Shanghai, a city of nearly 30 million people, is currently under a hard lockdown, as the Chinese government sticks to its Covid Zero strategy of limiting the virus at all costs. There have been some shocking images and stories over the past few weeks of frustrated apartment dwellers unable to go outside or get basic necessities. Some of those things have improved somewhat, and now some residents are able to coordinate and make their own delivery food orders. On this episode, we speak with David Fishman, an energy analyst at the Lantau Group, who, himself, is in a locked down Shanghai apartment complex. He discusses how he's been able to coordinate with other residents to group-buy food and obtain basic essentials. Transcripts have been lightly-edited for clarity.
Points of interest in the pod:
What were the first days of lockdown like in Shanghai? — 05:26
How the government communicates in lockdown — 06:45
Why people turned to group buying to get food — 08:58
Different types of group buying requests — 11:04
How group buying payment and coordination work — 13:00
On who’s actually making the deliveries — 15:58
On businesses adapting to the lockdown — 18:15
What a normal day is like during lockdown — 22:43
Official data versus personal observation of cases — 24:27
The mood in Shanghai during lockdown — 30:08
Tracy Alloway: (00:10)
Hello, and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway.
Joe Weisenthal: (00:15)
And I'm Joe Weisenthal.
Tracy: (00:16)
Joe. It feels like everyone is logistics expert nowadays.
Joe: (00:22)
Yeah. Everyone was an epidemiologist and then everybody became a dredging expert. And now everyone is just a logistics expert overall.
Tracy: (00:31)
I mean, I am joking, but there are a lot of people in China specifically that have been forced into becoming actual logistics experts because of the lockdowns that have been going on now for, in some cases, over a month in places like Shanghai.
Joe: (00:48)
Yeah. This is a really good point. So when people joke about everyone becoming an expert, usually they just mean, oh, they're an expert on Twitter or whatever, but for people who have to think about how do you get food, or how do you distribute food and other key supplies during a mass lockdown becoming a logistics expert actually is not just about tweeting. It's about serious stakes.
Tracy: (01:10)
Yeah. So just to set the stage, various parts of Shanghai have been in lockdown again, in some cases for, I think up to six weeks, something like that. The citywide lockdown has been ongoing for a about month, since the start of April. And what's been happening during that is, first of all, the government does deliver some groceries and needed supplies to people. But residents who are affected by the lockdown can also try to organize their own deliveries of essentials. And it's a phenomenon called group buying -- it’s something that's actually existed in China for a while now it's not necessarily lockdown specific, but it has seen a, I don't wanna say a Renaissance , but it has become a very vital part of actually getting supplies. So today, I'm very excited, we're gonna be speaking with someone who has been personally involved in group for their residential complex, someone who has had to learn the intricacies of logistics and practice them on a day to day basis.
Joe: (02:12)
This is going to be really interesting. I’ve seen various threads of people talking about what's available and going on the apps that they normally use to buy groceries. And every once in a while they’re able to find something, but often not. Sometimes they’re able to get a little bit of fresh food and people post images of what they're able to get in, but how this is all working, what the actual process is, how the big companies and the sort of delivery system is working. I still don't have a great understanding. So I'm looking forward to hearing what's going on in practice.
Tracy: (02:45)
Yep. And it might become information that's more useful to even more people because of course there is a lot of chatter that Beijing might go into lockdown soon as well. And we are recording this on April 26th. So without further ado, let's bring on our guest. We're going to be speaking with David Fishman. He's a senior manager at the consulting firm Lantau Group over in Hong Kong, my former abode and he's currently based in Shanghai. So David, thanks so much for coming on Odd Lots!
David Fishman: (03:16)
Hey, thanks for having me guys.
Tracy: (03:17)
Maybe just to begin with, could you maybe set the scene for us? What exactly is group buying in China?
David: (03:25)
Yeah, sure. So in its most pure, basic economic sense, I guess group buying is a bunch of people getting together and using the power of volume to secure a good deal, to secure a lower price or to incentivize a vendor or a supplier of something to maybe service an area that they wouldn't normally at a price that they wouldn't normally, because now you have the power of a larger group of people all buying together.
