Don’t Take Your Freedom For Granted

American businessman Bill Russo has a long record of success in China. The 18-year veteran in the country arrived in Beijing as head of North East Asia at Chrysler, and went on to set up his own consulting business in Shanghai, Automobility. Today, his strategy and investment advisory firm employs a staff of 10 and has several collaboration partners around the world. Russo has stakes in a dozen global technology start-ups, has been active in the American Chamber of Commerce in Shanghai, and happily lived in the city with his wife and daughter.

That was until disaster struck this year. Lockdowns in pursuit of the goal of “zero Covid” left most of the city of 26 million shuttered at home for weeks, and have shaken the confidence of expats about governance in one of China’s top international business hubs.

“China’s gone through a whole lot in the 18 years I’ve been there, and it’s always been moving in such a way where you could always say tomorrow will be better than yesterday,” Russo said. “I can’t say that anymore.”

“They did a good job in the early days managing the aftermath of pandemic – probably better than most countries. The decisions now really raise a question of whether that’s still true. And that’s why I think a lot of foreigners now are leaving.”

How many Shanghai expats – reported by Chinese media in 2020 to number more than 164,000 — are leaving or planning to isn’t clear, though Twitter in recent weeks has chronicled residents saying their farewells; many still there have vented frustration over the lockdowns on the local WeChat messaging platform. Russo this month returned home to Reno, Nevada, on one-way ticket and will wait it out there for at least two months.

“If I’m going to sit in the room on a Zoom call, then I can do that here,” he said in a Zoom interview. “I’d rather be able to go outside breathe fresh air and do what I want to do. That’s a little taste of freedom that you should not take for granted. When it can be stolen from you that quickly, you have to remind yourself to never take it for granted.”

For its part, China’s Commerce Ministry said Thursday that it would work to stabilize foreign investment in the country and provide a better business environment to foreign companies, Xinhua news agency reported. “Influenced by multiple factors, China faces many challenges in utilizing foreign capital,” Shu Jueting, a ministry spokesperson said at a press conference. “But favorable factors that affect China’s foreign investment have not changed,” Shu added. “China remains attractive to foreign investment as its economic fundamentals for long-term growth remain sound and unchanged. Foreign enterprises are optimistic about their long-term development prospects in the country,” Shu noted, according to Xinhua.

That was true back when Russo arrived, three years after China’s entry into the World Trade Organization triggered a boom in trade and income. “When I when I came to China in 2004, it was a three million unit market,” Russo said of auto sales. “In 2017, it had risen to 28.9 million. In 2000 at the beginning of the before the accession of the WTO they sold a million cars a year. Where are you going to get that kind of growth in this industry of about 70 million cars a year? There’s no other place like it.” Automobility, among other things, tracks the performance of U.S. companies such as Tesla and GM, as well as fast-growing China electric vehicle makers such as BYD, NIO, XPeng and Li Auto. Among its portfolio companies, Arbe Robotics, a provider of imaging radar for cars, went public in the U.S. through a SPAC last year.

Now 61 years old, the Columbia University-educated engineer’s perception of China’s handling of the Covid pandemic early on was positive, he said, compared with the struggles in the U.S. and Europe. “The calculus over the last two years was: ‘Ok, I’m trading off convenience of seeing my family, and the convenience of lifestyle and frequent travel because they’re doing things to keep things stable. That’s good for the economy, long term.”

“I hazard to say the last two months have not been good for the economy,” he added.

Disappointment for Russo began when China didn’t make international vaccines available when they were launched in other countries. Omicron’s easy transmission outwitted local precautions this year.

Shanghai’s dark days with widespread home lockdowns involving millions of residents started in March; eventually the building where his office is located was closed, too, Russo said. “I had a team member that was confined then — and he’s been confined now for more than two months. In early March, he was told he had to stay home and they locked him in his apartment, not even allowed out except to be tested. We closed the office — March 11th was the last time we went to the office.”

Automobility’s space in Shanghai’s swank Xintiandi district remains closed to this day. “I haven’t seen my team other than on Zoom and Teams calls for almost two months. We’re working from home,” he said. Lockdown durations seemed arbitrary, with supposedly short confinements being extended, depending among other things on whether others in his residential complex tested positive. Russo never tested positive.

The Shanghai lockdowns forged close ties among neighbors due to the shortages of food in the city, an incentive to do group buying online. “If you didn’t know how to buy online, you’re going to be hungry,” he said. Even then, Russo said, it was important to get the hang of shopping in bulk. “The way you have to buy, first of all, is as soon as something becomes available, you buy as much as you can. Foreigners don’t do that. Foreigners say, ‘How much can I fit my fridge? How much do I need to eat?’”

