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San Jose Mercury News, February 8, 2004 Sunday

Perspective

A Tale of Two Shanghais

By KARL SCHOENBERGER

SHANGHAI, China – Imagining the past is irresistible in this city of ghostly colonial architecture. Here, historic treasures from the jazz age survived the excesses of Maoism, only to be squeezed by a thickening forest of silver-skinned skyscrapers. But the grandeur and the mystique of Old Shanghai is powerful enough, still, to screen out the eyesores of China’s great leap into capitalism.

Visually, Shanghai is a feast. It is a film set for a history of colonial exploitation, with its granite bank buildings from the 1920s and ‘30s and its sumptuous Western mansions scattered about the old French quarter. The old architecture conjures up a distant era when the opium trade made European traders and their Chinese cohorts sinfully rich, when those elites’ wealth and decadence contrasted with the misery of the Chinese underclass on the streets. That cruel disparity helped give birth to the Chinese communists, who held their first party congress here.

The imagined grandeur of old Shanghai is as deceptive as it is revealing of contemporary China. All the excitement about Shanghai’s emergence as a global financial capital masks the reality that the Dickensian divide between wealth and poverty is as troublesome today, in the twilight of communism, as it was in Shanghai’s glory days.

Over the past 16 years, Shanghai has been my window into China, my barometer for the country’s progress. I’m not a China hand and do not speak the language, but I reported on China out of Hong Kong and Tokyo and have traveled around the country. I think I’m one of many Western journalists who feel a strange intimacy with Shanghai
. Its past, gilded and sordid, makes the contradictions of China’s current status, socialist and capitalist, easier to digest.

The city’s architecture takes you halfway under Shanghai
’s skin, giving you at least a partial comprehension of China’s shame at its subjugation by the Europeans and then the Japanese, its pride in its newfound power—and its ambition. You can’t say Shanghai is a typical Chinese city, but you can argue that it is pointing in the direction China wants to go: sophistication in high finance and high technology, and proficiency in the social engineering of benign authoritarianism.
 
Market economy 
Currency, sex were easily exchanged

I was on vacation when I first visited Shanghai in 1987. I’d read that Chinese leader Deng Xiaoping’s bold reforms were opening up a socialist market economy “with Chinese characteristics.” Indeed, I saw the market economy in action soon after checking into the Peace Hotel, a shabby but ornate state-run hostel. The pyramid-domed Peace was a landmark on the historic Bund, a long boulevard of decaying, but still majestic, 1930s commercial buildings lining the Huangpu River.

On the raised concrete promenade along the river, young blue-eyed Uighurs—members of the Islamic ethnic population from northwestern Xinjiang Province—had benefited from reforms that loosened travel restrictions. They vigorously pursued the local market in currency arbitrage. Dressed in tattered clothing, they hounded me with hoarse whispers of “Change money, change money?”

The world’s oldest trade also seemed to have been liberated from prudish communist mores. At a restaurant near the Peace, an assertive female entrepreneur accosted me with a timeless business proposal. Rebuffed, she called my hotel room repeatedly until I complained to the management.

The experience was irritating but evoked the fantasy of Shanghai’s sinful past, when the seaport was called the “whore of the Orient,” when the streets were filled with rowdy foreign sailors and opium dens. I indulged in that aura of a lost era later at the hotel bar, where some of the original musicians from the Peace Hotel Jazz Band—purged for its Western decadence in the 1950s—had reassembled and honked out sluggish renditions of “Brazil” and “When the Saints Go Marching In” and “The East Is Red.” I was a tourist, hooked on Shanghai
.

Nanjing Road, the city’s main commercial artery running perpendicular to the Bund, was so jammed with bicycle traffic that taxis and other autos took the side streets, blasting their horns in broken Morse code to make progress. The city had a frenetic feel to it, wrapped in Stalinist gray. When I tried to buy a hat at the dowdy, Soviet-style Shanghai No. 1 Department Store, the clerks were sullen and indifferent. They sent me from one counter to another, where I’d get the same languid response, “Mei yo” (don’t have it), even when I pointed to a rack of hats.

