The lockdown in Shanghai has burdened the city’s citizens for two months now. Numerous terrifying videos circulate on social media: People screaming their despair from balconies at night, workers isolated in factories – and in some cases overrunning security forces as infections also spread there. Frank Sieren spoke with German 3-star chef Stefan Stiller, who is certain: The people of Shanghai will struggle with the psychological consequences of the lockdowns for a long time. And many self-employed will also reach their financial limits, since the government’s support measures have so far failed to address the problems faced by many companies.
The Covid crisis has shaken some certainties in China and appears to exacerbate other trends. European companies complain about a lack of transparency and limited ability to plan their business activities. But there is also a lot going on aside from the lockdowns: A growing number of expats are leaving the country, authorities grant fewer visas to locals, and the situation for international schools is becoming increasingly complex, as Christiane Kuehl explains.
Overall, it seems as if zero-Covid has long since become more important than economic growth. And this makes sense, since many elderly citizens are not sufficiently vaccinated. A widespread Omicron outbreak could prove catastrophic for China. So the government is willing to accept two or three “bad quarters” – as irritating as that may seem to Western companies. After all, so far they have known virtually nothing but limitless growth in the People’s Republic. It is surprising that the central bank and Beijing have no intention to introduce a comprehensive economic stimulus package to revive economic growth. At least not yet. After all, Xi’s re-election is approaching in the fall. Growth must not be allowed to collapse any further.
How does a star chef with nearly 40 employees feel after more than 60 days of lockdown?
A week ago I said that I expected that there would be some relaxation at the beginning or middle of June, perhaps supermarkets and stores would be able to open again slowly in July, and then gastronomy would follow in stages. I hoped that we would be able to reopen in July, maybe with restrictions.
And hope is fading now?
Currently, more and more fences are being erected and more districts are being cordoned off. No situation to make predictions anymore. If you listen to the news from Beijing, it sounds like: Zero-Covid is a war that must be won.
What does this mean for your industry?
For many smaller restaurants without much cash flow, the point will soon come where they can no longer survive. When there’s no more money, there’s no more money. It’s as simple as that. That will hit many.
Does the government help you out?
If you are in a government building, the rent is lowered. In private buildings, you have to negotiate yourself. There are tax breaks. But without revenue, they are of little help. There is a great sense of frustration everywhere. And on top of that are horror stories on social media. Domestic violence is on the rise because people are not used to being with their families in such close quarters for such a long period of time. The lockdown will yet push many people to their limits, psychologically and financially.
Do you continue to pay your employees?
We have been closed since March 17. In March, we were still paying in full. In April, I reached a solution with my employees: I didn’t want to go to 2,590 yuan minimum wage as proposed by the government. So we reduced the employees with the highest wages the most and those with the lowest wages almost not at all. Once things resume, we will work an extra day a week. Before the lockdown, we were closed on Sunday and Monday. That way I can recoup some of the losses. Our goal this year is for all of our employees to end up making what they were originally supposed to make as their annual salary. Fortunately, our restaurants in Guangzhou continue to run at 60 to 70 percent of normal capacity. There are no restrictions there. But fewer travelers are coming to Guangzhou.
Do you consider pulling out of China if the situation will drag on for months?
That would make no sense, because our life is centered in Shanghai. We have our business here, and I think we will survive the lockdown economically. Sure, it will cost us a lot of money. I can probably forget about 2022 as a fiscal year. But if I look at this lockdown over a period of five years, it hardly matters.
So how did you get through the Covid years of 2020 and 2021?
These were two very good years. 2021 was even our best year yet. It was spectacular. Shanghai was not affected by Covid at all – and we even benefited from the fact that our guests could not travel and therefore went out to eat more. We were fully booked for most of the two years up to March 17.
So the government did everything right during the first two Covid years. Indeed, we have also been affected by private restrictions. We haven’t seen our daughter, who lives in London, for a long time now. I also haven’t seen my mother, who is not in such good health, for a long time. The same goes for my wife’s mother. That is tough. From the business side, however, I still said at the beginning of this year: perfect, keep it up.
In Guangzhou, however, you were also closed for just under a month last June.
Yes, but the situation was quickly back under control. After the reopening, it took a week to ten days. Then business was back to normal. That’s what I had expected for Shanghai at the beginning. Things turned out a little differently.
You have even received a third star for your restaurant in November? What have you done better?
You can’t force that. We continued to step on the gas after the first two stars. Every day we ask ourselves anew: What can we do better instead of resting on our laurels? Still, the third star was a big surprise for me. We continue to cook mainly for our guests and are very pleased when our menus are also well received by restaurant critics.
Who are your guests?
More than 90 percent are Chinese who come to us not on business, but for private reasons. They have traveled a lot, are very familiar with international cuisine, have high expectations – and are willing to spend an average of between 300 and 400 euros per evening and person.
