Tag Archives: Shanghai

Omicron’s Challenge To China’s Zero-Covid Strategy Hits Global Shipping

SUPPLY CHAINS, ALREADY under heightened stress because of the Ukraine conflict, face a new challenge from the latest Covid-19 lockdowns. 

Congestion in the Yantian and Shekou container terminals at Shenzhen and the terminal in Hong Kong is at its worst in five months, leading to further delays in shipping to export markets. 

Approximately 174 container ships are anchored or loading in Shenzhen and Hong Kong, the most since October 21 last year in the aftermath of Typhoon Kompasu.

The same is shaping up in Shanghai. In the north, the lines of vessels waiting to get into Qingdao port in Shandong were double the length mid-month that they were at the end of February. 

The Omicron variant’s challenge to China’s zero-Covid strategy is making the congestion worse than that typically seen around Chinese ports after the Lunar New Year. The delays will have a ripple effect as shippers re-route cargo and loadings to other ports. Longer delays will also push up freight rates.

As well as affecting port operations, lockdowns have hit production, with factories being temporarily shuttered or allowed to operate under strict restrictions.

While Shenzhen has just eased its lockdown, Hong Kong is battling a fearsome outbreak of the Omicron variant. Shanghai, which handles more tonnage than either of the two southern shipping hubs, is still seeing a rise in infections. Although denied by authorities, rumours of a coming complete lockdown are circulating.

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China Battles Multiple Outbreaks As Omicron Variant Surges

Rolling 7-day average of new daily confirmed Covid-19 cases in China. Source: Our World in Data. Licenced under CC-BY

THE COVID OUTBREAKS across China are expanding. The National Health Commission on March 14 reported a daily total of 1,337 new locally transmitted cases, including 895 in the northeastern border province of Jilin.

Severe movement restrictions have been imposed on Jilin, the first provincial-wide sealing-off since much of Hubei was locked down in 2020 following the first outbreak in its provincial capital, Wuhan. This broadens the restrictions imposed last week on the provincial capital of Changchun, where most of Jilin’s infections have been reported. Emergency isolation hospitals are being erected. Toyota’s factory there has had to halt production. (Update: Jilin City mayor Wang Lu has been sacked due to ineffective epidemic prevention and control, Xinhua reports.)

In Shanghai, schools have reverted to online teaching, road transport to the city is being restricted. A ban on inbound international flights is reportedly being considered.

The lockdown in central Shenzhen has expanded to cover most of the city’s 17.5 million population, and three rounds of testing have been ordered. High-tech factories such as those of Apple supplier Hon Hai Precision Industry (Foxconn) and Huawei will temporarily stop production. However, the Shenzhen Yantian Port container terminal is still operating, but under strict Covid controls.

The Shenzhen outbreak is likely to be a spillover from the raging infection in neighbouring Hong Kong, where 26,908 new daily cases and 249 deaths were reported on Monday. New infections appear to have plateaued, but deaths are still rising, especially among the unvaccinated elderly.

New cases are also reported in Beijing, Tianjin and cities across Guangdong province.

As of March 9, 14 of China’s provinces had been declared high or medium-risk for the virus. The clusters of outbreaks caused by the fast-spreading Omicron sub-variant BA2 are proving a stiff test of Beijing’s zero-tolerance policy.

No death from the virus has been reported in China since January 2021. However, on Friday, National Health Commissioner Ma Xiaowei said strict controls need to be kept in place.

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The Disneyfication of Shanghai

Magic Castle at Disneyland ShanghaiTHERE AREN’T MANY places you could convene a crowd of 60,000 in China without police of any stripe in sight. Indeed, there may be only one — the new Disneyland in Shanghai (above).

Such was the appetite for Shanghai to land the theme park that Disney was able to negotiate self-policing rights. Chinese police authority stops at the exit to the new metro station outside the front gate. Thereafter it is the Disney security staff that you can see anywhere in the world there is a Disneyland.

Shanghai’s may turnout to the be world’s most-visited theme park. What does that say about whether American or Chinese culture is the most dominant?

