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An Excerpt From A Brief History of Humankind

As in previous eras, there is today a division of labor between the elite and the masses. In medieval Europe, aristocrats spent their money carelessly on extravagant luxuries, whereas peasants lived frugally, minding every penny. Today, the tables have turned. The rich take great care managing their assets and investments, while the less well heeled go into debt buying cars and televisions they don’t really need.

Buildings On The Bund (Waitan), Shanghai (2)

Block Two

No. 3 – The Union Building |友宁大楼 | 有利大楼 (formerly no. 4)

Built in 1916.

Past: a group of insurance companies (including Union Insurance Society of Canton，于仁洋面保安行/保安保险公司/友宁保险) -> Mercantile Bank of India, London and China (有利银行，purchased for £80k in 1937)

Now: Three on the Bund. In 2004, House of Three Ltd. under Giti Group established Three on the Bund which opened to public in September same year. Giti Group is controlled by the Nursalim family (Cheri Nursalim is the daughter of Sjamsul Nursalim)

In-between: Japanese control, Shanghai Civil Architecture and Design Institute

Block Three

No. 5 – The Nissin Building | 日清大楼

Built in 1925

Past: Japanese shipping company Nisshin Kisen Kaisha Shipping Co.

Now: high-end restaurants, e.g. Ruth’s Chris Steak House, M on the Bund, etc.

In-between: China Merchants Steam Navigation Company, Shanghai Maritime Bureau, the Bund branch of Huaxia Bank

No. 6 – China Merchants Bank Building | 中国通商银行大楼

Built in 1907

Past: Imperial Bank of China, first Chinese-owned bank modelled on Western banks and banking practices, founded by Mr. Sheng Xuanhuai in 1897; later changed its name into Commercial Bank of China

Now: high-end restaurants, e.g. 东京和食 SUN with AQUA Japanese Dining & Bar, 御锦天, etc.

In-between: Shanghai Changjiang Navigation Company (长江轮船公司)

Buildings On The Bund (Waitan), Shanghai (1)

A roundup of those historically unique buildings.

Block One

No. 1 – The McBain Building, Asia Building | 亚细亚大楼

Built in 1916.

Past: Asiatic Petroleum Company (oil & gas), a joint venture between the Shell and Royal Dutch oil companies founded in 1903 (Royal Dutch and Shell merged into The Royal Dutch Shell Group in April 1907)

Now: Japanese control, East China Petroleum Company, China Pacific Insurance Company (insurance)

No. 2 – The Shanghai Club | 上海总会大楼

Rebuilt in 1909.

Past: The Shanghai Club, the principal men’s club for British residents of Shanghai, founded in 1861. The club was originally named “The Correspondent’s Club”.

Now: leased by the Hilton group in 2009 and converted to become the Waldorf Astoria Shanghai on the Bund, a luxury hotel. The new hotel opened in 2011.

In between: Japanese Navy Base, International Seamen Club, Dongfeng Hotel, from 1990 to 1996 for hosting the first KFC restaurant in Shanghai.

Coffee Chains And Prices In China

While Starbucks is probably the No.1 coffee brand in China, its position has constantly been challenged. Luckin Coffee, (briefly covered in a previous post) is cutting into the mass market with lower pricing.

Many people are eyeing on China’s growing coffee market, which will be huge and many are betting on the growth in average coffee consumption.

On the global capital market, Starbucks’ China push and Blue Bottle’s exciting/interesting movements (Jun 2015 $70 million series C; Sep 2017 acquired by Nestle, $425 million for ~68%) may as well push Chinese counter-parties to think about aggressive expansion or building boutique brands.

Listed here are 3 shops I visited recently. Will add more during the summer.

Costa, from UK

Costa Coffee is eyeing 1,200 stores in China by 2022, a big increase from more than 400 at the end of 2017.

Costa stores | Source: Business Insider

Costa is in direct competition with Starbucks, pricing its coffee at exactly the same level – grande latte @ ¥32.

% arabica, from Japan

% arabica @ the bund, Shanghai | Source: arabica.coffee

Started in 2014 in Kyoto, Japan, % arabica is a young brand. It opened the first store in China in Shanghai in Feb 2018 in a trendy (网红) way. It already has opened 4 store in Shanghai alone, including a roastery at the Bund (7 in mainland China and 4 in Hong Kong as of May 2019).

% arabica is a premium brand with latte price starting @ ¥35 (but in short size), @ ¥45 for a tall size (or a little bigger than tall.. cant’ tell exactly), @ ¥40 for tall ice latte.

S.Engine, from Shanghai

A trendy (网红) brand, 鹰集 is a little pricer than Starbucks, with its flagship store opened in January 2017 at Xintiandi, Shanghai.

While its office website only lists 3 locations right now, its has 6 places listed on Meituan in Shanghai. Growing very fast.

S.Engine on Meituan | Source: meituan.com

Pricing is in line with (or a little lower than) boutique coffee shops. Americano @ ¥28 and latte @ ¥36 (¥38 for ice latte). There is only one size (tall); a fair amount of cups are served in reusable cups.

China’s “Dual Pricing” System

Just landed in China last week.

So “dual pricing” sounds a little bit bizarre.. It’s not something like two menus, but it does exist in some way.

One example is the prices in restaurants/dining rooms affiliated with state-owned-enterprises (SOEs) or established traditional corporations. The price in restaurants in the same/nearby block would be 4-10 times more expansive (food quality and others things adjusted).

This is actually similar to what US tech companies provide – free lunch. The difference is that US tech companies actually pay a lot for those food as an employee benefit, while the cost for established/connected Chinese companies are very low.

Essentially, there are some places in China that are not affected by as much inflation as other parts are. And throughout the pat 10-20 years, the “dual pricing” has become increasingly evident. (US tech companies’ free lunch is actually on par with the inflation I think)

Another example is “friendship-based” transactions. It is more like the world in the “exchange economy” so that goods/services are not priced in numbers. Due to the nature of exchange, there will be no/little markup in “prices”.

Say Service A costs $100 and is usually priced for $1,000; good B costs $50 and is usually priced for $500. Then exchange based transaction would probably involve one A and two B (the value of which depends on people’s perceptions, say $300 but no money exchanged), while money-based normal business would involve two $1,000 transactions.

Friendship-based economy exists everywhere I believe and is a very natural/common development in history. Since China’s friendship-based transactions are more pervasive and maybe represents a higher percentage of the “economy”, it does create another “dual pricing” in China.