What is the biggest difference with Europe?
In Europe, the guests are around 60 years old. Here, they are between their mid-20s and mid-30s. That’s why we are certainly one of the most unconventional three-star restaurants in the world. We have a very casual atmosphere. White tablecloth, candlelight, piano players, you won’t find these stereotypes here. We are noisy. We have fun and action. Most of our guests sit at the counter of the open kitchen.
You have not seen these rooms for over 60 days. Like everyone else in Shanghai, you are locked up in your apartment. How are you feeling personally?
I really can’t complain. We have a very nice apartment. We have everything we need. A closet filled to the brim with good wines. A small terrace with a small grill that I can fire up and put a steak on. We are well supplied by our suppliers, as far as it goes. I have set up a small gym in the guest room. After all, guests are not coming at the moment.
And you started making cooking videos. Out of boredom?
It was actually supposed to be a help: a friend had ordered meat when the lockdown started. She can’t cook that well. My wife then said: Let’s make a video for her. My wife posted that on WeChat – with great reception. Then we made a few more. The video, for example, in which I cook an onion soup, now has almost 100,000 views. In the meantime, I’m receiving inquiries from companies that say: ‘We’ll send you our products. Can’t you cook with them, and we’ll pay you for it?’ That’s how they turn the crisis into an opportunity. That says a lot about China.
Are you now becoming a successful influencer?
Presumably, it’s hard to avoid it. But it won’t become my focus. I want one thing above all: to go back to my restaurant and cook.
Born in Hildesheim in 1966, Stefan Stiller was already cooking in a star-rated restaurant in Cologne at the age of 21. In the summer of 2004, Stiller moved to Shanghai, where he became head chef at Club Shanghai. In 2008, Stiller opened his own restaurant, Stiller’s Restaurant. In April 2016, the star chef opened Taian Table restaurant on Tai’an Road, which received its third Michelin star in November 2021.
Resignation spreads among international companies in China. In the short term, there is no sign of a departure from the zero-Covid policy, nor of a way out of the cycle of recurring outbreaks. Instead of a major vaccination campaign, the government plans to blanket all cities with a dense network of “PCR testing kiosks”. Without a valid negative test, normal life will be virtually impossible for the time being (China.Table reported).
Now Shenyang, which was sealed off for a few weeks, has nearly fully reopened, tells Harald Kumpfert, EU Chamber chairman for northeast China. “But in return, there are now tests at least every 48 hours. And many cities don’t accept test results from other cities.” Business travel is not without risk, according to Kumpfert. “Anyone who passes a city by train or car with only one case of Covid can be quarantined afterward.”
There are similar stories from all over China. “You need four Covid tests within 24 hours for a short trip between Chengdu and Chongqing because there are high-risk areas in both cities,” reports Massimo Bagnasco of the EU Southwest Chamber. The two metropolises are two hours apart by high-speed train. In Jiangsu, on the other hand, truck drivers must spend three days in quarantine after “entering” some cities, according to the local EU Chamber. In the area around Shanghai, travel and logistics have shrunk to a fraction anyway (China Table reported).
Even the weeks-long lockdown of Shanghai, China’s biggest economic hub, and all its consequences have so far failed to prompt the government to reconsider its approach: Beijing apparently even sacrifices growth for the sake of zero-Covid. Posts made by doubters, including Chinese economists, are being censored.
Since April, the full force of zero-Covid on the economy has become apparent. Industrial production fell by more than three percent compared to the same month last year, retail sales by eleven percent, and car sales by as much as 48 percent. “Everything is pointing in the wrong direction,” says EU Chamber President Joerg Wuttke – including vaccination statistics. “In March, an average of 800,000 over-60s were vaccinated per week. By the first week of May, that number was down to 300,000.” Vaccination staff are being pulled away for testing in many places.
By now, it should be obvious to everyone that an end to zero-Covid or at least a certain degree of predictability cannot be expected in the short term. The biggest problem is the uncertainty as to what will happen next, as is evident from the statements of the EU chamber representatives. Hardly anyone continues to work on new projects at the moment; everyone waits and sees.
Some experts have warned China of a “growth recession” – very slow economic growth coupled with rising unemployment. Unemployment rose to 6 percent in April; among 16-24 year-olds, it was over 18 percent. Others believe that China faces a so-called double-dip recession, similar to what happened in the US in the early 1980s – a recession followed by a slight recovery, followed by another recession.
And Beijing does not intend to respond with a large-scale economic stimulus program this time around. The state and local authorities are far more indebted than in previous crises – not least because of the economic stimulus programs launched in the past. In its quarterly analysis published in April, the CP Politburo promised tax cuts and other supportive measures. EU Chamber officials also report selective local government support. But the central bank stresses that there are no plans to flood the economy with liquidity.