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China’s Urban Margins

Mostly anything with a $6 trillion price tag catches our attention. China’s new leadership plans to spend that much on infrastructure over its decade, with urbanisation the focus as an engine of economic growth.

Lucy Hornby and Jane Lee writing for Reuters underline the Achilles heel of such plans: cheap, shabby and often sub-standard working class — in China’s case, migrant worker — housing gets bulldozed to be replaced by expensive high-rise apartment blocks that the displaced can’t afford. The always promised affordable housing rarely materialises.

Some 350 million more Chinese are expected to move from the farms to the cities over the next two decades, completing one of the most remarkable transformations ever of a country from a predominately rural to a majority urban population. China isn’t the first country to face the problem of providing affordable housing for city workers, or of trying to strike the right balance in the provision of public and private urban housing. At the same time it has a rare opportunity, and the money, to build sustainable, efficient and livable cities.

Unlike most industrializing and emerging economies China has avoided large-scale slums in its cities. That is not to say that people aren’t living in makeshift accommodation, crowded and sub-standard tenements and dormitories that are no more than sub-divided rented rooms. Officials in places like Shanghai may be embarrassed to have residents living in old shipping containers (though it is possible to turn even those into designer homes), but the harsh reality of urban life is that many residents live on the margins. Even $6 trillion won’t change that for most of them.

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If Pigs Could Float

If pigs could fly. Well, they do float. At least when dead. More than 2,000 bloated pig carcasses have been fished out of the Huangpu River at Songjiang on the outskirts of Shanghai. It is not unusual to see all sorts of pollutants in China’s rivers, including dead pigs, if not on this scale. It is not clear how the pigs got into the river, or who dumped them in it, but there are plenty of pig farms upstream. Authorities say there is no cause for concern over the quality of drinking water taken from the river, but this unusual case seems set to become a touchstone for popular concerns about environmental pollution.

Update: Authorities say the number is now up to 2,800 dead pigs, that the animals came from Jiaxing City in  Zhejiang, and that the pig virus, PVC (porcine circovirus, which is not known to infect or cause disease in humans), had been found in one water sample.

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China’s Cities Clustered

China is no more a single market than any other large economy, a basic point but one that bears repeating. The McKinsey Quarterly has given visual expression to that thought with a map delineating the country’s central and eastern mega-conurbations. It also offers a reminder that Greater Shanghai is as large an economy as Switzerland.

China's central and eastern cities clustered into metropolitan areas.

The chart is excerpted from a larger McKinsey Quarterly article, Winning the $30 trillion decathlon: Going for gold in emerging markets.

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Submerged Shanghai

Nine major delta cities' vulnerability to coastal flooding

Flood vulnerability index for coastal cities. Source: Natual Hazards

A new research paper* into the vulnerability to coastal flooding of the nine major world cites on river deltas makes grim reading for Shanghai however you look at it. No city of the nine is worse situated. Shanghai has the longest waterfront, along both river and sea. It has the highest concentration of residents living in flood-prone areas. It has the weakest institutional flood-repsonse capacity for the size of risk it faces. Taken together, as the chart above shows (a 1 is bad, zero good) those factors make Shanghai the most vulnerable major city in the world to coastal flooding, a title, the report says, it will still hold at the end of this century unless action is taken.

That action is urgent. As we have noted before Shanghai is sinking. Meanwhile, sea levels continue to rise.  If there is a silver lining to the report, it is that Shanghai is wealthy enough to recover relatively quickly from such a disaster.

*A flood vulnerability index for coastal cities and its use in assessing climate change impacts. By S.F. Balica and N.G. Wright of the UNESCO-IHE Institute for Water Education and Delft University of Technology, and F. van deer Meulen of the School of Civil Engineering, University of Leeds. Natural Hazards. 2012.

Footnote: The nine delta cities studied were Buenos Aires (Argentina), Calcutta (India), Casablanca (Morocco), Dhaka (Bangladesh), Manila (Philippines), Marseille (France), Osaka (Japan), Shanghai (China) and Rotterdam (the Netherlands).

