地沟 does, in fact, translate to gutter, but it's even worse than your imagery could possibly make it out to be. My chef friend claims to have witnessed the oil people extracting the excess (already recycled) oil from restaurant trash bins in the wee hours of the morning and mixing it with the rest of their stock, which they deliver in large vats several hours later. This practice seems to be commonplace throughout China, but in Shanghai, I have numerous higher priced options at my disposal. While I suppose it's nice that my daily spend in NN is very low, my stomach doesn't care for this city so much.

I might actually have to start cooking my own food! (Unheard of in Shanghai.)