In 1987, Deng’s spirit of entrepreneurship had not produced much competition in the retail sector. These ladies didn’t care whether they sold me a hat or not. Their jobs were secure. When I finally made the purchase, they tortured me with paperwork; little slips of paper had to be taken back and forth to a comatose cashier.
 
Pro-democracy protest 
Tumult scares foreigners away

A little bit of terror was in the air when I made my second trip in Shanghai in June 1989. Nanjing Road was cut off to traffic by a bus barricade that protesters had set up in the big intersection in front of No. 1 Department Store. They had acted in sympathy with the pro-democracy student demonstrators camped out in Beijing’s Tiananmen Square. Two days earlier, People’s Liberation Army troops had cleared the Square by shooting their way through throngs of citizens who blocked their way.

I had “parachuted” into
Beijing, and now Shanghai, to cover the unrest for the L.A. Times. One man I met aboard a barricaded bus helped me read the protest signs taped to the windows, then insisted I join him for tea and dim sum the following morning at Yu Yuan Garden, in the warren of narrow lanes winding through the old Chinese sector.

I suspected he was a plainclothes cop, keeping tabs on foreign journalists, but he did a good job interpreting the rage toward Deng and the central government expressed by the shopkeepers and patrons we interviewed along the way. Those killings wouldn’t be allowed in Shanghai
, they said, and they were right.

In the week after the bloodshed in Beijing, Shanghai Mayor Zhu Rongji (later China’s premier) rejected the idea of calling in troops and showed dignified restraint when tens of thousands of protesters marched up Nanjing Road from the Bund to People’s Park. They went home quietly after a last day of anti-government speeches.

Then the barricades came down and the narrow streets filled again with a riot of bicycles, honking taxis and careening buses. I filed a dispatch to Los Angeles that began: “The streets of Shanghai were in chaos Thursday—that is, things had started returning to normal.”

But things weren’t returning to normal. The foreign businessmen making their first steps into
China’s potentially vast market economy bailed out, spooked by the risks of further political instability. Construction on the giant Shanghai Center luxury hotel and office tower project ground to a halt. The head of the fledgling American Chamber of Commerce in Shanghai, investment lawyer Norman Givant, was deeply pessimistic about the impact of the political violence in Beijing. “Political and economic reform must go hand in hand,” he said.
 
Boom lures investors 
Poor left behind without a safety net

When I came back seven years later, in 1996, Shanghai was a boom town, reeking of frothy prosperity. The completed Shanghai Center’s Portman Hotel was a deal-making hot spot for foreigners. Big American companies like Intel and General Motors were investing billions in local factories. The city redevelopment authority had turned the vast expanse of rice paddies on the east side of the Huangpu River—Pudong—into a fairyland of office towers. A futuristic TV tower skewering a purple orb had become a distinctive, if tasteless, symbol of Shanghai
’s raw energy and boundless optimism.

Mr. Li, a solicitous young man from the city information bureau, gave me a grand tour of Pudong’s mostly vacant and under-construction edifices. We finished on a barren street at the foot of the handsome new Shanghai Stock Exchange building. I gave a 1-yuan coin (12 cents) to a beggar woman holding an anemic-looking child, and suddenly out of the shadows came a swarm of street urchins who clung to me. Mr. Li had to pry the children off, one by one, before I could get into our car, shaken.

Over the past two years, I’ve returned twice to Shanghai on assignment for the Mercury News. By my latest trip, in December, China’s GDP had ballooned since my first trip in 1987. The central part of Nanjing Road had been turned into an upscale pedestrian mall, thronged with cheerful, well-dressed shoppers and lined with shining new retail outlets. City planners tried to ban bicycles from major roads to make way for all the new cars, but they were deterred by a popular uproar.

