Shanghai, with its rich history, has never failed to surprise. The Pearl of the Orient is an affectionate nickname bestowed upon the Chinese city in the heydays of the 1920s, when deals, parties, fights and intrigues were everyday life. In that era, identities were interchangeable: patriots or gangsters, traitors or businessmen.

On my red-eye flight to Shanghai earlier this week — my first visit since 2019 — I watched the espionage thriller Hidden Blade, starring Tony Leung, just to get into the mood not for love, but to see, hear and feel the pulse of this metropolis post Trump, post Covid.

Over the last two decades, I have visited Shanghai more than two dozen times, for both work and pleasure. My first trip was back in 2004. I was then with Standard Chartered Bank (Stanchart), and I was a mystery shopper sussing out what rivals Citibank and HSBC were offering. I also worked with regulators to roll out innovations. Very quickly, we recognised the huge appetite of China to try new things, to speculate — and yes, to copy.

When the Global Financial Crisis hit in 2008, many local banks that replicated what foreign banks touted became unwitting channels reselling credit and other toxic risks. With nary a thought and understanding of governance and suitability, customers were left in the lurch.

Hong Kong tycoons were omnipresent in Shanghai then. Vincent Lo, chairman of Shui On, made Xintiandi the city’s hottest lifestyle destination by repurposing quaint old buildings dating back to the French Concession days. Robert Kuok and Li Ka-shing were similarly in the thick of the action. Not to be outdone, CapitaLand and other Singapore developers got in on choice assets in Puxi, which is the city’s traditional centre on the west bank of the Huangpu River.

In another addition to the long list of what-ifs throughout history, Singapore, so the story goes, was offered to develop Pudong, which was then a near-empty tract on the opposite bank of the river, into an industrial park. Singapore placed its bet on nearby Suzhou instead.

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Lujiazui, the centre of Pudong, is today the skyscraper central of China, if not the world. First, there was the 420.5m-tall Jin Mao Tower, completed in 1999, famous for high tea in the clouds offered by Grand Hyatt located within. It was eclipsed in 2007 by the 492m-tall Shanghai World Financial Center; and in 2015, the 632m-tall Shanghai Tower took the top spot. These behemoths drew financial institutions across the world, including the Singapore Exchange (SGX), whose local office is in the Shanghai International Financial Center in the same neighbourhood.

From any of these towering giants, one can gaze down and across the river at The Bund, whose famous stretch of historical buildings was where many global financial institutions of today had their earliest beachheads in Asia. Two doors to the right of the iconic Peace Hotel is a building now called The Bund No. 18 — it was once the Chartered Bank of India and China — the institution which predates Stanchart. Not far down the same stretch, Cornelius Vanderbilt Starr founded what was then known as American Asiatic Underwriters in 1919. Today, we know it as AIA.

Interesting, international characters were present in Shanghai over the years. Morris Cohen, a Polish Jew, made his way to the city via Canada, where he joined the revolutionaries trying to overthrow the Qing Dynasty. Equally adept with both his left hand and right, he acquired the nickname Two-Gun Cohen, serving as bodyguard to Sun Yat Sen.

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Others of Cohen’s ilk made their impact felt in Shanghai via more conventional ways — making money, lots of money. Rival Iraqi Jewish clans, the Sassoons and the Kadoories, once owned large swaths along the main commercial thoroughfare, Nanjing Road. Like many other Shanghainese with the means, they migrated from the Paris of the East to the Fragrant Harbour after the communists won the civil war in 1949, with their economic vibrancy visible in Hong Kong and a tail of their diaspora also in Singapore. Will they come back?

As Pudong’s skyline transformed in the 2000s, so did the financial markets of China. Many of the first few batches of S-chips of Singapore and a number of H-shares of Hong Kong are best forgotten. It is a different story for China’s domestic markets. Powered by a thundering retail herd louder than any Merrill Lynch could ever muster, daily trading volumes in Shanghai overtook Tokyo’s more than a decade ago.

Naturally, fuelled by speculation, there was a series of booms and busts. Regulators had to step in often and clean up in the aftermath. At one stage, in their bid to calibrate the markets, they were even the ones fixing the IPO prices. Yet, the trading fervour remains, powering on capitalism with Chinese characteristics.

China’s commodities and financial futures exchanges are also unique. Stemming from bad experiences with state-owned enterprises and some private institutions with interest rate futures, there was a historical lack of trust. Thus, by the 2010s, when China launched new products such as options and futures, they introduced them for qualified retail investors first ahead of institutions, instead of the other way round. Yet, volumes almost always take off immediately, as retail punters partake merrily in the speculation of everything from steel rebar to cotton to eggs.

