YWR: China is getting cooler. Trip takeaways.
There is a saying in San Francisco real estate to always follow the artists. The artists establish the new cool neighbourhoods, then the yuppie tech bros come in afterwards and drive up the prices. So get in early with the artists.
This might surprise you, but I think China is the new cool neighbourhood. And that might be the most important stock market indicator for this hated market.
The background is that noticing my family’s infatuation with South Korean culture is what got me into our mega memory trade. I’d love to say I predicted the whole memory bottleneck, but what actually started me looking at South Korea is that my daughters were obsessed with South Korean music and TV. So I started looking into the stocks which had coincidentally sold off over a temporary presidential coup. This seemed like a great short-term opportunity so we bought the ETF in December 2024 (Who am I ETF?).
Now the YWR daughters are into China and asked if our summer trip could be to HK, Shanghai and Beijing. They’d heard so much about all these cities and wanted to see them.
And my big takeaway from the trip so far is not self-driving cars or robo-taxis. It’s that China is cooler than I thought. It is reinforcing my suspicion that this market can take-off.
Hong Kong
Strangely, the girls were not in love with HK. They’d heard so much about it from their friends and came in with high expectations. The HK girls at their universities’ carry on about ‘HKIS’ and HK incessantly. I think the pre-hype somehow had the opposite effect. My girls said the city was ‘OK’. but the girls in HK were super cliquey, and it was a turnoff. They liked London more.
To me HK is a unique city. I love that it has that San Francisco style combination of a financial centre with open space and mountain biking 15 minutes away. One morning we popped over to Shek-O and did the scenic Dragonback hike along the mountain tops down to Big Wave beach. Then 30 minutes back to Wan Chai. Where else can you do that?
With HK you also get those unique British colonial touches like a horse racing track right in the middle of the city. You can imagine the colonial governors back in the day planning out how they would like the city to make it the most fun for them. To help get over missing England. Of course they would have said HK should have a horse racing track right in the centre. And a golf course next to the beach. Why not? You can design it however you want. Harare is the same way. Golf course all over town. These stylistic touches will never happen ever again so cities that have them are unique. We went for the Wednesday night racing at Happy Valley. Admission is free and it’s tons of fun. Also a total scene for the youth.
While in HK I met with a real estate investor and fellow YWR reader who is surprised at the strength of high end HK residential real estate. 1,400 square foot penthouses in Kowloon in new developments are going for $8,000/square foot. He gets the listings every day from Knight Frank is amazed at the transactions. He thinks it must be mainland Chinese buyers. Commercial real estate is not picking up in the same way yet, but it’s a good sign that residential is heating up.
After HK we the plan was to cross the border into the Mainland China and take a high speed train to Shanghai.
Before entering the mainland we downloaded all our Chinese apps and VPN’s. Doing this it hits you how weird it is that China is in its own internet bubble where nothing from the rest of the world works.
BTW, over the last 2 years China has granted visa free entry to all of Europe and the UK so it is much easier to visit and Western tourism is picking up.
The surprising coolness of Jingdezeh (Pottery Town)
Shanghai is an 8 hour train ride from HK so we decided to do something adventurous and stop overnight in a no-name town called Jingzedeh which is famous for pottery. While planning the trip back in London we had a hard time picking which town to stop in because they all seemed like they would be boring Chinese mega-cities. Nobody has heard of this town, but I’m into Japanese pottery, so I thought Jingdezeh had a 10% chance of being interesting. I kept everyone’s expectations super low and told them Jingdezeh would be a boring stopover with the idea that something interesting and unexpected might happen. I like to have these wildcards in my trip planning.
Jingdezeh ended up being a massive hit.
And this is where I started to get a new view of China.
I’ll start by saying the countryside is prettier than I expected. Super green and hilly.
On the taxi ride from the train station to the hotel we drove by lots of those narrow high rise apartments which are all over China. The ones you see in the housing bubble documentaries. I gave the girls a 5 minute lesson about how they built these all over China, people bought 4-5 at a time, but now they are all poorly maintained and losing value, and that China was in a massive property crash. No-name Tier 2 cities like Jingdezeh were especially hard hit.
“Look kids. A Chinese housing bubble apartment complex.”
But then we got to our hotel in the Taoxichuan Ceramic Cultural Creative Park and I was blown away. I don’t really know how it happened, but the city took a run down 22 acre pottery factory and renovated it into a high end retail, cultural real estate development. It was like the fancy open space malls in Phoenix, but better. The hotel was brand new, super high-end and sleek too, but only cost $90/night.
After checking in we went for a stroll down the pedestrianised lanes with beautiful pottery studios, art galleries and museums. As part of the real estate development they kept the old factory kilns and smoke stacks. It reminded us of the coal drop yards in Kings Cross (London).
After wandering around the studios we had a big dinner for the whole family for $60. Then afterwards we walked around some more and gathered with the rest of the people to listen to the outdoor musicians. It was a fun night.
What struck me though was that the Taoxichuan pottery development was high end, super sophisticated and played off the town’s cultural roots in a modern way by renovating the old buildings. It was so well done it shocked me. I’m used to the typical EM tourist traps. Tons of trinkets and souvenirs for sale, overly commercial and gaudy where you just roll your eyes. But this was completely different. If you are from Milan, New York, San Francisco, Miami, Paris, whatever, you would think it is super cool. I’ve never seen anything like it. Again, it’s like the coal drop yards in Kings Cross, but with a total focus on the artists, which makes it cooler. The pottery was really good. Like Japan style good.