Joe: (03:53)
Well, can you, for our listeners to set the scene, describe roughly your living situation. how big of a building is it? How many units, residences and a little bit about like the sort of day-to-day, you know, pre pre-lockdown?
David: (04:11)
Yeah, sure. So I live in apartment community in Shanghai, a pretty normal standard, I'd say middle class, maybe upper middle class, apartment community. There's 25 floors in this building. Each floor has I think seven units, and our apartment block has two buildings like that. It's on the smaller side, I would say definitely for an apartment community in China. So we've got 25 times seven times two is how many households we have in ours.
Joe: (4:44)
350?
David (4.45)
Yeah. And you know, some people are living in, Shanghai's got a big variety of different types of architecture and different types of living conditions. Some people are living in these massive sprawling, 30 buildings times 30 stories type places. And other people are living in, you know, much older construction, much older buildings, maybe their whole community has just eight households.
Tracy: (05:04)
So when the city first went into lockdown or when you were first affected, what was the supply situation like? What was your initial reaction? Did you immediately go out, you know, as we all did in Hong Kong in the very early days of 2020 and start buying toilet paper and rice and things like that? Did, did you have time to stock up?
David: (05:26)
The folks over in Pudong had about a day or two notice and that meant we had about a day or two plus four days. So we had about six days notice. I've been through, I mean, I was in Shenzhen in 2020, and so we had a locked down of sorts in Shenzhen, but that was different because we were able to leave the house and go out and buy groceries. You know, once every two days or something like that. The grocery stores were still functioning. There were still some deliveries going on, so it was a cessation of activities, but it wasn't a full, you know, ‘stay inside your apartment community, stay inside your apartment all the time.’ So this time around, we bought some stuff. We went out and, you know, picked up a few things just to make sure we had a normal amount of food, but not that much because you know, it was only four days originally. And it didn't seem like, you know, we didn't think at the time that it was gonna be a 10 or a 15 or a 20 day, or, you know, we're at 26 days now. So we bought, I would say a reasonable amount of food for, you know, four days of not being able to get your favorite stuff and that's about it.
Joe: (06:34)
What did they tell you? Or when they say, okay, you're going into lockdown, what do they establish as the rules? How are they communicated and how are they enforced?
David: (06:45)
So when it came to what does a lockdown mean? That was communicated really through kind of municipal level announcements. We understood already from other buildings and compounds that have had this ‘ lockdown,’ that it would mean that the barrier between their compound and the street would probably be close. And they'd say, ‘Hey, you know, you can't come by here.’ There's gonna be some type of shelf there for delivery drivers and packages to be placed there. And then you can come and pick it up. And we've got this kind of membrane between your big front gate and the outside world. So that's what we understood lockdown to be at the beginning. That was communicated through municipal level announcements and then kind of propagated down to individual community levels, the lowest organization level being, you know, the neighborhood committee or the local committee. So the local committee at that point, used kind of people that they knew in the building already and volunteers, and kind of the power of people, adding people to pull everyone in our building into a WeChat group, an instant messaging WeChat group that we could use to notify everybody, you know , at this time on this day, we're gonna be entering into our lockdown.
Tracy: (07:57)
So once the group WeChat group was set up, how long was it until people were doing group buying for supplies? How did that get started?
David: (08:07)
By the time I was pulled into the big group WeChat group, we had already established a group buying group, a separate group buying group. So we wouldn't clutter up the main group. So maybe I guess it was probably immediate. And so we said, yeah, the big group that should be used for just announcements about testing and lockdowns and things like that, let's keep the group buying and all of that commercial activity in our group buying group. So it was pretty much immediate.
Joe: (08:34)
But what happens? Because I've seen conflicting reports about what is even possible. And people talk about going on the various grocery apps, and sometimes they say, oh, there's nothing available. There's nothing that can be delivered. I can't get through. Sometimes people talk about, there is a little bit. It’s one thing to be able to buy, say, you wanna buy in a group, but what's available? And what has the process been like?