Companies and their employees are increasingly foot voting. According to a recent survey by the German Chamber of Commerce in China (AHK), 28 percent of foreign employees of surveyed companies plan to leave China because of zero-Covid. Andreas Risch, EU Chamber Chairman for Jiangsu in Nanjing, said the number of foreigners there has dropped from 30,000 to 8,000. Tens of thousands of foreigners have left China since the start of the pandemic. Another exodus is imminent this summer, according to Wuttke.
Recent announcements also do not bode well: Until further notice, Chinese citizens will no longer be allowed to travel abroad without an “important reason”; passports will also only be issued if valid reasons for travel are given. “This was a huge shock for many of our employees,” says Shanghai Chamber Vice President Bettina Schoen-Behanzin. “It feels like a new era. But we don’t know what kind of era it will be.” And Joerg Wuttke added, “It’s ironic that we localize our management, but then this management is not allowed to travel abroad.”
The situation for international schools in the country is also critical. Around 40 percent of all teachers at international schools are expected to leave China this summer, according to Reuters – normal pre-pandemic levels were 15 percent. And in the meantime, it has become extremely difficult to fill these positions, according to EU Chamber representatives from several regions. Jobs in China are not very attractive to international teachers given the lockdowns. Besides, it is still difficult for them to get a visa.
In a recent EUCCC flash survey, 23 percent of companies surveyed reported they were considering moving current or planned investments to other countries due to the COVID-19 measures (China.Table reported). An even more recent survey by the American Chamber of Commerce in China also showed that more than half of US companies surveyed had already postponed or reduced their investments.
At the 70th anniversary of the China Council for the Promotion of International Trade (CCPIT) on Thursday, Premier Li Kepqiang spoke in front of representatives from several foreign chambers of commerce, acknowledging supply chain and logistics problems for foreign companies, among other issues. According to the British chamber, Li vowed to help companies: “We will continue to address everyone’s general concerns, focus on solving the problems [foreign firms] encountered, and provide better services.” He added that China wants to continue to be open.
But it is difficult for local authorities to attract foreign investment in this climate, says Andreas Risch. “Several local governments have approached us to help attract investment.” The channel of communication is good, he says, and member companies are generally pleased with local authorities. “But they are aware of centralized decision-making, Jiangsu has little choice.”. The zero-Covid policy is made in Beijing. And there, the well-being of international companies is currently not a priority.
Hopes are rising that China’s embattled tech giants will finally get a reprieve from the severe legal and regulatory crackdown that has wiped out over $1.5 trillion of their shares’ value. Amid mounting challenges to economic growth, some Chinese government officials have signaled a possible shift to a new strategy: the acquisition of a 1% equity stake – or a so-called golden share – in major tech firms. But will this approach really brighten the outlook for China’s tech industry?
A new approach is certainly needed. The authorities’ effort to discipline Chinese tech firms over the last 18 months has been clumsy and highly costly, featuring a raft of opaque and unpredictable regulations. The abrupt suspension of Ant Group’s initial public offering in late 2020, the record antitrust fines imposed on Alibaba and Meituan, and the surprise cybersecurity investigation into Didi Chuxing all spooked investors and sent share prices tumbling.
China’s government now seems to hope that the golden-share arrangement will give it the information and influence it craves while avoiding the economic costs of ham-fisted regulations. A 1% equity stake would normally enable the state investor to appoint a director to the board, ensuring insider access to important corporate decisions and the power to veto them. This would go a long way toward assuaging government fears of the “disorderly expansion of capital.”
At the same time, China’s leaders apparently hope that the arrangement would help tech firms manage their regulatory risk, as it would enable them to ensure their alignment with the state’s agenda and policies. Any disagreement would be handled internally at the firm, eliminating the need for the state to intervene after the fact and offering greater clarity and certainty to investors.
This might have helped the ride-hailing giant Didi Chuxing. When the firm decided to list its shares on the New York Stock Exchange, China’s powerful internet regulator, the Cyberspace Administration of China, advised it to conduct a cybersecurity review first. Didi ignored the CAC’s advice, and raised $4.4 billion in its initial public offering in June 2021.
Within days, the CAC announced that it had launched an investigation into Didi. The regulatory pressure continued over the ensuing months, and Didi was ultimately driven to delist from the NYSE, sending its share price plummeting and triggering a global selloff of Chinese internet stocks. With a golden share in Didi, the government representative might have vetoed the firm’s initial decision to list on the NYSE, averting all the subsequent tumult.
The golden-share arrangement thus appears to be a win-win for the government and tech firms. And steps have already been taken in this direction. In April 2020, Weibo – a social-media platform with over 500 million active users – sold a 1% stake to an entity owned by the China Internet Investment Fund, which was established by the CAC and the Ministry of Finance in 2017.
