. This may be the end of one chapter, but it is certainly not the end of the book. China possesses the determination and resources to surmount these challenges and continue its transformative journey.

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As we look ahead to 2024, I extend my best wishes from Shanghai. May the coming year bring success and prosperity to us all.

From Shanghai

Alexander Glos