And the whole place was super clean, and tidy with no riff riff, no pick pockets, and no gypsies. I was surprised there would be a market for this type of high-end tourism in China, but there was. It’s a sign of a new type of Chinese consumer. Way more upscale and sophisticated. I think the whole Europe trip trend might be fading, and people might start checking out China.
So our night in Jingdezeh was a highlight and a complete eye opener.
Shanghai
Shanghai has also been a hit.
Like I said in Shanghai Crash Fund, I had previously only been to Shanghai for investment conferences in Pudong (the Canary Wharf of Shanghai). So it was different hanging out with university age daughters and doing things they wanted to do.
Instead of business dinners and investor meetings we’ve been going to roof top bars, restaurants featured in Instagram and art districts.
I have to say I like Shanghai.
Maybe I’m just in the nice parts, but again like Jingdezeh, it’s super clean and tidy, with no riff riff. It’s a good mix of new buildings, restored older buildings and tons of cool, edgy retail concepts. I know what you are going to say. No. It’s not sterile, clean like Disneyland. It’s cool. Where else can you take a picture with Bumblebee and try an Apple-Cinammon Latte next to the water? It’s also not crowded and great value.
Later that afternoon we were wandering around looking for something else, and ran into a small outdoor craft beer bar where you pull up a bar stool and drink craft beers next to the sidewalk. There were only 10 stools, so we stayed for a while and ended up chatting with everyone else there. It was tons of fun. Later on down the road at another establishment my daughter and I lost to two Shanghaiese girls at foosball. That was fun too.
Another night we went to dinner at Warehouse 3 which is a trendy new restaurant concept. The food presentation was super creative, like serving my Coke in a glass handbag. A Chinese friend I was talking to said the Shanghai restaurants have to always come up with new ideas for food and presentation because it is so competitive. Meanwhile, the restaurants in London kind of pride themselves on always doing the same thing. They would never make it in Shanghai.
After dinner we went to a great rooftop techno party next to the river (top picture) with kids partying their brains out to JayZ’s ‘New York, New York’ under the CCP flag. It made me think there is a cultural revolution underway, just not the one Mao expected.
And can I say, the office lights on the Bund were also impressive. Yes, it’s just a light show, but all the buildings put work into their displays and it’s really pretty. Again, cool in a way you don’t see anywhere else.
Afterwards, while we were waiting for a taxi I got to chatting with an Italian who is the China CEO for a super well known Italian shoe brand. We were talking about China and he said the people he works with are amazing. He said ‘just you wait’ about China. His employees are committed to the company in a way you don’t see in the West (who are more checked out). The Chinese employees are energised and fast charging. He said he has a hard time translating their ideas and how fast they want to move to the HQ back in Milan. It’s two different worlds. He also said the Chinese tastes have switched somewhat to being more interested in local brands so as an Italian company they have to evolve a bit and find new concepts that are a mix of Europe and Chinese tastes. He said they need to find a ‘bridge’.
Another night we found a five story shopping mall which has been converted into a massive techno club complex. INS Land. I had read about it online, but was still surprised at the concept. You pay £35 at the front door then get access to all the different clubs inside. Again, it was super fun and cool. And it was normal kids attending. Not an over the top DJ scene like in Miami or Ibiza. I sipped a £2 cocktail and watched a crazy dubstep DJ crank her own tracks while young Shanghaiese bopped around me in crazy outfits.
The IDGAF Stage
This might upset some people so I apologise in advance.
I’ve been going to Asia for a long time, starting with Japan when I was in high school.
And I see a change. I see a change in the Japanese. And it looks like it is happening in China too. Maybe it’s happening in South Korea as well, but I see it more in China and Japan.
The Japanese have always had some edge to them, but if you went to Tokyo in the 1990’s or 2000’s it was still 90% robots. Everyone dressed the same, everyone acted the same. Everyone was on the same path; to get a salaryman job at a big company. Very little originality. Even the edginess back then seemed kind of forced and dorky. Often the rebelliousness was just a copy of Western trends. Like the whole obsession with 50’s doowop.
Again, I apologise for my stereotypes and insensititivies.
But something is changing.
I think the youth in Japan and China are to some degree starting to say IDGAF. The corporate robot path of the past doesn’t work anymore. Or isn’t working like it used to. And that realisation, while painful, is opening up some space.
The youth are experimenting with new culture and new ways. And you can see something cool, and original emerging.
On this trip I am having experiences where I’m like ‘Wow.. this is super cool.., super fun.. and super safe” and I can’t think of a better version of it back in the US. No knife attacks, no street takeovers.
In the past Asia has always looked to the West for cultural leadership. California was always the epicentre of cool. Hollywood movies, Western music, etc. But I see a shift. I see China, Japan and Korea coming up with their own cool trends which are even catching on back in London (with my daughters).
The cultural epicentre slightly shifting and we should take note.
How do we make money?
Month after month the YWR Global Factor model data has been flagging the estimate momentum in China, Japan, Taiwan and Korea. The factor model is telling us to take note of Asia.
This trip reinforces the data for me in another way. There is something going on here.
So maybe take an investment trip and explore China with the family.
And get in before everyone else figures out it’s cool.
Erik