Since then, the CIIF has invested in more than 40 Chinese tech firms, including ByteDance (which owns Douyin and TikTok), the popular video app Kuaishou, the podcast firm Ximalaya, the artificial-intelligence start-up SenseTime, and the truck-hailing company Full Truck Alliance. While most of these investments do not appear to be golden-share arrangements, the CIIF or its affiliates have taken a board seat in at least two companies, ByteDance and Weibo.
But, when it comes to enabling firms to avoid regulatory hassles, this arrangement is hardly a silver bullet. For starters, the golden share empowers the state investor to veto only decisions that are deliberated by the board; it would have little to no impact on the company’s day-to-day operations. Yet those are the activities that regulation tends to target. Approaches to issues like competition with rivals, treatment of employees and gig workers, the distribution of value among platform participants, and the collection, processing, and sharing of user data are unlikely to be vetted by the firm’s board. But they all fall within the ambit of regulation.
Moreover, regulatory powers in China are divided among a number of government departments and agencies, which often engage in fierce competition with one another. Direct or indirect ownership by one government department may do little to protect the firm from intervention by other government departments, especially if the ownership stake is held by a lower-tier government entity.
A regulatory body might even target a firm in which it has an ownership stake. There is precedent for this. Though a CAC-backed entity has held a board seat at Weibo since 2020, the CAC imposed 44 fines on the platform, totaling just over $2 million, between January and November 2021. In December, the CAC summoned Weibo executives to impose another fine and reprimand them for their content-moderation failures, in what was apparently a deliberate attempt to inflict reputational damage. The firm’s stock fell by almost 10% on the day the new fine was announced.
Likewise, the CAC’s indirect investment in Full Truck Alliance did not spare the firm from a surprise cybersecurity review last July. The CAC’s move sent the company’s shares plunging, just two weeks after its IPO in New York.
Golden-share arrangements might serve the Chinese government’s interests, but those who believe they will protect tech firms from the costs of continued regulation are likely to be disappointed. And this is to say nothing of the risks of state ownership, such as the corruption and regulatory capture that have long plagued China’s bureaucracy. Far from saving China’s tech golden goose, golden-share arrangements are likely to tarnish it further.
Angela Huyue Zhang, a law professor, is Director of the Center for Chinese Law at the University of Hong Kong and the author of Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation (Oxford University Press, 2021).
Copyright: Project Syndicate, 2022.
www.project-syndicate.org
你吃了吗？Nǐ chī le ma? – “Have you eaten yet”? Many newcomers to China briefly fall into a communicative shock when this phrase is shouted at them for the first time by Chinese colleagues or superiors passing by, usually at lunchtime. The problem is that before you as a “Laowai” have sifted through your Chinese, answered in detail and explained your meal plans, the Chinese interlocutor has already disappeared around the next corner of the corridor or behind the next office door. And you wonder: What was that all about? Don’t worry, just a “situational greeting”! Because actually, your Chinese counterpart just wanted to say a quick “hello”.
While we Westerners like to think of the question about one’s food intake status as an invitation to small talk, it is simply a greeting in China. The background: Chinese is famous (and notorious) for being highly context-sensitive. This can be seen, for example, in the fact that many concrete pieces of information and grammatical building blocks do not always appear in every sentence or do not have to be repeated over and over again (such as the grammatical subject). But you notice it in everyday communication as well. Here, contextual information also flows strongly into certain language conventions and a certain contextual horizon is expected.
And here we are back at the situation greetings: As the name already suggests, these greetings can vary greatly depending on the situation. What all greetings have in common, however, is that they usually simply mean “hello”. As a reaction, a short answer like 吃了 chī le (“I’ve already eaten”.) or 还没 hái méi (“Not yet”.) is enough. After that, you can just go back to your daily business. What is not expected is for you to engage the other person in small talk at this point, or even to start a deep conversation (for example, about the importance of food in a sociocultural context). Unless, of course, you want to put your colleagues and superiors into communication shock this time (touché).
Some other greeting examples to illustrate: “Are you going out?”, “Where are you going?”, “What are you up to?”, “You picked up an express package?”, “On your way to a meeting?”.
And the newest addition: “Have you already been tested today”? For real? Yes, really. The question of whether you’ve been to the Covid test yet (你核酸了吗? Nǐ hésuān le ma? respectively 你做核酸了吗? Nǐ zuò hésuān le ma? – borrowed from the expression 做核酸检测 zuò hésuān jiǎncè “to do a PCR test”), has become a common greeting from Shenzhen to Beijing since the recent virus outbreaks and in light of sometimes daily mass testing. On WeChat, you can even find a whole range of matching emojis and stickers on which cotton swabs and test tubes are diligently brandished and with which you can also greet each other in a digitally contemporary way. We can only hope that people in the Middle Kingdom will soon be able to greet each other with fewer viruses-related expressions and again ask “Have you eaten yet”?
Verena Menzel runs the online language school New Chinese in Beijing.
