Shanghai’s Commercial Attractiveness Wanes as a Population Crisis Emerges

People stroll past shopfronts for Swedish clothing giant H&M and Italian sportswear company Fila in Shanghai on March 26, 2021. Hector Retamal/ AFP via Getty Images

News Analysis

Shanghai, the once prosperous commercial capital of China, is no longer the county’s top industrial city, according to the latest statistics. Meanwhile, the city lost at least a quarter million migrant workers amid the implementation of its draconian COVID-induced policies, local authorities say.

As the most populous metropolis in China, Shanghai was an international hub boasting the most regional headquarters of multinational companies in the country.

However, according to China’s recently released 2022 GDP ranking of the top 10 industrial cities, Shenzhen took the lead with an industry value added of 1.13 trillion yuan (about $164 billion), surpassing Shanghai’s 1.08 trillion yuan (about $157 billion), with Suzhou ranking third.

For Shanghai, which has held the top spot for over a decade, the change has extraordinary significance.

Despite being the financial center of mainland China, Shanghai is no longer at the top in terms of deposit balances. Among the deposit balances of financial institutions in China’s major cities as of the end of 2022, Shanghai’s total deposits are about 19.23 trillion yuan (about $2.8 trillion), surpassed by Beijing’s 21.86 trillion yuan (about $3.18 trillion).

Shanghai has the largest number of financial institutions in China and the Shanghai Stock Exchange. However, a large amount of money has moved out of the city.

Shanghai’s GDP was 4.456 trillion yuan (about $648.7 billion) last year, ranking first among Chinese cities. Despite this, the city’s GDP growth rate reportedly dropped 0.2 percent compared to the previous year, the only negative number among the top ten GDP cities.

For eight consecutive years—from 2012 to 2019—Shanghai was rated as “the most attractive Chinese city in the eyes of foreign talents” or expats. However, in 2020 and 2021, it gave up this title to Beijing.

Shanghai’s international competitiveness suffered a severe blow after several months of draconian lockdowns last year.

An aerial view shows the Pudong area in lockdown in Shanghai on March 30, 2022. Hector Retamal/AFP via Getty Images

According to the latest “Shanghai Position Paper,” an annual report released by the European Union Chamber of Commerce in China, many multinational companies no longer have the confidence to set up headquarters in Shanghai. Reporting on the position paper, a Voice of America (VOA) article noted that only 12 percent of European businesses are willing to set up their Asia-Pacific headquarters in Shanghai.

Meanwhile, according to Voice of America, at least 500 Chinese companies have moved to set up headquarters in other countries due to the disruption caused by Shanghai’s lockdowns. In addition, the decline in foreign residents in Shanghai is a major concern. About 25 percent of German nationals left the city after the 2022 lockdown, while the French and Italian nationals each fell by 20 percent, said VOA.

Economist Li Songyun told The Epoch Times on April 3 that Shanghai became an economic powerhouse in China largely due to its ability to attract foreign investment. However, the city’s attractiveness took a huge dive after its draconian handling of COVID-19 outbreaks last year, resulting in the exodus of foreigners from the city.

“Coupled with negative population growth and [an] aging population, what Shanghai experiences is a microcosm of China as a whole,” Li said.

An Emerging Population Crisis

A recent survey shows the number of rural-urban migrant workers—who make up a large proportion of Shanghai’s factory workers—has dropped by a quarter million. The city is also now an aging society, with almost 20 percent of its total population in 2022 consisting of those aged 65 and older. Meanwhile, around 60 percent of Shanghai locals do not plan to have another child, according to a Statistics Bureau survey reported by Yicai Global.

On March 28, the Shanghai Municipal Bureau of Statistics released population survey data for 2022. The data indicated that Shanghai’s population in 2022 was 24.759 million. That figure included 14.696 million locals and 10.063 million workers from other Chinese provinces or foreign countries.

Compared to 2021, in 2022 the city saw a reduction of 257,000 rural-urban migrant workers, a primary reason for its population decline.

China does not allow its citizens to migrate freely between provinces. In most cases, people’s primary residences will remain in the provinces where they were born unless they meet specific requirements for migration or long-term residency in other provinces.

The data showed about 71 percent of those from other provinces seeking long-term residency in Shanghai are looking for employment opportunities. Employment being the primary reason, 88.2 percent of those who came to Shanghai are workers between the ages of 15 and 64.

Although the Chinese regime has broadened its birth restrictions, implementing a “two-child policy” in 2016 and a “three-child policy” in 2021, most families in Shanghai choose to have only one child, mainly due to the city’s high living cost.

According to the survey, 58.5 percent of Shanghai residents said they only want one child, which included 70.8 percent of locals and 45.0 percent of those from other provinces. Meanwhile, 36.7 percent wanted two children, 2.6 percent wanted three, and over 2 percent did not want any, said Yicai Global.

When asked about the main reasons for “not planning to have another child,” 41.8 percent said they are “satisfied with the status quo,” 28.5 percent said it was due to “the high cost of child support and heavy financial burden,” and 13 percent said it was due to “age or other health reasons.”

Official data showed the birth rate in Shanghai was 6.77 percent in 2022, a decline from 7.52 births in 2021. Meanwhile, the death rate in Shanghai last year was 7.37 percent, up from 7.18 per thousand in 2021. The country experienced a net population loss of 850,000, the first year-on-year decline since 1961.

Those aged 60 and above in Shanghai accounted for 25.0 percent of the city’s total population, increasing 1.0 percent over the previous year, while those 65 and above accounted for 18.7 percent of the total population, rising 1.3 percent year-over-year.

On a national level, China’s National Bureau of Statistics showed those aged 60 and above accounted for 19.8 percent of the country’s total population in 2022, and those 65 and above accounted for 14.9 percent. The numbers are 5.2 and 3.8 percent lower than Shanghai’s, respectively.

This photo, taken on Dec. 5, 2018, shows residents lining up for lunch at the Yanyuan community for senior citizens on the outskirts of Beijing. China's population is aging rapidly and years under its one-child policy left many parents with only a single child to help them in their old age. Greg Baker/AFP via Getty Images

According to many international standards of aging, when the population over 65 years of age in a country or region is between 7 and 14 percent, it is called an “aging society.” When the percentage is between 15 and 20 percent, it becomes an “aged society,” and a society in which 21 percent or more are over 65 is a “super-aged society.” By these standards, Shanghai has become an “aged society.”

Peng Xizhe, executive vice president of the Fudan Development Institute in Shanghai, recently told Chinese state-run media The Paper that China experienced a birth peak in 1963—compensating for a period of decline prior to that year. With this segment of the population turning 60 starting this year, the country’s elderly population will only grow faster from this point forward.