True, property prices are down, and a known set of problems continue to bedevil the Shanghai Stock Exchange – lack of transparency, non-tradable share overhang, poor quality companies and so on. Problems plague brokerages, creating an even greater morass for equity markets. There is even talk of a shift in business activity out of the city into other parts of the Yangtze delta, suggesting China's Big Apple is losing ground.
Much of what is said is true enough, but why the dark conclusions? Equity markets were in a mess in the midst of the Shanghai boom. What is more, much of the Shanghai economic (relative) downturn has been deliberately engineered through rule changes aimed at cooling the economy China-wide. The old Shanghai Gang is no longer in the commanding position it once was to help the city escape its dose of bad-tasting medicine.
Citing new growth along the Yangtze as evidence that the metropolis is slipping is to forget that such investments are along the world's third longest river (behind the Amazon and the Nile) traversing not jungle or empty sand, but rather the breadth of productive Central China. This is not bad news for Shanghai. As the great cities of Chongqing, Wuhan and Nanjing and many lesser cities in between become prosperous, their inhabitants, and those from their vast hinterlands, will generate vast amounts of extra GDP in years to come, much of which will benefit Shanghai. Development along the Mississippi, the Rhine and the St. Lawrence was never a source of tears in New Orleans, Rotterdam and Montreal.
An added benefit in this case is that greater development on the Yangtze translates into fewer homeless people flocking to Shanghai, having been diverted elsewhere in search of opportunity. In the mid-term though, much depends on the broader China picture. Whether current government economic manipulation will effect a hard or a soft landing is again a point of speculation throughout the China-conscious world. Shanghai is just a part of that wider national picture.
The Chinese dragon, it is said, has two eyes. Hong Kong and Shanghai. While Shanghai's is on occasion a little bloodshot, it seems to sparkle more brightly than Hong Kong's. China's output remains as sensational as ever and much of it crosses Shanghai's docks, and much more will in time. True, Hong Kong is the core of the rich Pearl River Delta, taking in Shenzhen and Guangzhou, with their highly productive hinterlands of 125 million people. But Shanghai heads the Yangtze River trade, with a third of the Chinese population along its shores, and the longer term trend is undoubtedly a shift in economic activity, including deal-making, from Hong Kong to Shanghai.
Shanghai's role as the preeminent city in East Asia is uncertain only in timing. The fundamentals appear to be in place.