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From Sweatshops To Catwalks

Models present fashion creations at the DUNNU Collection Autumn/Winter 2012-2013 show during the ongoing China Fashion Week in Beijing, capital of China, March 26, 2012. (Xinhua/Li Mingfang)
With China fashion week in Beijing in full swing (above), and a recent report that international fashion houses are starting to shifting production out of China, this Bystander thought it worthwhile to republish our piece from last month about the challenges facing China’s textile and apparel industry, and its need to move up market:

 China’s rag trade is the world’s largest. It consumes 45% of the world’s fiber, accounts for a third of world textile exports and now has a huge and fast-growing domestic market for textiles and apparel into which to sell. As best we can guess, the industry has half a trillion dollars in annual sales and employs more than 20 million people. A further 140 million are involved in cotton farming, and millions more in the chemicals industries producing man-made fibers. Our numbers, though based on commerce ministry data, are a guess. Many of the businesses operating in the industry are too small to get counted in the official figures.

One thing we do know is that the textile and garment industry is both privately and foreign owned to an uncommon extent for such a significant Chinese industry. Another is that it faces the challenge of breaking away from its low-cost, high-volume model, like other industries that have thrived in the export-driven phase of China’s growth over the past three decades. The slump in demand in its export markets in the developed world may be temporary, but rising labor costs will be permanent, and the more painful as industry wages are generally lower than in other parts of manufacturing. The high value added parts of its supply chain lie in the hands of others, notably specialist logistics companies.

The rag trade globally has always been a hybrid of  the high-quality fashion market, characterized by modern technology, relatively well-paid workers and designers and a high degree of flexibility, and the low-end, mass production of cheap and standard clothing, such as t-shirts and uniforms by semi-skilled and unskilled, usually female, labour, in which international retailers have the dominant market power. The potentially highest value added part of the business, internationally recognizable fashion brands, are almost completely outside the Chinese industry’s orbit. The country, and Shanghai in particular, does have an emerging cadre of world-class couture designers, some of those work has been making an increasing splash at the biannual Shanghai Fashion Weeks. A collection from Zhang Zhifeng’s Ne Tiger line opened the most recent show, seen above. Yet Shanghai’s best labels are still far from challenging the likes of Louis Vuitton, Chanel, Gucci, Dior and Armani, even inside China where those European labels are the ones that dominate the domestic fashion market.

Every fashion industry cascades down from couture through ready-to-wear to the cheap knock-offs sold on market stalls and needs a textiles industry underpinning it. Redressing China’s textile and garment industry’s structural shortcomings will require a level of innovation beyond anything the domestic textile industry has known. Inevitably, there is a plan. It has been devised by the China Textile Industry Association, a trade body, and officials in Songjiang, one of the satellite towns on the western outskirts of Shanghai and better known for Thames Town, the surreal facsimile of an English home counties market town that has been built there. They plan to build a 2,000 acre industrial zone for the textiles and fashion industries that will be part business park, part R&D center, part fashion expo and shopping mall, and part brand incubator. Two years in the making, a small corner of this project opened a few months back. The full vision will take six or seven years to realise.

The notion of clustering firms, in the hope that the cross-pollination of people, ideas and capital, will foster innovation, is taken from high-tech industries. Fashion Valley, as the zone is being called in an echo of Silicon Valley, will sit alongside Songjiang’s existing industrial zone, already home to biotech, semiconductor and pharma firms.

It will also be close to another essential component of a high-tech industrial cluster, a leading university. Songjiang has several. In particular, the fashion and fabrics-centric Donghua University, whose roots go back to the Shanghai Textile Engineering Institute and which absorbed the textile sections of a number of regional institutions in East China after the Communist Party took power in 1951, maintains a campus in Songjiang. Over the road is the Shanghai University of Engineering Sciences’ new home for its Institute of Clothing Technology, arguably China’s leading fashion design college thanks to its partnership with Paris’s IFA. Neither campus is far from the proposed fashion incubator.

