Go East, Young Man

Shanghai Nights

Drinking to Sino-American business cooperation.

Next stop: Pudong

At the epicenter of Shanghai is the Bund, which follows the western bank of the Huangpu River. As you stroll down the riverfront, dodging fake-Rolex vendors, the stone facades of the ornate buildings across the road make you feel like you are in Paris. Turn toward the river, however, and gaze over the container ships, gravel barges, and tour boats to the gleaming buildings beyond, and you feel like you have been transported to an adult Disney World.

Fifteen years ago, before China turbocharged its economic revolution, Shanghai’s “Pudong New Area” consisted of vegetable fields. Today it supports, among other things: the Oriental Pearl Tower, a gaudy 1,500-foot television aerial with elevators, observation decks, and the clichéd rotating restaurant; the Super Brand mall; enough office space to house 300 of the Fortune 500; a lush community of single-family villas; a dozen or more skyscrapers in various stages of construction; the maglev; the $2 billion airport; and the Jinmao Building, which contains the world’s highest hotel. To get to Pudong from the Bund, you can pay $4 and board a mini-train for a trip through the Tourist Tunnel, which bombards you with a laser light show, blow-up dolls, and a cackling sermon about Paradise and Hell (if I could explain, I would).

When I ascended the tunnel escalator into Pudong last Sunday, the sun was setting. I had nowhere in particular to go, so I wandered the wide streets, fending off vendors, and then made my way to the Grand Hyatt at the top of the Jinmao Building. Like Buick and other American brands, Hyatt has upscaled itself in China, where its brand is the equal of, say, the Mandarin or the Ritz. The Grand Hyatt occupies the upper 33 floors of the Jinmao Building, with the double-height glass wall at the 54th-floor check-in desk revealing a swoon-inducing view of blinking antennae and smoggy haze. I was headed for the Cloud 9 bar on the 87th floor but never made it that far.

No more Shanghai potato fields

After taking the wrong elevator to Cloud 9, I stepped into a foyer on the 56th floor flanked by three restaurants and a jazz bar. The restaurants—Japanese, Italian, and Californian—hugged the windows (“Terrifying table for two, sir?”), and the bar filled the building’s central atrium, an open cylinder rising several hundred feet. I’m not a fan of heights—or of sitting beneath 33 floors of open, terraced hallways—and as I explored the restaurants it also occurred to me that Shanghai might be located in an earthquake zone. Even the bathroom was an adventure: The urinal hung about 11 inches from another floor-to-ceiling glass wall.

Still, the sushi bar beckoned. So I sat down, ordered, and was immediately offered a glass of Asahi by a fellow loner next to me. I’ll call him Patrick and say he is from Cleveland and runs a cell-phone distribution company. These details aren’t true, but Patrick didn’t get to be a CEO by also being an idiot, and insisted on anonymity.

The Asahi was Patrick’s 10th drink of the evening, give or take a few. He’d also had sake, a slug from a bottle of Grey Goose vodka, and six Heinekens ordered from room service that afternoon. When the waiter brought the Heinekens, along with a cheeseburger, he had asked how many Patrick wanted opened. From the bathtub, Patrick had replied, “All of them.”

Patrick was celebrating a major business deal struck with a Suzhou cell-phone factory boss the prior evening. That week, Patrick had attended a vendor conference hosted by the factory in which he and a dozen other distributors had been wined and dined (“frog, sea turtle, eel, etc. …”). But the industry was changing, Patrick said, loyalty lines being redrawn, and after a seven-year relationship, Patrick had finally persuaded the factory owner to give him all of North America as a territory. The deal had been consummated, Patrick explained, “after eight Heinekens—with two Chinese girls on his lap and two Chinese girls on my lap.” That morning, Patrick had decided to celebrate by checking into the most expensive hotel in Shanghai.

