It is clearly not a good time to have a business targeted at foreigners in Shanghai. In the last week, our landlord and several other business owners have asked us this question. Our apartment block has gone from 100% to less than 70% full for example.
What’s going on?
Well, if you look out of the window of your apartment on an average day, it’s kind of obvious. It’s the air. Yes, it may be better than Beijing and a host of other Chinese cities, but that doesn’t make it good. And when the grandparents ask what are you doing to their grandchildren’s lungs, they don’t differentiate between cities. This has been a force that just builds and builds. Buying more air filters doesn’t really eliminate the problem, in some ways it just makes you more aware of it.
Multinational companies are localizing more, reflecting the fact that there is more quality local talent available at entry, mid and senior level positions. And if you are going to have expats, see if they can work on a fly-in, fly-out basis, and so avoid the cost of supporting the family move.
More multinationals are focused on performance in China today rather than investing for the future. If current year performance is below plan (as is the case for a good number today), costs have to be reduced. For many multinationals, the sectors in which they compete in China have passed their years of peak growth, and management takes a more mature market mindset to moving in more people.
Shanghai has many schools targeting international students. A number are pretty average in their performance in preparing kids for universities around the world. The reputation of the poorer ones has an impact across all schools, and can lead families to move out of Shanghai as high school approaches for their kids.
The exodus of Japanese executives and their families continues as Japanese businesses feel their growth prospects in China are limited.
The opportunity to get from downtown Taipei to downtown Shanghai in only a touch over 3 hours is leading quite a number of executives to move their family to Taiwan, and spend 4 days a week in Shanghai, 3 back in Taipei.
And finally, a new residential center of gravity is emerging in Shanghai. The developments out beyond the Hongqiao transport hub are lower cost and newer than many of the options in Pudong, and certainly offer more space than in downtown. If your business is in the Hongqiao area or requires frequent domestic travel by plane or train, it makes a ton of sense to live there. And if you do, the number of times you come downtown could easily fall close to zero.
Image credit: Paul Arps / Flickr