David: (08:58)
Yeah, there was definitely an evolution to that. So remember the first couple days it was already planned, right? Everybody had bought four or five days of groceries. And even on the second day there was a government parcel. So nobody was really freaking out at day two or day three or even day four. It was when the cases were still rising, say day four, day five. And our lockdown hadn’t been lifted and it had become increasingly hard to use the grocery delivery apps because, you know, the first couple days people had stockpiles, they had food stored up. They weren't necessarily ordering food that day. So you could still get orders to the couple main grocery delivery apps that were available. But day four, day five, everybody was trying to use them. And it was just a huge bottleneck. At that same time, most of the group buy vendors hadn't quite responded to the growing demand yet. So at that moment, you weren't getting anything through the standard grocery delivery apps and group buy offers were pretty limited . There’s group buy platforms out there that are always offering stuff, but they couldn't get stuff into Shanghai. And the phenomenon of the Shanghai-only group buy offer hadn't really emerged yet. So there was a couple days, you know, I would say like the sixth, the seventh for us, where there was a lot of real concern because it just didn't seem like any avenues, any channels were gonna be able to bring us food.
Tracy: (10:18)
What is the Shanghai-only group buying offer? Because I've heard some talk of this. There are these different types of group buying requests that go out. So you have sort of citywide group buying, and then you also have, I think, fantasy buying where people put like long shot items that they would really like to have, like burgers from ShakeShack and things like that?
David: (10:41)
Yeah. I think I know what you're referencing here. So definitely at the beginning when group buying was becoming prominent, but nobody was really sure what was out there, people would say, oh, I'd love to get, you know, X item. I'd love to get a delivery of Shake Shack. Does anybody know if Shake Shack is still open? Can we buy in bulk from Shake Shack?
Tracy: (11:01)
This would be me by the way, during the lockdown.
David: (11:04)
Yeah. Or a more practical one that keeps coming up is like, can somebody group buy some hair salon, some guy to show up inside our, you know, a team of guys to show up inside our building and give everybody haircuts because we really need it now. That's fantasy. But no, at that time, the only things that were available for real, besides these fantasy ones, was you would go on, for example, say like, Kuai Tuan Tuan, which is a brand underneath PDD, Pinduoduo big Chinese tech platform and you would go on there and you'd see all these group buy offers and they would say, you know, for noodles or rice or bread or wherever. But they couldn't actually get into Shanghai because the highway exits leading into Shanghai from outside of the city had checkpoints. And it was a one-way trip.
If you came into Shanghai, you couldn't leave again because it was a city under lockdown. So at that point, either you could find a vendor already in the Shanghai city limits, or you could find a vendor, I guess, who was willing to make a one-way trip. Otherwise there were no, or very few options for Shanghai group buys. Eventually these big commercial platforms, they started clearly noting, like Kuai Tuan Tuan, would have ‘limited only to Shanghai. Can deliver within 24 hours, 36 orders of noodles,’ you know, whatever. They would start noting very clearly that it was only available for Shanghai. Those were the big tech platforms. Besides that you also had just hustlers, right? People who knew somebody who knew somebody who has a warehouse out in the suburbs and the factory workers are close by and the warehouse workers are sleeping in the warehouse in tents, and they can get you in order of food if you place an order through WeChat, something like that. There's a couple different models.
Joe: (12:45)
So how do you coordinate with the other households in your complex and what's the process like, is someone deputized to actually place the order?
David: (13:00)
Yeah. There's two different ways to do that. The more functionally smooth one certainly is to have the app, the software platform, Kuai Tuan Tuan, or another one, set up kind of like a shopping cart. They already have their shopping cart software set up. And so then you go in there, you choose the things that you want from the group buy vendor, you click checkout, you make sure you write down your address, the building that you're in, and then you spam it. You send it out into the WeChat group and you say, ‘Hey guys, I just placed an order on this platform. We only need 39 more people to place an order on this platform. Once we get 40 orders, they'll ship it all to our address. Please just go buy, go buy through this platform.’ That's the smooth technologically-enabled way. That's more preferable. The less smooth, less technologically-enabled way is one person -- me, for example -- or another group leader, the group master, is the single point of contact. You contact the vendor. You pay the vendor a lump sum, and then you are responsible for individually collecting money from all the people in your building. I've done both ways.