Songjiang is not an illogical spot for such a project. The district has been associated with the textile industry ever since the Mongols replaced rice with cotton as the area’s main crop in the 14th century, leading to spinning and weaving becoming prominent local industries.

The question, asked a thousand times by economic development planners everywhere, and yet to be convincingly answered, is can innovation be systemized? This Bystander doesn’t doubt local bureaucrats’ natural affinity for expensive, large-scale real estate and infrastructure development. And up to a point, in China, if you build it, they will come. Some are told to; others just know to hear the call. Several local firms are already signed up. Developing creative industries and expanding China’s soft, cultural power are all now national priorities.

No doubt, too, that if China’s textile and apparel industry is to escape being stuck in the low-value end of the business it will have to become vertically integrated. To do that it will need to develop both management skills and quality standards along the value chain, as well as dealing with the sustainability and labor issues surrounding the fashion industry internationally. One point in its favor is that the textile and garment industry is suitable for the sort of incremental and process innovation that Chinese firms are starting to become adept at, rather than needing to search for breakthrough products and technologies. Another is that if the textile industry diversifies into technical textiles, for use in the medical, aerospace, automotive and green-technologies industries, for example, it can ride the development arc of those industries, all of which are being championed as strategic national interests.

Best business practice can always be taught, but industrial clusters tend to emerge despite the best intentions of planners. In the U.K. it took more than three decades of economic planning to develop a high-tech company incubator around Cambridge University, known as Silicon Fen. Yet, over the past couple of years, London’s Silicon Roundabout had emerged organically as the place for web start-ups. Closer to home, as well as a thriving fashion industry, Shanghai has an vibrant modern art scene that has grown up around 50 Moganshan Road to the north east, organically and unplanned.

The challenge for the textile and garment industry is give the creativity of designers and fashion entrepreneurs enough free rein to develop world-class brands and labels while providing them with both the technical advances and the business and production disciplines to compete with the established fashion multinationals. In the world’s fashion capitals it is the design and fashion schools rather than industrial parks that play a crucial part in that, places like London’s Central St. Martin’s, New York’s Parsons and FIT, Paris’s Ecole de la Chambre Syndicale and Esmod, Milan’s Instituto Marangoni and Tokyo’s Bunka Fashion College, all of which would fall into the top 10 of most lists of the world’s top fashion schools. SUES and Donghua, which woldn’t rank in many top 50s, will have to break into those ranks.

China has the potential to reshape the global couture market, as it does all luxury markets, because its domestic market is likely to grow so fast and so far. In white goods, Haier is a harbinger of what is possible. It turned a high-end consumer good, wine-cooler refrigerators, into a much cheaper middle-market product, and grabbed a 60% global market share in the process. Unlike as it seems now, it is perfectly conceivable that Shanghai, perhaps even Songjiang, will one day be spoken of in the same breath by fashionistas as Milan, Paris, New York and London.

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Shanghai Becomes More Like Venice, In A Bad Way

So serious has the depletion of China’s groundwater become as a result of industrialization and urbanization that the country’s large cities are sinking, as, potentially, are the high-speed rail corridors between them. So concerning is that to authorities that the State Council has made areas with high-speed rail links a priority in a new land subsidence research project it has approved to be completed by 2015. In the order of these things, that is a crash deadline.

The survey is one of four projects that the Ministry of Land and Resources said this week that the State Council had ratified to combat the effects of China’s growing water shortage. Others include yet more controls on pumping underground water, and the setting up of monitoring networks in the worst affected areas–the Yangtze river delta, the North China Plain and the Fen and Hua river basins. The network is to be in place by 2020.

It didn’t take any technology to see the 8 meter crack that opened up earlier this month in a road near the Shanghai World Financial Center. (There are some pictures here.) That is despite authorities taking preventive measures since 2005 to combat ground subsidence caused by falling water tables. Municipal officials say the city is still sinking by seven millimeters a year. That is a better state of affairs than in the past, however. Shanghai used to be sinking by several centimeters a year.

