Treachery in Shanghai!

The Shanghai government is reaping a whirlwind of rising xenophobia and reviving memories of the Opium Wars over a plan to force local retailers out of the famed Nanjing Lu shopping area and turn the district over to upscale foreign brands.

If web postings are any yardstick, the plan has generated nearly unprecedented protest. Hundreds of outraged comments on websites like Netease and Yahoo make it seem that official meddling in real estate is leading to the equivalent of foreign gunboats again steaming up the Huangpu River to humiliate the motherland. Shanghai government officials are bearing the brunt of the acerbic criticism.

The protests so far do not seem to have manifested themselves in street action such as that in 2003 and 2004, when the business empire of Shanghai real estate mogul Zhou Zhengyi collapsed in financial irregularities. Instead, this new and vitriolic dissent has emerged on the Internet, which so far officials have not moved to shut down.

The busy Nanjing Lu stretches west from the Bund and is divided into eastern and western portions, which respectively fall into the jurisdiction of the Huangpu district and the Jing’an district government. It is prime real estate and both district governments have drawn up plans directing the future development of the two shopping avenues.

The essence of the development plans is to internationalize the strip and upgrade the retail shops to world-class level, following the model of big cities like London, Paris, Tokyo and New York. To achieve this goal, landlords have been directed not to renew shop leases signed with domestic brand names in order to bring in more international brand names.

Shanghainese officials, the posters say, are turning their backs on their own people while acting obsequiously towards foreigners in what they describe as a throwback to the era of the Opium Wars and the international settlements, perhaps the most humiliating period in Chinese history.

Shanghai is a place that breeds traitors with a record of kowtowing to foreigners, say some posters. It has brought disgrace upon itself by not running local businesses competitively. Its planners have used money to speculate in property and stocks, thus giving short shrift to other interests.

As much as domestic businesses have good cause to blame government policies for an incrementally more difficult or competitive business environment, it is a necessary price China has had to pay for having joined the World Trade Organization in 2001. By December 2006 China had been a WTO member for five years and from then on, the transitional period was officially over and most markets have become fully open to the world. In such a scenario, the country has no choice but to welcome more foreign companies in all sectors.

Chinese media reports indicate the protest rose to the surface late last year when the flagship stores for three local companies Metersbowne, a casual fashion house; Three Guns, an underwear maker; and Herborist, which makes beauty products were told by their landlords that their leases wouldn’t be renewed. Adidas and Nike are expected to succeed them.

The issue pits what appear to be wholly adequate local firms with decent products against the recognized giants of international marketing, say analysts, and the government is stacking the deck against the home-grown firms in Nanjing Lu by helping to push them out.

In the words of a Hong Kong University professor and marketing expert, “For many products, on the level of craftsmanship and technological know-how, Chinese enterprises are able to compete with many international companies. In fact, China-made products have first-class quality and are cheaply priced. The only drawback is that these Chinese companies do not own world-known brand names.”

Said another expert: “China-made products come in huge quantities but have low profit margins. On brand building, China still has a long way to go.”

For these domestic businesses, the battle is already an uphill one without government intervention making it worse. But the issue is also emotional. For some, the Nanjing Lu story has triggered fears of living under the supremacy of westerners again.

“This modern Shanghai makes one grieve,” one wrote. “I cannot accept nor understand this way of doing things. This is a cause for grief for Chinese people in this modern age. Why don’t they (officials) contemplate the reality that China faces now? They are just being myopic, focusing only on the present without giving any thought to future generations. I am sure if there is a war now, Shanghai will be the first city to lose out.”

The anonymous writer goes on to accuse Shanghainese of being “utilitarian, fawning and sycophantic. They look down on their own fellow countrymen. They have always been blind followers of western culture. It is easy for such a place to breed traitors.”

The angry poster says Shanghainese are “arrogant” and “’hypocritical”. Most unkindly of all, for a city that suffered during World War Two, the writer says “many Shanghainese have married Japanese. In fact there are so many Japanese companies in Shanghai now and for this reason Shanghai is full of Japanese spies.”

Another called the internationalization plan “equivalent to digging one’s own grave. If you don’t respect yourself, don’t expect others to respect you. It looks like we are going to have a new International Settlement. Remember to put up signs saying ‘Chinese and dogs are not allowed.’!”

The uncertain future facing both employees and owners of the displaced companies also fuels the anger.

“Where can we find another shop location that’s as good as this one? This flagship represents our corporate image and from this our company could really branch out,” complained Metersbowne’s sales manager, Zhou Ren Rong,

It’s not as though these local shops are doing poorly. Metersbowne recorded sales revenue of over 30 million yuan for the first nine months of 2006. Herborist has enjoyed monthly sales revenue of 200,000 yuan while Three Gun’s 2005 sales figures were over 4 million. But their future after losing the prime locations is unpredictable, raising again questions over whether China is doing enough to balance the interests of the economy with the needs of local people.