Tracy: (14:05)
Just on the topic of payment, is non-payment ever an issue? Do people say, you know, I'm interested and then they don't pay, or is it technologically impossible for that to happen because everything is going through, you know, things like the red envelope app, where you can make individual payments on WeChat and stuff like that?
David: (14:26)
Well, for the technology-enabled ones that are going through the platform, that's all, you know, all very smooth. If you pay, you get what you've received. And if the order doesn't meet its minimum requirement, you get refunded. No problem. When stuff goes through me, yeah, we're operating a little bit on the honor system. For the first couple orders, I insisted on collecting all the payment first, before I, or, you know, 90% plus of the payments, before I felt comfortable making the bulk order. But after a couple times of it all working out okay, I felt more comfortable just kind of putting my neck out there and going out first and placing a big order for like a thousand bucks of apples or something. And then counting on the fact that my neighbors are gonna pay me back. You know, of course they might not, but it's an enclosed environment. We’re all neighbors. We all know each other.
Tracy: (15:14)
You know where they live?
David: (15:15)
Yeah, yeah, exactly. Right down to the room number, because I'm delivering the apples to it. So yeah, it's on the honor system for that second one and we haven't had any real problems.
Joe: (15:25)
What is the, you know, so obviously for any of this to work, there have to be individuals that aren’t in lockdown and people who can make the deliveries and people who can operate the factories or the grocery delivery centers. You know, obviously in the U.S. when there were cities that had quasi-lockdowns, I mean, we never had real lockdowns here, but there were people who were designated, you know, the so-called essential workers. How has the government there sort of established who can even be in a position to go around the city and make deliveries?
David: (15:58)
Yeah, sure. So at the beginning it was almost no one. That's why we ran into the issues that we did at the very beginning where we had an extremely last mile delivery centric model, right? Just tens of thousands of last mile delivery drivers, pretty much all removed from the street or maybe just working on a skeleton crew of 5%, 3%, something like that. As the days went on and it became apparent that this was gonna last longer and that the last mile delivery guys had become a huge sticking point in the system, the major tech platforms -- your Jingdong (JD.com), your Ele.me, your Meituan. They recalled lots of workers who were previously in lockdown with their families and said, ‘please come back to work. We'll give you benefits and perks and overtime pay, and you can stay in a hotel’ and, you know, whatever perks they promised them. They called in drivers for other provinces as well to try to bolster their workforce from the management side.
I know these guys are required to get a test every day and maybe also a rapid antigen test once or twice throughout the day. And they have what's called a Tong xing zheng, like a travel permit specifically for logistics drivers and delivery drivers that you need to maintain a green code on so that you can keep driving around all day in the last couple days, I know that they've just mixed up the system for that. And they're acquiring a different system for the delivery drivers. And a lot of the guys didn't get it updated in time. And so today we heard some stories of drivers being turned away from compounds because they showed up the gate. They didn't have the new code set up yet. And the, you know, the gate guard said, ‘sorry, we've got orders. Go, go away, come back with your new code.’
Tracy: (17:44)
In general, what sort of adaptation have you seen from businesses? Because, you know, anecdotally, I have seen some talk of small-scale fruit sellers, you know, the type of people who used to have stands outside on sidewalks, maybe those converting into a pure sort of web-based selling model and things like that. Have you seen the major platforms and the small-scale grocery shops, have those adapted to the new situation?
David: (18:15)
Oh yeah. Absolutely. With different channels and different products. So for a couple of examples, you know, my neighborhood coffee shop right across the street, I used to go there and get a latte almost every day. Now they do bulk orders of fresh milk and coffee beans. And I assume they're acting as a front for one of their vendors, one of their suppliers, right. They, you know, ‘Hey, I'm, I'm now the last mile delivery point. Let me know if you need a bulk order of 36 bags of coffee beans, and I'll set that up for you from my vendor.’ So that's one example, at least he's still doing stuff related to his actual business. Others, you know, you'd go on on Meituan delivery and you'd open up what used to be a crayfish restaurant or, you know, some skewers or something like that. And you open up and they're selling eggs and packages of fruit and fresh pork or something, right? They've got totally different business models now. And they're just maintaining the fact that they still have a storefront. They still have a listing on the Meituan delivery app, or they'll just have a product listing that says doing offline business only, please add this phone number. And we'll discuss on WeChat, what we have for sale. They're doing everything they can to try to get the message out what they have for sale, even if it's totally relay to, to what their business used to be.