A third of China’s water reserves lie in underground aquifers. They supply 70% of the country’s drinking water and 40% of its farm irrigation needs. They are being stretched to their limits, particularly across the grain belt of the North China Plain as evermore wells are sunk to draw water for city dwellers and industry. Underground water pollution is a separate concern, but as serious.

Shanghai is one of more than 50 large cities with a similar Venice-like problem of subsidence because the water table below it is sinking. Beijing, Tianjin, Hangzhou and Xian are among others. As the number of 50 cities has been quoted since at least 2006, we suspect it may undercount the problem today. In a paper the China Geological Survey published that year the direct economic cost of subsidence was put at 1 billion yuan ($160 million) a year. It will likely top that now.

Tianjin, which like Shanghai has been sinking since the 1920s although it wasn’t until the 1960s that it was understood why, shows why widespread limits on groundwater pumping are so urgent, and also how difficult it is to control subsidence. The city introduced restrictions as long ago as 1985. Its sinking has slowed from 80 millimeters a year then but is still dropping 20 millimeters a year now. Coastal cities share another characteristic with Venice. Floods are becoming more frequent and severe. The lower cities sink the more susceptible they are to them.

We have noted before the potential explosive social costs of a water crisis getting beyond the government’s control. It will take a comprehensive program of water conservation, better water resource management and better husbandry of the ecosystem. And there are plans on all those fronts. But if they fail, it will be more than a high-speed train or two that comes off the rails.

 

 

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The Catwalks Of Songjiang

Models present creations for the NE TIGER Couture 2012 collection with the theme "Tang Dynasty" on catwalk during China Fashion Week for Spring/ Summer 2012 in Beijing. Source: Shanghai Daily

China’s rag trade is the world’s largest. It consumes 45% of the world’s fiber, accounts for a third of world textile exports and now has a huge and fast-growing domestic market for textiles and apparel into which to sell. As best we can guess, the industry has half a trillion dollars in annual sales and employs more than 20 million people. A further 140 million are involved in cotton farming, and millions more in the chemicals industries producing man-made fibers. Our numbers, though based on commerce ministry data, are a guess. Many of the businesses operating in the industry are too small to get counted in the official figures.

One thing we do know is that the textile and garment industry is both privately and foreign owned to an uncommon extent for such a significant Chinese industry. Another is that it faces the challenge of breaking away from its low-cost, high-volume model, like other industries that have thrived in the export-driven phase of China’s growth over the past three decades. The slump in demand in its export markets in the developed world may be temporary, but rising labor costs will be permanent, and the more painful as industry wages are generally lower than in other parts of manufacturing. The high value added parts of its supply chain lie in the hands of others, notably specialist logistics companies.

The rag trade globally has always been a hybrid of  the high-quality fashion market, characterized by modern technology, relatively well-paid workers and designers and a high degree of flexibility, and the low-end, mass production of cheap and standard clothing, such as t-shirts and uniforms by semi-skilled and unskilled, usually female, labour, in which international retailers have the dominant market power. The potentially highest value added part of the business, internationally recognizable fashion brands, are almost completely outside the Chinese industry’s orbit. The country, and Shanghai in particular, does have an emerging cadre of world-class couture designers, some of those work has been making an increasing splash at the biannual Shanghai Fashion Weeks. A collection from Zhang Zhifeng’s Ne Tiger line opened the most recent show, seen above. Yet Shanghai’s best labels are still far from challenging the likes of Louis Vuitton, Chanel, Gucci, Dior and Armani, even inside China where those European labels are the ones that dominate the domestic fashion market.

Every fashion industry cascades down from couture through ready-to-wear to the cheap knock-offs sold on market stalls and needs a textiles industry underpinning it. Redressing China’s textile and garment industry’s structural shortcomings will require a level of innovation beyond anything the domestic textile industry has known. Inevitably, there is a plan. It has been devised by the China Textile Industry Association, a trade body, and officials in Songjiang, one of the satellite towns on the western outskirts of Shanghai and better known for Thames Town, the surreal facsimile of an English home counties market town that has been built there. They plan to build a 2,000 acre industrial zone for the textiles and fashion industries that will be part business park, part R&D center, part fashion expo and shopping mall, and part brand incubator. Two years in the making, a small corner of this project opened a few months back. The full vision will take six or seven years to realise.