The lockdown in Shanghai has burdened the city’s citizens for two months now. Numerous terrifying videos circulate on social media: People screaming their despair from balconies at night, workers isolated in factories – and in some cases overrunning security forces as infections also spread there. Frank Sieren spoke with German 3-star chef Stefan Stiller, who is certain: The people of Shanghai will struggle with the psychological consequences of the lockdowns for a long time. And many self-employed will also reach their financial limits, since the government’s support measures have so far failed to address the problems faced by many companies.
The Covid crisis has shaken some certainties in China and appears to exacerbate other trends. European companies complain about a lack of transparency and limited ability to plan their business activities. But there is also a lot going on aside from the lockdowns: A growing number of expats are leaving the country, authorities grant fewer visas to locals, and the situation for international schools is becoming increasingly complex, as Christiane Kuehl explains.
Overall, it seems as if zero-Covid has long since become more important than economic growth. And this makes sense, since many elderly citizens are not sufficiently vaccinated. A widespread Omicron outbreak could prove catastrophic for China. So the government is willing to accept two or three “bad quarters” – as irritating as that may seem to Western companies. After all, so far they have known virtually nothing but limitless growth in the People’s Republic. It is surprising that the central bank and Beijing have no intention to introduce a comprehensive economic stimulus package to revive economic growth. At least not yet. After all, Xi’s re-election is approaching in the fall. Growth must not be allowed to collapse any further.
How does a star chef with nearly 40 employees feel after more than 60 days of lockdown?
A week ago I said that I expected that there would be some relaxation at the beginning or middle of June, perhaps supermarkets and stores would be able to open again slowly in July, and then gastronomy would follow in stages. I hoped that we would be able to reopen in July, maybe with restrictions.
And hope is fading now?
Currently, more and more fences are being erected and more districts are being cordoned off. No situation to make predictions anymore. If you listen to the news from Beijing, it sounds like: Zero-Covid is a war that must be won.
What does this mean for your industry?
For many smaller restaurants without much cash flow, the point will soon come where they can no longer survive. When there’s no more money, there’s no more money. It’s as simple as that. That will hit many.
Does the government help you out?
If you are in a government building, the rent is lowered. In private buildings, you have to negotiate yourself. There are tax breaks. But without revenue, they are of little help. There is a great sense of frustration everywhere. And on top of that are horror stories on social media. Domestic violence is on the rise because people are not used to being with their families in such close quarters for such a long period of time. The lockdown will yet push many people to their limits, psychologically and financially.
Do you continue to pay your employees?
We have been closed since March 17. In March, we were still paying in full. In April, I reached a solution with my employees: I didn’t want to go to 2,590 yuan minimum wage as proposed by the government. So we reduced the employees with the highest wages the most and those with the lowest wages almost not at all. Once things resume, we will work an extra day a week. Before the lockdown, we were closed on Sunday and Monday. That way I can recoup some of the losses. Our goal this year is for all of our employees to end up making what they were originally supposed to make as their annual salary. Fortunately, our restaurants in Guangzhou continue to run at 60 to 70 percent of normal capacity. There are no restrictions there. But fewer travelers are coming to Guangzhou.
Do you consider pulling out of China if the situation will drag on for months?
That would make no sense, because our life is centered in Shanghai. We have our business here, and I think we will survive the lockdown economically. Sure, it will cost us a lot of money. I can probably forget about 2022 as a fiscal year. But if I look at this lockdown over a period of five years, it hardly matters.
So how did you get through the Covid years of 2020 and 2021?
These were two very good years. 2021 was even our best year yet. It was spectacular. Shanghai was not affected by Covid at all – and we even benefited from the fact that our guests could not travel and therefore went out to eat more. We were fully booked for most of the two years up to March 17.
So the government did everything right during the first two Covid years. Indeed, we have also been affected by private restrictions. We haven’t seen our daughter, who lives in London, for a long time now. I also haven’t seen my mother, who is not in such good health, for a long time. The same goes for my wife’s mother. That is tough. From the business side, however, I still said at the beginning of this year: perfect, keep it up.
In Guangzhou, however, you were also closed for just under a month last June.
Yes, but the situation was quickly back under control. After the reopening, it took a week to ten days. Then business was back to normal. That’s what I had expected for Shanghai at the beginning. Things turned out a little differently.
You have even received a third star for your restaurant in November? What have you done better?
You can’t force that. We continued to step on the gas after the first two stars. Every day we ask ourselves anew: What can we do better instead of resting on our laurels? Still, the third star was a big surprise for me. We continue to cook mainly for our guests and are very pleased when our menus are also well received by restaurant critics.
Who are your guests?
More than 90 percent are Chinese who come to us not on business, but for private reasons. They have traveled a lot, are very familiar with international cuisine, have high expectations – and are willing to spend an average of between 300 and 400 euros per evening and person.