Joe: (19:32)
Yeah. That definitely happened here during spring of 2020. And you'd see restaurants, it seemed like a mix, like you'd see restaurants essentially just selling groceries. You also had commercial food wholesalers whose customers were typically restaurants suddenly offering in retail. And so you could buy, you know, hundreds of pounds of like duck fat or something, something that would typically go to a restaurant. I'm curious also, talk a little bit more about how the informal buying, when you have to use WeChat, or you just have to like, get a message out to someone, as you say, the people sort of like hustle or scrounging things up from a warehouse, how do you like find those people and build those connections and how does the WeChat-based commerce work?
David: (20:20)
Right. So the WeChat-based stuff, it comes from a variety of channels. Sometimes it's a friend of a friend, somebody says, Hey, this guy is selling vegetables. Just add him and ask him what's going on. Or maybe it's somebody in your neighborhood. It's, you know, generally a good practice as you become a frequent guest of various businesses in your neighborhood to get to know the people that own them, the local vegetable market seller, or your local coffee guy or something like that. So if you had those in your WeChat already, obviously lean on that. And then, you know, the channel, I just mentioned where a lot of these stores, they maintain an online listing. They've taken all their products off of the shopping cart software, except for one. And it's just a picture that says to discuss products. ‘Please add my WeChat’ and then they give you their phone number. So that's, I would say those are the three main ways where you can try to find somebody who's hustling and has some stuff to sell.
Tracy: (21:19)
What items have been most difficult to get?
David: (21:23)
At the beginning, it was all essentials. And so anything non-essential was really hard, and that included everything from like dairy products besides milk, to sweets, to sodas, things like that. And then as more vendors got into the game, these all became available and you could buy them. You were really only limited by whether or not you could scrounge together enough people to put together a group buy. I mean, that's always gonna be a challenge. At this point now, I would say almost everything that I could think of that I want to order I can order, or I could have ordered if I found 49 more people to order it with me and maybe. You know, that's the limiting factor, but there's a vendor out there for almost everything I can imagine now at this point.
Joe: (22:18)
So it has healed to a significant degree. So what is it, I mean, setting aside the actual aspect of like ordering foods and other basic necessities, can you just walk through a little bit about what your day to day life is like? Are you able to get outside? Do you have space, is there room to walk around? What are people doing?
David: (22:43)
Right. So we've had a case in our building in the last seven days, which puts us into the highest level of secure zone, controlled zone. In, in theory, we're not even supposed to leave our doors, the doors, to our apartments, but ours, like I think a lot of other buildings, have been operating that on the honor code as well. Because I still see people going downstairs. There's nothing, there's no security camera at my door or anything like that. I can still go outside and go downstairs and if I spent a lot of time downstairs hanging out in the courtyard or something, I'm sure my neighbors would have something to say about me because we're all supposed to be staying inside our apartments, but there's no actual restriction on, you know, walking down and walking around. I'm a volunteer for receiving our deliveries. So I get out a lot already. I breathe the fresh air and I get to spend a lot of time outdoors. Other people, you know, they gotta walk their dogs or they just wanna like get some fresh air. I've seen people going out and spending some time outside. I know other apartment compounds and other apartment communities have differing levels of stringency when it comes to this. And some places are very strict about not leaving your door at all.
Tracy: (23:56)
What's your sense of the official data that's been out there around cases and supply availability and maybe fatalities as well, versus what you've personally experienced and seen on the ground. Because of course when it comes to China, there are always questions and sometimes doubts about the validity of the official data, so I I'm curious how your personal experience stacks up against what's been officially reported?