Many counterparts from other Chinese exchanges marvelled at how SGX managed to build products “gradually” with a good balance between overnight real risk managed volumes and intra-day activity, which is in contrast to their “excessive” volumes that often had to be reined in. For many of us in international exchanges, we wished each of our products would be liquid almost immediately, though the boom-and-bust China model may not be sustainable, as people get hurt and regulators have to act.

After years of stock connecting with Hong Kong, which reduces the arbitrage of onshore and offshore share prices, this link has also expanded to bonds. This as the policy of dual circulation keeping capital more internal, as well as financial liberalisation in the last 20 years, ebbs and flows, depending on China’s relative economic strength and confidence in engaging the world. For Singapore, the ETF Connect with Shenzhen Exchange was also expanded to Shanghai Stock Exchange more recently, a humble prelude to enable more capital to flow south — should the policy conditions in Beijing become more dovish over time again.

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Local friends I have been speaking to recognise that the overtures of China to the West, in this post-Covid phase, continues to not be smooth-sailing, with a divided US Congress and the start of the presidential campaign. China’s special friendship with Russia remains troublesome for the West. It is really the Belt and Road through Southeast Asia as a region that appears hospitable to outbound direct and portfolio investment from China — and even then, not consistently so.

For now, it appears that the anaemic post-Covid recovery has also spilled over to the financial sector. Technopreneur wealth built over the last decade fled China during the pandemic and has not returned. 2023 appears to be yet another year of decline in foreign interest and outbound investment activity. International trading firms, which enjoyed the volumes on domestic exchanges notwithstanding the periodic changes in rules and regulations, are now leaving for political reasons — especially if they have a US heritage.

Even Sequoia, a leading private equity name with its roots in California, has recently announced a break-up, letting its India and China units go free — as “it has become increasingly complex to run a decentralised global investment business”. Under pressure from US politicians lobbying for global equity indices to reduce allocation to China, and the need to keep back-office data away from the hands of China’s jurisdiction, this decoupling will have some way to go. Chinese markets will likely have to find their own domestic mojo to replace international capital that is pressured to stay out, for now.

In a sign of one world, two systems, my arrival in Shanghai on Aug 7 was a comedy of unpreparedness on my part. With the end of the pandemic, Singaporeans can now again enter China visa-free. When I landed, my Apec card helped me cut the immigration queue. But I was still stuck, as I did not fill up an online health declaration form. Fortunately, I had WeChat, and could scan the QR code and file the declaration on the spot — unlike many other international travellers.

For years, I have already used WeChat to keep in touch with local friends. But, the really useful function of the app — making cashless payments — has been out of reach to foreigners, who are seeing a reversal of accessibility in the 2000s when foreign credit cards gradually gained wider acceptance and cash was always king. Recently, when WeChat and Alipay began to offer links to foreign credit cards, I promptly added my Trust card from Stanchart-NTUC. I thought I was now all set for cashless experience in China. Again, I was wrong.

When I attempted my first WeChat payment at a vendor to buy batteries, I was prompted by the app to register and complete the setup. With nothing to hide, I had no issues filing my passport details — only to find out that approval would take three days. By then, I would be more than half-way through my trip. I felt like the chap in the Visa payWave ad holding up the queue, while everyone else sauntered by, tapping effortlessly. Thankfully, amid a row of ticketing machines with slots for cash sealed, I managed to find one that would still take my three RMB1 ($0.19) coins for the subway ride.

The pandemic was the impetus for many companies — and entire societies — to digitalise. The ubiquitous Alibaba and Tencent platforms provided seamless connectivity, but also facilitated Covid monitoring, which many in the West baulk at. Perhaps I am less allergic to authorities having that much personal data, since we grew up with the NRIC system in Singapore and appreciate the positive trade-offs. Hopefully, with my Alipay set-up completed sooner than WeChat, I can then feel less like an outsider and my immediate Shanghai “surprise” can then wear off.

In a way, this is symptomatic of tech decoupling. As the West starves China of high-end chips, the insularity of China during the pandemic has made it less accessible for foreigners. And why not? After all, it is their country and economy, and foreigners who want to visit and invest ought to do it on their own terms. Although domestic consumer demand is weak with worries over the large and growing youth unemployment, demand for travel is booming unabated. The queue to get a visa to the US is said to be backed up to December.

My initial impressions are very mixed. I do not see any reason to panic immediately yet on my small asset allocation to China via ETFs. Meanwhile, I am still searching for the silver linings and rainbows, hopefully with a pot of gold at the end. Hold.

Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s lifetime achievement award. He serves as chairman of the Community Chest Singapore

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