What is the biggest difference with Europe?
In Europe, the guests are around 60 years old. Here, they are between their mid-20s and mid-30s. That’s why we are certainly one of the most unconventional three-star restaurants in the world. We have a very casual atmosphere. White tablecloth, candlelight, piano players, you won’t find these stereotypes here. We are noisy. We have fun and action. Most of our guests sit at the counter of the open kitchen.
You have not seen these rooms for over 60 days. Like everyone else in Shanghai, you are locked up in your apartment. How are you feeling personally?
I really can’t complain. We have a very nice apartment. We have everything we need. A closet filled to the brim with good wines. A small terrace with a small grill that I can fire up and put a steak on. We are well supplied by our suppliers, as far as it goes. I have set up a small gym in the guest room. After all, guests are not coming at the moment.
And you started making cooking videos. Out of boredom?
It was actually supposed to be a help: a friend had ordered meat when the lockdown started. She can’t cook that well. My wife then said: Let’s make a video for her. My wife posted that on WeChat – with great reception. Then we made a few more. The video, for example, in which I cook an onion soup, now has almost 100,000 views. In the meantime, I’m receiving inquiries from companies that say: ‘We’ll send you our products. Can’t you cook with them, and we’ll pay you for it?’ That’s how they turn the crisis into an opportunity. That says a lot about China.
Are you now becoming a successful influencer?
Presumably, it’s hard to avoid it. But it won’t become my focus. I want one thing above all: to go back to my restaurant and cook.
Born in Hildesheim in 1966, Stefan Stiller was already cooking in a star-rated restaurant in Cologne at the age of 21. In the summer of 2004, Stiller moved to Shanghai, where he became head chef at Club Shanghai. In 2008, Stiller opened his own restaurant, Stiller’s Restaurant. In April 2016, the star chef opened Taian Table restaurant on Tai’an Road, which received its third Michelin star in November 2021.
Resignation spreads among international companies in China. In the short term, there is no sign of a departure from the zero-Covid policy, nor of a way out of the cycle of recurring outbreaks. Instead of a major vaccination campaign, the government plans to blanket all cities with a dense network of “PCR testing kiosks”. Without a valid negative test, normal life will be virtually impossible for the time being (China.Table reported).
Now Shenyang, which was sealed off for a few weeks, has nearly fully reopened, tells Harald Kumpfert, EU Chamber chairman for northeast China. “But in return, there are now tests at least every 48 hours. And many cities don’t accept test results from other cities.” Business travel is not without risk, according to Kumpfert. “Anyone who passes a city by train or car with only one case of Covid can be quarantined afterward.”
There are similar stories from all over China. “You need four Covid tests within 24 hours for a short trip between Chengdu and Chongqing because there are high-risk areas in both cities,” reports Massimo Bagnasco of the EU Southwest Chamber. The two metropolises are two hours apart by high-speed train. In Jiangsu, on the other hand, truck drivers must spend three days in quarantine after “entering” some cities, according to the local EU Chamber. In the area around Shanghai, travel and logistics have shrunk to a fraction anyway (China Table reported).
Even the weeks-long lockdown of Shanghai, China’s biggest economic hub, and all its consequences have so far failed to prompt the government to reconsider its approach: Beijing apparently even sacrifices growth for the sake of zero-Covid. Posts made by doubters, including Chinese economists, are being censored.
Since April, the full force of zero-Covid on the economy has become apparent. Industrial production fell by more than three percent compared to the same month last year, retail sales by eleven percent, and car sales by as much as 48 percent. “Everything is pointing in the wrong direction,” says EU Chamber President Joerg Wuttke – including vaccination statistics. “In March, an average of 800,000 over-60s were vaccinated per week. By the first week of May, that number was down to 300,000.” Vaccination staff are being pulled away for testing in many places.
By now, it should be obvious to everyone that an end to zero-Covid or at least a certain degree of predictability cannot be expected in the short term. The biggest problem is the uncertainty as to what will happen next, as is evident from the statements of the EU chamber representatives. Hardly anyone continues to work on new projects at the moment; everyone waits and sees.
Some experts have warned China of a “growth recession” – very slow economic growth coupled with rising unemployment. Unemployment rose to 6 percent in April; among 16-24 year-olds, it was over 18 percent. Others believe that China faces a so-called double-dip recession, similar to what happened in the US in the early 1980s – a recession followed by a slight recovery, followed by another recession.
And Beijing does not intend to respond with a large-scale economic stimulus program this time around. The state and local authorities are far more indebted than in previous crises – not least because of the economic stimulus programs launched in the past. In its quarterly analysis published in April, the CP Politburo promised tax cuts and other supportive measures. EU Chamber officials also report selective local government support. But the central bank stresses that there are no plans to flood the economy with liquidity.
