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A Question of Vulnerability: Shanghai & China’s Other Favorite Children

Image via: Hector Retamal/AFP/Getty Images

Images of the 2022 Shanghai Lockdown sent ripples through the world. The lockdown — one which brutally dragged on for over two months — froze a city with over 25 million citizens. Scenes of trapped residents screaming from their balconies, streets taken over by hazmat suits, and families showcasing their depleted food stores slowly trickled through and flooded the internet. 

The Shanghai lockdown angered and demoralized millions across the country. Economically and politically, it was crippling. Predictably, it provoked sharp criticism regarding China’s flawed pandemic response strategy. However, the pernicious impact of the lockdown also poses larger questions about China’s domestic power distribution. Due to decades of unequal resource allocation, just a handful of cities like Shanghai account for a massive portion of the country’s economic and political power. This power concentration is an inherent vulnerability. Furthermore, due to the hukou system, which formally divides rural and urban residents into separate categories, rural residents have suffered decades of worsening quality of life. To understand the challenges China faces as it recovers from the pandemic, it is imperative to understand the implications of its unequal power distribution.

For years, the Chinese Communist Party (CCP) has granted tremendous and disproportionate levels of support to a handful of major urban areas. Noticeable change began in the 1980s as China transitioned into an international market economy, when financial capital, government resources, and citizens began conglomerating around coastal cities. Over time, an unofficial “Chinese City Tier System” emerged. At the top of the top tier sit Beijing, Shanghai, Guangzhou, and Shenzhen, colloquially known as Bei-Shang-Guang-Shen. Overwhelmingly, these cities dominate Mainland China’s economy. Shanghai, for example, is China’s single largest urban economy, handles 10.4 percent of China’s international trade, accounts for a fifth of China’s port volumes, and anchors an urban conglomeration that produces a quarter of China’s economic output. Together, Bei-Shang-Guang-Shen cities account for almost 60 percent of China’s Fortune 500 companies and over a quarter of China’s research & development output. 

With economic dominance comes political influence; accordingly, Bei-Shang-Guang-Shen and other top tier cities such as Hangzhou are the backbone of China’s socio-political fabric. Inside the cities, citizens enjoy the highest quality healthcare, education, and government protection in the nation. Altogether, these cities are China’s lifeblood, but more recently, they have been fostering vulnerability. When Shanghai is trapped, like in the lockdown, the whole nation feels its constriction.

During two brutal months of government lockdown, supply lines and industrial production halted, swaths of businesses in Shanghai’s service sector closed, and transportation to one of the world’s biggest marine and aviation destinations ceased. In aggregate, economists estimate that Shanghai’s lockdown could reduce China’s overall GDP by more than four percent. Other estimates show China lost $46 billion per month from the lockdown. Shanghai’s housing market is still suffering from loss of consumer confidence: Polling shows over 40 percent young people find moving to China’s major metropolises less attractive, and many foreign companies like Apple have already or are considering moving operations to other parts of Asia. Given the large cities’ oversized impact on the national economy, a downturn in those cities threatens China’s economic vitality at large. 

China’s large cities also create risk of domestic political turmoil. While the national government promotes centralization, Bei-Shang-Guang-Shen’s massive economic power gives local leaders a sense of independence, creating a constant dysfunctional struggle between local leaders and the national government. During the national reforms in the 1980s, the government actually decentralized and promoted economic autonomy and fiscal competition between cities. However, by the 2000s the national government sought to regain authority over the cities by reinvesting revenue into centralizing bureaucracy and tax enforcement. Today, an active political divide persists between advocates of centralization and decentralization. Using their economic size as leverage, the regional Shanghai government had initially succeeded in holding off many of the restrictions the government was implementing across the country during the height of the coronavirus pandemic. However, Shanghai’s eventual lockdown in 2022 — which occurred despite the explicit insistence of regional officials against the measure—signals a new and startling push toward centralization by the national government. The recent US-China trade wars, which significantly hurt Shanghai and other coastal cities by shutting down manufacturing and trade, also point to the central government’s tendency to make unilateral decisions without regional input. The outrage in Shanghai over the trade wars was unprecedented. Thousands of people began signing public petitions, and city officials voiced their displeasure. When massively powerful local leaders are constantly at odds with a national government intent on exercising centralized control, the possibility for internal strife is dangerously high. 

Meanwhile, as urban power accumulation threatens Chinese economic and political stability, citizens in rural Chinese regions suffer from deep neglect. This is because China is domestically governed through a system of region-based citizenship known as hukou, a residency status that provides holders with the services of the jurisdiction they’re from. Due to economic disparities, hukous from cities like Shanghai offer far better educational, healthcare, and economic opportunities than most other areas of Mainland China. This has created a stark divide in quality of life between different Chinese jurisdictions. Impacts of this institutional neglect span across all aspects of daily life; for example, China is the least educated middle-income nation in the world. Around 70 percent of the workforce is without a high school education. 

Unsurprisingly, this unequal system has created one of the largest internal migrations in human history. Millions of migrants flock to urban centers every year in search of better opportunities. In fact, around 40 percent of Shanghai’s 24 million residents are migrants from other areas of the country. As a result of the influx of migrants, even wealthy Chinese cities are overwhelmed. Housing prices have risen to around 15 to 20 times the average household income in places like Shanghai and Beijing.  

Globally, it isn’t unusual for major cities to wield disproportionate influence in their home countries. However, China’s extreme concentration of power in urban centers creates economic and political risk, while also harming its rural citizens. As the world’s most populous country and a famed model of economic development, China’s response to these challenges will be watched throughout the world. What ultimately happens to China’s cities will send more than just ripples in social media — it’ll help set a precedent for how developing cities around the globe are governed for years to come.