By this point, Patrick had already told me that his room was so amazing that I had to see it. He had also told me that, after dinner, he was hooking up with a Shanghainese woman who was the “personal assistant to Chinese rock stars,” and invited me to tag along. So I thought I had a good handle on where the evening was heading: Toward two Chinese girls on my lap, a proposition from Patrick, or both. Neither of these destinations, I suspected, would be popular with my wife, who isn’t the don’t-ask-don’t-tell type.

Paris of the East

But soon I was following Patrick into his executive suite on the 61st floor, being handed a glass of Grey Goose on the rocks, and being shown that the room was higher than the observation deck on the Pearl Tower. I noted this from the safety of the doorway, eight feet from the floor-to-ceiling glass. Patrick, meanwhile, plastered himself against the glass, peering into it as though into a murky fish tank. He observed, as I had already suspected, that sleeping in the room felt like sleeping on the edge of a cliff.

In the next few hours, I learned that manufacturing in Patrick’s industry had once been located in Japan. Many years ago, he said, Japan had sucked away the jobs from the United States, thanks to cheaper manufacturing and re(verse)-engineering. But then China had sucked away the jobs from Japan, offering products one-quarter of the Japanese price. Patrick could ship a container full of them to Cleveland for $4,000, he said, less than 10 percent of the value of the inventory inside.

Patrick believed that China’s manufacturing advantage was insurmountable, at least for the next few years. Reverse engineering was cheaper than product development, and the labor costs were in a different league. Eventually, rising raw material and labor costs and a revaluation of the yuan would spoil the party. But in the meantime …

I expected the “assistant to rock stars” to be dressed in a cat suit or miniskirt, the better to blend in at those famous Shanghai nightclubs. When we met her at the check-in desk, however, she was a pretty, young businesswoman in a cashmere overcoat. In response to Patrick’s urging for her to “take us someplace fun,” she asked the cab driver to take us to the Bund. Patrick filled this dead time by describing how he had just scored a superb $40 copy of a $45,000 Lange & Sohne watch at the market at Xianyang Park. The Chinese workmanship had gotten so fine, Patrick explained, that they now copied elements inside watches, so their fakeness wouldn’t instantly be revealed when you took the back off. The Lange & Sohne was too precious to wear, but Patrick proudly showed us his $4 Longines.

We toured the Bund, then Xintiandi—a new outdoor mall designed to look old—then, after concluding that we were about four hours too early for real night life, slid into a table in the jazz bar at the Peace Hotel. There, the assistant to rock stars (who actually worked at a theater company) explained charmingly, over a Corona, that democracy wasn’t as big on the Shanghainese agenda as we Americans might think, that, as long as business was OK, they didn’t really care who was running the country. So it isn’t only Americans who vote with their wallets.

By 10 p.m., Patrick was just getting warmed up. I was several drinks into the evening myself by then, however, and past my prime, and I was also beginning to feel like a third wheel. So I toasted the two of them, Sino-American business cooperation, and Shanghai, and stumbled out into the night.

Pursuit of Truth Department

No smoking. One reader took me to task for “stereotyping” by noting the “blast of cigarette smoke” in lobby of Pudong Airport. He pointed out that smoking is banned everywhere in the terminal building and that the vast majority of guests follow the rule. So I should clarify: When I left customs and entered the airport lobby, I did not encounter a cloud of cigarette smoke, or even see anyone smoking. I did, however, run smack into the acrid stench that used to define every public place in, say, New York. Because smoking has been banned in public places in New York, however—and in the Pudong Airport—I have become so sensitized that even one smoker can make an area smell like a dive bar. So maybe that’s what happened in the Pudong lobby.

Free money. One reader asked about my capital cost assumptions for the maglev, which I estimated to be north of $60 million a year. I assumed that the estimated $1.2 billion used to fund the system’s construction cost about 5 percent per year (thus, $60 million). If the money were borrowed in a capital market, the cost would be significantly higher—a maglev is not what one might call a “risk-free” project—but the Chinese government has piles of capital lying around, so it also might be far lower. I should stress that these are my estimates and that one could argue that performing a financial return-on-investment calculation for a municipal development project is silly.