Companies and their employees are increasingly foot voting. According to a recent survey by the German Chamber of Commerce in China (AHK), 28 percent of foreign employees of surveyed companies plan to leave China because of zero-Covid. Andreas Risch, EU Chamber Chairman for Jiangsu in Nanjing, said the number of foreigners there has dropped from 30,000 to 8,000. Tens of thousands of foreigners have left China since the start of the pandemic. Another exodus is imminent this summer, according to Wuttke.
Recent announcements also do not bode well: Until further notice, Chinese citizens will no longer be allowed to travel abroad without an “important reason”; passports will also only be issued if valid reasons for travel are given. “This was a huge shock for many of our employees,” says Shanghai Chamber Vice President Bettina Schoen-Behanzin. “It feels like a new era. But we don’t know what kind of era it will be.” And Joerg Wuttke added, “It’s ironic that we localize our management, but then this management is not allowed to travel abroad.”
The situation for international schools in the country is also critical. Around 40 percent of all teachers at international schools are expected to leave China this summer, according to Reuters – normal pre-pandemic levels were 15 percent. And in the meantime, it has become extremely difficult to fill these positions, according to EU Chamber representatives from several regions. Jobs in China are not very attractive to international teachers given the lockdowns. Besides, it is still difficult for them to get a visa.
In a recent EUCCC flash survey, 23 percent of companies surveyed reported they were considering moving current or planned investments to other countries due to the COVID-19 measures (China.Table reported). An even more recent survey by the American Chamber of Commerce in China also showed that more than half of US companies surveyed had already postponed or reduced their investments.
At the 70th anniversary of the China Council for the Promotion of International Trade (CCPIT) on Thursday, Premier Li Kepqiang spoke in front of representatives from several foreign chambers of commerce, acknowledging supply chain and logistics problems for foreign companies, among other issues. According to the British chamber, Li vowed to help companies: “We will continue to address everyone’s general concerns, focus on solving the problems [foreign firms] encountered, and provide better services.” He added that China wants to continue to be open.
But it is difficult for local authorities to attract foreign investment in this climate, says Andreas Risch. “Several local governments have approached us to help attract investment.” The channel of communication is good, he says, and member companies are generally pleased with local authorities. “But they are aware of centralized decision-making, Jiangsu has little choice.”. The zero-Covid policy is made in Beijing. And there, the well-being of international companies is currently not a priority.
Hopes are rising that China’s embattled tech giants will finally get a reprieve from the severe legal and regulatory crackdown that has wiped out over $1.5 trillion of their shares’ value. Amid mounting challenges to economic growth, some Chinese government officials have signaled a possible shift to a new strategy: the acquisition of a 1% equity stake – or a so-called golden share – in major tech firms. But will this approach really brighten the outlook for China’s tech industry?
A new approach is certainly needed. The authorities’ effort to discipline Chinese tech firms over the last 18 months has been clumsy and highly costly, featuring a raft of opaque and unpredictable regulations. The abrupt suspension of Ant Group’s initial public offering in late 2020, the record antitrust fines imposed on Alibaba and Meituan, and the surprise cybersecurity investigation into Didi Chuxing all spooked investors and sent share prices tumbling.
China’s government now seems to hope that the golden-share arrangement will give it the information and influence it craves while avoiding the economic costs of ham-fisted regulations. A 1% equity stake would normally enable the state investor to appoint a director to the board, ensuring insider access to important corporate decisions and the power to veto them. This would go a long way toward assuaging government fears of the “disorderly expansion of capital.”
At the same time, China’s leaders apparently hope that the arrangement would help tech firms manage their regulatory risk, as it would enable them to ensure their alignment with the state’s agenda and policies. Any disagreement would be handled internally at the firm, eliminating the need for the state to intervene after the fact and offering greater clarity and certainty to investors.
This might have helped the ride-hailing giant Didi Chuxing. When the firm decided to list its shares on the New York Stock Exchange, China’s powerful internet regulator, the Cyberspace Administration of China, advised it to conduct a cybersecurity review first. Didi ignored the CAC’s advice, and raised $4.4 billion in its initial public offering in June 2021.
Within days, the CAC announced that it had launched an investigation into Didi. The regulatory pressure continued over the ensuing months, and Didi was ultimately driven to delist from the NYSE, sending its share price plummeting and triggering a global selloff of Chinese internet stocks. With a golden share in Didi, the government representative might have vetoed the firm’s initial decision to list on the NYSE, averting all the subsequent tumult.
The golden-share arrangement thus appears to be a win-win for the government and tech firms. And steps have already been taken in this direction. In April 2020, Weibo – a social-media platform with over 500 million active users – sold a 1% stake to an entity owned by the China Internet Investment Fund, which was established by the CAC and the Ministry of Finance in 2017.