David: (24:27)
I can only speak to my own experience, right. What we've seen is cases that we knew a hundred percent were in our building, where we knew were a hundred percent were in our compound. They showed up, but they took some time, you know, four or five, six days between when we knew that case appeared and we thought that person had been evacuated from the building and brought to a medical treatment center, and when that case appeared on the official ledger of our neighborhood, of our district or subdistrict. So right now, what I can say is, I know there's a lag between when cases appear in real life and when that individual case ends up making its way into the big numbers, the official data. Certainly at the beginning, I think based on what we had seen coming out of statistically from other locations that had Omnicron breakouts, it looked like we were looked like we were seeing a lot of cases with an incompatible number of severe critical cases and mortality. I would say in the last, you know, I haven't been checking the numbers every single day, but certainly I know in the last few days, those numbers unfortunately have been rising and will they end up, you know, somewhat statistically matching to what we've seen from other locations? I don't know, but certainly I think there's been a lag between what we see and what we observe and when it, you know, eventually shows up in the data.
Joe: (25:52)
So, I mean, bigger picture, I think that in the U.S. observing what's going on in Shanghai, I would say the overwhelming perception is sort of in incredulity. I feel like people just don't get it or they don't believe it. And they're like, what am I missing? Because none of this makes any sense. This is so economically damaging, it would appear. It's so psychologically damaging. It's socially damaging. It seems implausible given the virality of some of the latest variants to even have a Covid Zero policy. I think people are just scratching their heads. They don't have strong opinions per se. They're just really baffled. So what would you say, how do you perceive like the goal here, the strategy and sort of like what victory looks like or what the process looks like? How would you describe it to someone?
David: (26:53)
Oh, I mean, I think the image of what victory looks like in an ideal world is pretty clear. It's something like what Shenzhen did last month, right? You have a few cases, they pop up, you lock down tighter than a clam. You have excellent local logistics and apparently pretty strong local government support. Everybody puts in their time. And then you reemerge with your case load almost eradicated. And you know, I know the folks in Shenzhen are still having a pretty hefty testing requirement. They're testing every two or three days to make sure they maintain that. But I imagine that's like the platonic ideal for how a Chinese city pursuing its current Covid policy emerges from a localized municipal Covid outbreak.
Now people are gonna be analyzing to death, whether or not Shanghai couldn't do it because of local government or because they moved too late or because they were too liberal or whatever it is, you know, it's clear that Shenzhen was the golden standard and Shanghai has missed that by a long shot. So you can understand the desire to achieve something like Shenzhen. Once it's apparent that the, you know, the window has closed and the barn door is open and the horse is run away or whatever metaphor you want to use, then the question is okay, is it a reasonable ask to try to get back to what Shenzhen achieved? Opportunity cost? What are we looking at now? Hey, I'm not an epidemiologist or a virologist or a public health expert. So I don't have strong opinions on what will or won't work. I think I do understand what they were hoping for. And I think it made sense when you were considering a Shenzhen-like scenario. Now that we're in the scenario that Shanghai is in, I don't know what they're supposed to do. I certainly hope somebody with a lot of expertise in that is considering the different the different results we've seen so far from Shanghai and wondering is a course correction necessary. Does it have to be repeated to every other Chinese city that has an Omnicom breakout after this? Or is this a Shanghai-specific policy? I don't know, but I certainly hope somebody's thinking about it.
Tracy: (29:04)
What's your sense of I'm thinking how to phrase this and I'm very aware that, you know, no one would ever ask New York, like in the midst of the pandemic, ‘how does New York feeling about all of this?’ But what's your sense of the sort of broad mood in Shanghai at the moment and support for these policies? Because again, to Joe's point, if you talk to people in the U.S. or in Europe maybe, they hear about these very strict lockdowns and they don't really get it. They're sort of incredulous about all of it. But on the other hand in China, President Xi Jinping has been very careful about pitching this as a way to save lives and saying explicitly that they're doing this in a way that's different to what the west has done, where they're willing to accept fatalities in exchange for, you know, less harsh lockdowns and more individual freedoms. So how do you see that portion of it at the moment? What's the mood like?