The notion of clustering firms, in the hope that the cross-pollination of people, ideas and capital, will foster innovation, is taken from high-tech industries. Fashion Valley, as the zone is being called in an echo of Silicon Valley, will sit alongside Songjiang’s existing industrial zone, already home to biotech, semiconductor and pharma firms.

It will also be close to another essential component of a high-tech industrial cluster, a leading university. Songjiang has several. In particular, the fashion and fabrics-centric Donghua University, whose roots go back to the Shanghai Textile Engineering Institute and which absorbed the textile sections of a number of regional institutions in East China after the Communist Party took power in 1951, maintains a campus in Songjiang. Over the road is the Shanghai University of Engineering Sciences’ new home for its Institute of Clothing Technology, arguably China’s leading fashion design college thanks to its partnership with Paris’s IFA. Neither campus is far from the proposed fashion incubator.

Songjiang is not an illogical spot for such a project. The district has been associated with the textile industry ever since the Mongols replaced rice with cotton as the area’s main crop in the 14th century, leading to spinning and weaving becoming prominent local industries.

The question, asked a thousand times by economic development planners everywhere, and yet to be convincingly answered, is can innovation be systemized? This Bystander doesn’t doubt local bureaucrats’ natural affinity for expensive, large-scale real estate and infrastructure development. And up to a point, in China, if you build it, they will come. Some are told to; others just know to hear the call. Several local firms are already signed up. Developing creative industries and expanding China’s soft, cultural power are all now national priorities.

No doubt, too, that if China’s textile and apparel industry is to escape being stuck in the low-value end of the business it will have to become vertically integrated. To do that it will need to develop both management skills and quality standards along the value chain, as well as dealing with the sustainability and labor issues surrounding the fashion industry internationally. One point in its favor is that the textile and garment industry is suitable for the sort of incremental and process innovation that Chinese firms are starting to become adept at, rather than needing to search for breakthrough products and technologies. Another is that if the textile industry diversifies into technical textiles, for use in the medical, aerospace, automotive and green-technologies industries, for example, it can ride the development arc of those industries, all of which are being championed as strategic national interests.

Best business practice can always be taught, but industrial clusters tend to emerge despite the best intentions of planners. In the U.K. it took more than three decades of economic planning to develop a high-tech company incubator around Cambridge University, known as Silicon Fen. Yet, over the past couple of years, London’s Silicon Roundabout had emerged organically as the place for web start-ups. Closer to home, as well as a thriving fashion industry, Shanghai has an vibrant modern art scene that has grown up around 50 Moganshan Road to the north east, organically and unplanned.

The challenge for the textile and garment industry is give the creativity of designers and fashion entrepreneurs enough free rein to develop world-class brands and labels while providing them with both the technical advances and the business and production disciplines to compete with the established fashion multinationals. In the world’s fashion capitals it is the design and fashion schools rather than industrial parks that play a crucial part in that, places like London’s Central St. Martin’s, New York’s Parsons and FIT, Paris’s Ecole de la Chambre Syndicale and Esmod, Milan’s Instituto Marangoni and Tokyo’s Bunka Fashion College, all of which would fall into the top 10 of most lists of the world’s top fashion schools. SUES and Donghua, which woldn’t rank in many top 50s, will have to break into those ranks.

China has the potential to reshape the global couture market, as it does all luxury markets, because its domestic market is likely to grow so fast and so far. In white goods, Haier is a harbinger of what is possible. It turned a high-end consumer good, wine-cooler refrigerators, into a much cheaper middle-market product, and grabbed a 60% global market share in the process. Unlike as it seems now, it is perfectly conceivable that Shanghai, perhaps even Songjiang, will one day be spoken of in the same breath by fashionistas as Milan, Paris, New York and London.

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