Since then, the CIIF has invested in more than 40 Chinese tech firms, including ByteDance (which owns Douyin and TikTok), the popular video app Kuaishou, the podcast firm Ximalaya, the artificial-intelligence start-up SenseTime, and the truck-hailing company Full Truck Alliance. While most of these investments do not appear to be golden-share arrangements, the CIIF or its affiliates have taken a board seat in at least two companies, ByteDance and Weibo.
But, when it comes to enabling firms to avoid regulatory hassles, this arrangement is hardly a silver bullet. For starters, the golden share empowers the state investor to veto only decisions that are deliberated by the board; it would have little to no impact on the company’s day-to-day operations. Yet those are the activities that regulation tends to target. Approaches to issues like competition with rivals, treatment of employees and gig workers, the distribution of value among platform participants, and the collection, processing, and sharing of user data are unlikely to be vetted by the firm’s board. But they all fall within the ambit of regulation.
Moreover, regulatory powers in China are divided among a number of government departments and agencies, which often engage in fierce competition with one another. Direct or indirect ownership by one government department may do little to protect the firm from intervention by other government departments, especially if the ownership stake is held by a lower-tier government entity.
A regulatory body might even target a firm in which it has an ownership stake. There is precedent for this. Though a CAC-backed entity has held a board seat at Weibo since 2020, the CAC imposed 44 fines on the platform, totaling just over $2 million, between January and November 2021. In December, the CAC summoned Weibo executives to impose another fine and reprimand them for their content-moderation failures, in what was apparently a deliberate attempt to inflict reputational damage. The firm’s stock fell by almost 10% on the day the new fine was announced.
Likewise, the CAC’s indirect investment in Full Truck Alliance did not spare the firm from a surprise cybersecurity review last July. The CAC’s move sent the company’s shares plunging, just two weeks after its IPO in New York.
Golden-share arrangements might serve the Chinese government’s interests, but those who believe they will protect tech firms from the costs of continued regulation are likely to be disappointed. And this is to say nothing of the risks of state ownership, such as the corruption and regulatory capture that have long plagued China’s bureaucracy. Far from saving China’s tech golden goose, golden-share arrangements are likely to tarnish it further.
Angela Huyue Zhang, a law professor, is Director of the Center for Chinese Law at the University of Hong Kong and the author of Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation (Oxford University Press, 2021).
Copyright: Project Syndicate, 2022.
www.project-syndicate.org
你吃了吗？Nǐ chī le ma? – “Have you eaten yet”? Many newcomers to China briefly fall into a communicative shock when this phrase is shouted at them for the first time by Chinese colleagues or superiors passing by, usually at lunchtime. The problem is that before you as a “Laowai” have sifted through your Chinese, answered in detail and explained your meal plans, the Chinese interlocutor has already disappeared around the next corner of the corridor or behind the next office door. And you wonder: What was that all about? Don’t worry, just a “situational greeting”! Because actually, your Chinese counterpart just wanted to say a quick “hello”.
While we Westerners like to think of the question about one’s food intake status as an invitation to small talk, it is simply a greeting in China. The background: Chinese is famous (and notorious) for being highly context-sensitive. This can be seen, for example, in the fact that many concrete pieces of information and grammatical building blocks do not always appear in every sentence or do not have to be repeated over and over again (such as the grammatical subject). But you notice it in everyday communication as well. Here, contextual information also flows strongly into certain language conventions and a certain contextual horizon is expected.
And here we are back at the situation greetings: As the name already suggests, these greetings can vary greatly depending on the situation. What all greetings have in common, however, is that they usually simply mean “hello”. As a reaction, a short answer like 吃了 chī le (“I’ve already eaten”.) or 还没 hái méi (“Not yet”.) is enough. After that, you can just go back to your daily business. What is not expected is for you to engage the other person in small talk at this point, or even to start a deep conversation (for example, about the importance of food in a sociocultural context). Unless, of course, you want to put your colleagues and superiors into communication shock this time (touché).
Some other greeting examples to illustrate: “Are you going out?”, “Where are you going?”, “What are you up to?”, “You picked up an express package?”, “On your way to a meeting?”.
And the newest addition: “Have you already been tested today”? For real? Yes, really. The question of whether you’ve been to the Covid test yet (你核酸了吗? Nǐ hésuān le ma? respectively 你做核酸了吗? Nǐ zuò hésuān le ma? – borrowed from the expression 做核酸检测 zuò hésuān jiǎncè “to do a PCR test”), has become a common greeting from Shenzhen to Beijing since the recent virus outbreaks and in light of sometimes daily mass testing. On WeChat, you can even find a whole range of matching emojis and stickers on which cotton swabs and test tubes are diligently brandished and with which you can also greet each other in a digitally contemporary way. We can only hope that people in the Middle Kingdom will soon be able to greet each other with fewer viruses-related expressions and again ask “Have you eaten yet”?
Verena Menzel runs the online language school New Chinese in Beijing.