David: (30:08)
Yeah. I mean, and again, if you do it as effectively and efficiently as Shenzhen did you have nothing but takers. Everybody gets that social contract. They say, we give up our freedoms for a week or two. We get to squash everything. And then we go back to a fairly high-quality life like what we had before. Certainly when this drags on the way it has for Shanghai, what I've been seeing and hearing is that even people who are generally, I would say pretty supportive of China's Covid policy over the last two years, are saying, ‘Ugh, well, is Shanghai an exception? If Shanghai is an exception, how can we make it the only exception?’ Because people are bummed out here. I think that's fair to say, that the people in Shanghai are low energy. They understand the intent and they're still supportive of the intent.
But increasingly I feel at least from the people around me, the people I see like in my building WeChat group, things like that, people are losing -- I don't wanna say losing enthusiasm for the overall cause. Because I think people don't really think like that. I think there's -- and I'm just gonna go on a ramble tangent here -- but I don't think that the people in the midst of a lockdown are really the ones analyzing this by saying, ‘oh, should China change its policy on Zero Covid now given what I'm going through?’ No, they're just saying I'm sick of testing all the time and I'm sick of being confined to my home. And if you told me Zero Covid means we get to do it like Shenzhen, I love Zero Covid, and if you told me Zero Covid means this, Ugh, I don't know how I feel about this, but I don't think people are necessarily processing it as like, ‘oh yeah. We've gotta change the way we think about this now.’
I think most people are just thinking about it on a daily life basis. And I would say, yeah, they're sick of it. They're sick of being inside. They're sick of whatever this is. And if you want to rebrand it, if you wanna call it something else, if you wanna say this is Dynamic Zero Covid, or now this is some version of living with it. But we’re still trying to get back to zero, however you brand it, just like make this better. Make my life right now better. And then we can talk about how you label it.
Joe: (32:32)
David, what are people doing who don't have jobs that can be done on a computer?
David: (32:37)
I've gotta imagine they’re surviving on the largesse of their employers, if possible. And if not, then they might be cutting into their savings. I mean, I'm a pretty white collar guy and most of the people I know are white collar too. So we're all working from home. But I don't know. I know Shenzhen had some pretty strict policies back in 2020 when I was there about whether or not employers were allowed to dismiss their employees because they weren't working and what kind of protections were in place for them. And I haven't seen or heard anything about whether there's something equivalent right now in Shanghai.
Tracy: (33:15)
So David, we would be remiss if we had you on and if we didn't talk a little bit about electricity in China as well, because this is your day to day job -- speaking of jobs. I wanted to ask, what's your sense of what's happening with Chinese infrastructure spending at the moment? And I know you're very interested in renewables, but we did have GDP figures released relatively recently showing a slowdown in growth, which is something you might expect going into lockdown although the figures actually didn't take that most recent period into account. But do you feel like there's a big wave of fresh infrastructure spending coming to try to offset some of these lockdowns? Or is it basically impossible to do these projects given the current situation?
David: (34:05)
Well, I'll say if we talk about offsetting sluggish GDP growth with big infrastructure projects that gets into macroeconomic questions and I tend to avoid those because I think that's black magic, but I will say from an individual microeconomic perspective, there's massive demand for renewable electricity in China. The government plans for capacity of power and that it has to be green power/renewable power are staggering and that the cart would pull the horse in that sense where we would say, we need to pull up GDP figures, so we're gonna increase infrastructure spending. I don't know if that's the right way I'd think about it. I’d think of it in terms of, we are definitely going to build a lot of green energy, a lot infrastructure associated green energy because we want it. Because we need it. And then maybe that becomes a thing that actually props up GDP, but not necessarily, you know, the other direction.
On the microeconomic level, so many international corporations and grid companies and state-owned enterprises, everybody has these mandates to consume a ton of renewable electricity and all of the grid infrastructure and all of the power plants and everything that goes into making those individual microeconomic needs achievable and meetable means building a lot of stuff. So I guess if you look at it from that perspective, yeah, sure. A lot of infrastructure spending coming in to be able to meet the green development goals.
Joe: (35:46)
Just in terms of total energy demand, this sort of acute moment. I mean we've seen global oil prices, well they're still very high, but they've come down from recent highs, in part, it would seem very likely because of this collapse of Chinese demand for gasoline and other petroleum products while so many people are stuck inside their homes. What do you view as the sort of the, the size of the current shock to energy demand from these changing consumption patterns and just changing patterns while the lockdown is happening?