Thus followed barter among neighbors. “Others in the community will do the same — buy what’s ever available in bulk, and then you exchange with each other. It’s quite interesting. Foreigners eventually learned how to get in the game.”

As the lockdowns dragged on, the reasoning behind them made less sense to Russo given the economic costs to China. Authorities said the goal was to protect its older population – one estimate reported by Xinhua said up to 1.55 million could die if China moved away from zero Covid. Russo, however, was thinking, “How can a system that can lock down 26 million people not mandate vaccines for the elderly population, if that is the reason why you’re doing this?”

China, like it or not, delivered higher living standards to locals with a large amount of social stability for decades, but what the lockdowns have brought has been “different,” he said. “On a moment’s notice, you have your freedom of choice ripped away and are placed in a system that is not quite understandable from our lens. What I experienced in the last two months is definitely not stability. It is economic stress and its very importantly psychological stress to the population, not just foreigners.”

“The worst-case scenario is you get interned in a Covid camp. Thankfully, I never had that experience,” Russo said.

Leaving wasn’t easy. “First,” he noted, “if anyone in your building tests positive, you can’t leave your building. If it’s your compound — if one case comes up, you can’t leave the compound.” His compound has 3,000 people and is walled, making quarantine easy to enforce.

Finally, cleared to go, Russo also bought one-way tickets home for his wife and daughter. The purchase and travel across the city to the Shanghai Pudong International Airport were “a crap shoot,” he said. “If you take a ride to the airport and for whatever reason, your flight gets cancelled, you’re living at the airport” because of a city rule that says once you have passed through two local districts in a taxi, you couldn’t go back home. “There were two or three checkpoints on the way to the airport where people are wearing hazmat suits. The person driving you is in a hazmat suit. We were able to get through to the airport, but it was surreal and like a ghost town, from when you leave your compound until you reach the airport.” The taxi price for the 25-minute ride: $250.

On arrival, the normally bustling airport has only three departures listed. “There were actually more people in hazmat suits than there passengers getting on planes,” he said. He arrived in Reno via San Francisco and Seoul on Sunday, May 8.

Russo still plans to go back to Shanghai. Partly, he chuckled, it’s for his cats. “I just dialed them up on my camera, my Internet camera. They look up at the camera and are like, ‘What’s going on?’” A neighbor is feeding them while he’s gone.

Russo remains interested in China’s innovation. “I started my company five years ago sensing that China was the market that would accelerate, though necessarily originate, next-generation automotive technology, and it does that more now than it ever has,” he said. “The market has a size and scale that doesn’t exist anywhere else on the planet. The Chinese digital economy is really brilliant at and far ahead of anywhere else on the planet in terms of its ability to scale and monetize new technology.” In the U.S., he noted, “I’m already accumulating coins and paper currencies. It’s like, ‘What, haven’t we evolved beyond that?’ You don’t need that. I don’t even touch cash in China.”

Yet family life at home is also giving him pause. His four-year-old daughter hadn’t been in the U.S. for two years and is fitting into their Nevada home in a new way. “It’s so much of a relief to be able to get back to some semblance of your normal life,” he said.

Changes he sees in China and the world are weighing on his mind. “Ideologies are becoming more polarizing. It’s scary. The world’s not a stable place right now. When that happens, you want to be close to what you’re familiar with, closer to home.” When he first arrived in China, Russo said, he had been told: “’Anything is possible, but nothing is easy,’ and that has proven to be true. Now, I’m not sure it’s ‘anything’s possible,’” Russo said. “You can’t dream big and with the force of inspiration conjure up amazing results. That’s what has historically brought the overseas attraction to China.”

Nevertheless, many expats including returning overseas Chinese that have built businesses in Shanghai “have this belief that ‘I’ve seen bad things happened before, China always comes back and it comes back even stronger.’ I hope so. I honestly do hope so,” Russo said. “But this particular medicine (lockdown period) and how it’s been dispensed is going leave an aftertaste. It’s going to be hard to forget for those who experienced it firsthand.”

In the meantime, havoc in the auto industry this year will lead to reconsidering of China’s role and his own business there. “It’s important to note is there is so much supply chain risk. If it’s that vulnerable, then shouldn’t you diversify the mix of where you place your bets in terms of investments? If you put all your eggs in the China basket, and things get unstable like they have this year, then risk management dictates that you diversify that.”

At least he’ll be able to size that up away from the confines of his Shanghai lockdown apartment.

See related posts:

China Covid Policy Will “Exact A Very High Cost On The Economy”

Amcham China President Sees Frustration, Risks As Beijing Starts Covid Mass Testing

American Lawyer Quarantined For 37 Days In China Describes ‘Chaotic’ Environment (forbes.com)

@rflannerychina