I returned to Shanghai No. 1 Department Store to buy a hat. It was still a state-owned enterprise, but bright lights now illuminated the glass counters selling perfumes and jewelry. Upstairs, three grinning clerks in the men’s accessories department chortled out English phrases as they assisted me.

I selected a black felt dome cap; it was a little too large, but I wanted to reward the clerks for their enthusiasm. I did, however, still have to make the same trek I did 16 years earlier to and from the cashier’s cage with triplicate slips of paper to make payment (about $8) and redeem my merchandise. It was a subtle reminder that China’s economy remains mucked up by the managerial acumen of state-owned enterprises, including big industrial concerns that can’t sell the things they make, but continue borrowing money to make them anyway.

That is just one reason why I can’t help remaining, at a gut level, skeptical of Shanghai
’s wondrous transformation and, by extension, China’s economic miracle. I witnessed financial bubbles burst in Japan and in Silicon Valley, and I sniff a classic case of tulip mania in Shanghai. The office towers in Pudong are populated by legions of international bank employees, but partly because authorities required their firms to transplant local headquarters from the charming old city to fill the vacancies in Pudong. Communist central planning is alive and well in a real estate market dominated by state-owned enterprises.

It’s always possible the Chinese economy—now expanding at an annual 9.1 percent clip—can grow fast enough to make my doubts about Shanghai
’s stability irrelevant. To be sure, Pudong isn’t a wasteland. There’s an American residential village with gated villas, a golf club and a new high-tech industrial park out near the new airport. A dozen international schools serve the expatriate community, which includes some 300,000 transplants from Taiwan. The Taiwanese brought with them the core of a cutting-edge high-tech manufacturing base.

I make a point of lodging in the old city, Puxi (across the river from Pudong), and stay at the Peace Hotel if I can. The Peace underwent a major remodeling but still retains a bittersweet patina of communist mismanagement. Its famous jazz band still plays off-key. For me, the Peace is seductive because it has an element of retro-corniness to it, evoking the glory and the decadence of Old Shanghai and all that was lost to decades of grim leveling under communist rule.

What’s revealing about Shanghai
’s past, though, is that the city has come full circle to a present where Pudong’s commercial opulence was made possible by mass evictions of peasants who had farmed its rice paddies. The high and the low seem eternal here.

Today’s urban elite behave as they do in any cosmopolitan city, and on the surface, they pass the “just like us” litmus test we American missionaries look for. They hang out at international-brand coffee franchise outlets and have become lavish consumers of luxury goods. But as in any Asian supercity—Shanghai now has more than 20 million people—you don’t have to look very far to find scenes of humiliating poverty.

The sight of disabled people exposing shrunken limbs on the sidewalks of prosperous shopping streets, paper cups outstretched, is what disturbs me most. They are symbols of China’s dire lack of a social safety net, a critical gap that also puts the hundreds of millions of workers relying on doomed state-owned enterprises in peril.

Imagine the social chaos that could result if Shanghai
’s financial bubble burst. It would cut off the billions of dollars in non-performing loans from state banks that keep state-run businesses afloat.

I can’t help going back to the question of June 1989, when so many American businesses retreated: Is it possible for economic reforms to truly succeed without political reform? Can Shanghai prosper in the long run without popularly elected political leaders—and the accountability that implies—on the local and national levels? Can China prosper if human rights abuses, the detention of political prisoners and the suppression of labor activists and religious leaders continue? It’s much too soon to celebrate Shanghai
’s, and China’s, stunning economic progress.

I am grateful, however, to Shanghai’s urban-planning autocrats, who are restoring the bank buildings along the Bund and sparing many of the city’s architectural relics from the wrecking ball as Puxi sprouts skyscrapers. It keeps alive the fantasy of Old Shanghai for visitors like me to comfort themselves in, waiting for the real China to show its face.

KARL SCHOENBERGER is the Pacific Rim
reporter for the Mercury News. He has reported on Asia for 22 years, including for the Los Angeles Times and the Wall Street Journal.