I visited Shanghai this month, my first overnight trip to mainland China since January 2020. So much has happened in that time, and I can’t tell you how much I’ve yearned to be back. Separated by just a river, Hong Kong is a world away. It’s been hard to be apart from friends, and harder still as an investor to understand the nuance of events in China without being there in person.

I took the high-speed train from Kowloon West Station to Shanghai Hongqiao. I like train rides because I can sit and look out the window as I read, taking in the countryside. An eight-hour journey lets you appreciate the scale of a country. We crossed sub-tropical southern Guangdong before zooming through an endless series of tunnels cutting through the hills of northern Guangdong and southern Jiangxi. We reached the plains of Zhejiang as the sun was setting, then pulled into Hangzhou, and then finally arrived in Shanghai.

I stayed with a friend in the Jing’an District, a stone’s throw away from the Suzhou Creek. After unpacking and getting my bearings, my first stop was to find some Lanzhou Lamian. These are my Chinese comfort food: hand-pulled noodles in a hot meat broth, flavoured with scallions, chilli oil, cumin, white pepper, radish and coriander. I had dreamed about eating these for over three years, imagining how they would smell and taste. They were delicious. It was good to be back.

The purpose of my visit was to present to some fellow investors who meet monthly to discuss a business and share what they see at work. They’ve become a tight group over the years, and I consider myself lucky to be included. I arrived on Wednesday, presented on Saturday afternoon and left on Sunday. I spent my free time meeting friends and exploring the city. I walked an average of sixteen kilometres a day, wending my way through shopping malls, supermarkets, business districts, new neighbourhoods, old new neighbourhoods and old old neighbourhoods. It was good to be back!

My most important observation first: Mainland China’s dynamic-zero COVID policy is history, and everyday life has returned to normal. I had to make a health self-declaration upon entry, but that was it. Only a tiny minority of people wore masks, even on public transport. Restaurants and bars were open and bustling. The Bund, Shanghai’s riverfront promenade, was heaving with visitors from out of town. I raised the topic of Shanghai’s almost three-month lockdown with my friends, more as a way to enquire about their emotional well-being than to probe for details. And, for the most part, it is a thing of the past. They survived and have moved on. Perhaps their most lasting trace of zero COVID will be an unseen one: the children they didn’t have because they chose to wait until better times.

Twenty years ago, when I first visited Shanghai, there were a lot of rough edges. Now, you have to look hard to find them. I enjoyed the tasteful elegance of Swire’s HKRI Taikoo Hui Mall on West Nanjing Road and was awed by the opulence of Hang Lung’s Grand Gateway 66 Mall in Xujiahui. Even the malls in the outer inner suburbs, whose names I forget, were pleasant enough. Service in restaurants and elsewhere has improved dramatically, too, I suspect because of the transparency and intense competition created by rating apps like Meituan’s Dazhong Dianping. And I did everything through WeChat; if apps killed the open web in China, have mini-programs killed apps?

I tasted the Coconut Latte, whose popularity apparently resurrected Luckin Coffee following the fraud perpetrated by its founder; I won’t be in a rush to buy another. I didn’t try Tim Horton’s or Manner Coffee, though all these coffee chains seem everywhere now. I twisted a friend’s arm to have dinner with me at recently-listed Domino’s Pizza China. Our Peking Duck pizza tasted good enough, but the staff were at a loss how to serve dine-in customers, and we couldn’t figure out why our order cost so much more on Domino’s mini-program than on Meituan’s. The Pickled Vegetables and Fish at Jiumaojiu’s Tai’Er was excellent; I heartily recommend it.

You can tell an EV in China by its green licence plate, and there were many of them on the streets of Shanghai. I have never seen cars showcased in shopping malls before. But Tesla and its Chinese EV competitors are doing just that. Does it reflect intense competition? Or cutting out the dealers to sell direct? Or both, perhaps? The Chinese EVs look good: they have stylish interiors and many clever features.

The best part of my presentation was the discussion which followed. My friends wanted to know if I have less invested in China today than four years ago. The answer is yes. It’s been hard to keep confidence without regularly spending time on the ground. And given how far certain events were out of my expectations, I have had to ask myself if what I once took as understanding and insight were simply overconfidence and luck. It was reassuring to hear, then, that some things puzzled them too. For example, what impact will the sudden dismissal and arrest of the CEO of China’s best bank have on its development?

I asked them about their experience investing in China over the last few years. Most people around the table made money, just, which probably left them with a more sanguine assessment than peers who hadn’t. Yes, they were shaken by the panic selling in March and October 2022. And they admitted they had to pep each other up when things were most bleak. But they had the conviction to average down and then average down again, whereas I’m sure many others cut their losses at the bottom. Of course, my friends have a home team advantage: they themselves are fully invested in China and its system. They did not fear sanctions, capital controls or expropriations by their own government.

We’re not out of the woods, though; one friend opined that business sentiment today is worse than it was in October last year. The real estate market has not healed, and local governments have no money. Businessmen lack the confidence to invest. The consensus is that China has already entered a period of low growth. We discussed the implications of this for long-term stock-picking: can organisations built and tuned for the days of high growth adapt and re-invent themselves? Will first-generation founders be able to slow down? Will second-generation managers have the vision and chutzpah? And will either be willing to return capital to minority shareholders rather than chase at windmills?

It was amusing to hear that the group’s ‘deep value’ investors now own erstwhile growth stocks, while the more ‘quality-minded’ investors have become “flexible” enough to buy coal and utilities. China is, after all, a complex economy with the breadth and depth of listed companies to match. All companies have their cycles, too.

Investing in China has been a trial of fire over the last five years, though there was money to be made if you looked beyond the crowded trades. Surely, the same will hold true for the next five years. However, will that extra effort be a good use of time if one can’t scale the position or is always worried about tail risks?

I’ve deliberately written this post to emphasise anecdotes and impressions. Please remember, too, that Shanghai is far from representative of China; it is an affluent and cosmopolitan city by the coast, and home to just twenty million souls. If you want data - and you should! - then, I highly recommend the China Charts substack.