David: (36:23)
Well, certainly the lockdown right now is just Shanghai, right? So Shanghai is 25 million people, which is actually just a drop in the bucket for China, right? And there's a couple other places that are under a lockdown and most of the countries it’s business as usual around. So if we're seeing reduced energy demand, probably probably macroeconomic stuff, stuff, uh, more long term macroeconomic stuff, there might, might be, uh, kind of domestic consumption, instability or domestic consumption kind of, of uncertainty that would lead to a bit of a slowdown individually. I don't think is gonna be driving that.
Tracy: (37:02)
All right, David, well, we're gonna have to leave it there. I hope that things start to improve for you and your neighbors relatively soon. But thank you so much for coming on Odd Lots and walking us through everything that's been going on in Shanghai — really appreciate it.
David: (37:17)
Yeah, sure. Thanks for having me.
Tracy: (37:34)
So, Joe, one thing I was thinking about through all of this was how impossible it would be to do this in the U.S., not just because I think people would sort of intuitively revolt against it, but also because I don't really think we have the technology or the platforms to arrange things like this, certainly like imagine, well, I guess you could Venmo payments, but it just seems it would be a massive hassle.
Joe: (38:02)
No, the software wouldn't exist for like the group purchasing or group shopping carts. And I remember of course, you know, one of the first conversations we had over two years ago with Dan Wang and some of the other technologies that David was just talking about, you know, the idea of like issuing people a different colored, basically passport, or a different type of license to be out? You would never have this sort of like agility on a sort of government or neighborhood level to issue something like that so fast and have people check it, for better or worse. I think most people in the U.S. are probably happy that the government can't quickly issue all kinds of different passports to people for their neighborhoods. But yeah, there's sort of like a degree of like tech that would make something equivalent almost impossible to imagine in the U.S.
Tracy: (38:55)
Yeah. And the other thing that I found interesting was the speed with which it seems like businesses have actually adapted. And you mentioned that you saw that here in New York. Yeah. I guess I never really saw it in Hong Kong because we didn't have a hard lockdown, but it was interesting David's description of like the local coffee shop that is now a bulk supplier of coffee beans.
Joe: (39:19)
Well, I was in Texas for a while during that spring and the local TexMex place, they would like sell these kits where instead of like ordering enchiladas, you would get this big tray of beans and chicken and tortillas to make your own enchiladas. And I thought that was great. I was like, oh, maybe this is how it should stay. Like all the restaurants become like meal kit companies.
Tracy: (39:42)
Yeah. This is the other thing I'm wondering, how much of the group buying dynamic stays. Even if lockdown is sort of, you know, if it goes away, because as I said in the intro, group buying has existed in China for a while and people usually use it to try to get good deals on bulk buying or just try to secure something that's difficult to import without enough people demanding it. I wonder if, if it becomes even more of a thing,
Joe: (40:08)
Not specifically related to this, but it's sort of, I forgot that in China, a city of 25 million people, even though it's, you know, the most important city economically is also kind of a drop in the bucket but you know, you think it's like, oh, there's this huge hit and it is really big. But on the other hand, China is just so enormous that from the grand scale of, you know, goods consumption or energy consumption, it's not like it's not gigantic. You know, it's not a gigantic share,
Tracy: (40:40)
China is just on a different scale to everything else. However, what I would say is there have been a lot of anecdotes about smaller villages in the countryside being locked down completely. There's someone I follow close to Harbin who said the entire village was basically carted off to quarantine. Now there's this talk about Beijing going into lockdown as well. And so it, you know, there's a lot going on. China's a big country, but it does seem like there's the potential for this to be a very significant economic hit.
Joe: (41:13)
Yeah. Really, uh, really extraordinary. And I just can't imagine. I mean having kids, having pets, as you mentioned, just the fact that, you know, people are sort of, it strikes me as a very psychologically taxing situation, setting aside even concerns about being able to get food and such.
Tracy: (41:34)
Yeah, absolutely. All right. Shall we leave it there?
Joe: (41:37)
Let’s leave it there.
You can follow David Fishman on Twitter at @pretentiouswhat.