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October 17, 2018

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Shui On’s Lo lauds better business climate

Hong Kong entrepreneur Vincent Lo, founder and chairman of Shui On Group, is sometimes called the “son-in-law of Shanghai” by the local media — a reference to his decades-long involvement with the city’s urban development.

In 2001, Lo first shot to national fame with the opening of Xintiandi, a premium dining, shopping and entertainment area in the heart of downtown Shanghai. Part of the multi-phase Taipingqiao project, one of the pre-eminent urban redevelopment projects in the world, Xintiandi has remained one of the city’s hottest leisure destinations for both residents and visitors.

In July, Shui On Land, the flagship property development company of the Hong Kong-based group on the Chinese mainland, announced that it and partners China Pacific Life Insurance Co and Shanghai Yongye Enterprise (Group) Co had won the bid for development rights to three land parcels in Huangpu District.

The deal, which will enable Shui On to complete its Taipingqiao integrated hub of premier office, commercial and residential development, covers 34,824 square meters, with total built-up floor space of 390,700 square meters.

In a recent interview conducted via e-mail, Lo shared with Shanghai Daily his thoughts on the major changes he has witnessed in the real estate industry following the country’s reform and opening-up policies.

Q: From the perspective of the real estate business, what is the most impressive change you’ve seen in China since the country adopted reform and opening up policies in 1978?

A: China has experienced dramatic changes in many ways. From the perspective of real estate, government-led infrastructure investment and urban regeneration projects have transformed once run-down city core areas into a vibrant CBD and modern, livable communities. Shanghai during this period was transformed from a primarily manufacturing economy into a service economy specializing in trade and finance, and now aims to become an excellent global city by 2035.

Q: How has your business strategy toward China evolved in that time?

A: In the early days of market reform, city planning and urban redevelopment usually just involved pulling down old houses and buildings, and constructing new apartment blocks or office towers serving singular functions. This approach has resulted in cities losing their unique character and charm, and creating an urban environment that lacks open space and vitality.

Seeing this inadequacy, Shui On was the first to introduce the concept of master-plan development to Shanghai in 1996. Located in the former Luwan District, the Taipingqiao area was once a residential district filled with shikumen (stone-gate houses) featuring Shanghai’s unique architectural style. Our development proposal was to rejuvenate the old downtown housing quarters into a mixed-use community with residential, office, retail, entertainment and cultural functions. Through the transformation of Taipingqiao into an area for multinational corporate headquarters, Shanghai’s role as an international economic center for modern China is better showcased to the world.

Shui On’s business model is underpinned by the philosophy that our development projects should dovetail with the development plan of the city and contribute to its prosperity. China’s huge market and the progress of urbanization had given us the opportunity to replicate Taipingiao’s success in a number of major cities. Our Wuhan Tiandi, Chongqing Tiandi and Foshan Lingnan Tiandi projects have all succeeded to preserve the respective city’s historical, cultural, humanity and geographical elements, and are in alignment with local governments’ urban development needs.

Q: How much money have you invested in China? How many staff do you employ here? And what are your investment plans in the next five years?

A: Shui On Land has nine projects in various stages of development in prime locations in Shanghai, Chongqing, Wuhan and Foshan. As of 30 June 2018, the company had 3,039 employees and its total landbank stood at 8.4 million square meters.

As China moves toward an innovation-driven economy, our investment focus will be on first- and second-tier cities that can attract talent and provide immense growth potential, such as Shanghai, Wuhan, Nanjing and the Guangdong-Hong Kong-Macau Greater Bay Area.

In line with this trend we will continue to pursue development similar to our Knowledge and Innovation Community in Shanghai. In 2018, Shui On Land and CITIC Pacific have joined hands to build Optics Valley Innovation Tiandi to create a world-class innovation center that mixes an innovative financial service center, an innovative entrepreneurial hub and an innovative living center. In addition, our new office product line INNO aims to provide office space solutions for both individual and corporate tenants.

Shui On Plaza will soon unveil its new face, with the commercial podium Xintiandi Plaza scheduled for opening toward the end of the year. In April this year, we announced Xintiandi as our revitalized retail brand, covering the full range of commercial assets and underlining our expertise in commercial asset management. This rebranding is giving the market a clear vision of what we stand for and shows how we are responding to the changing needs of the rapidly changing retail market.

Going forward, we will deepen our partnerships because they are a centerpiece of our asset-light strategy, which enables us to recycle capital more quickly, target higher returns and grow with lower capital exposure.

Q: Foreign companies are always urging more reforms and faster reforms. What specific additional initiatives would help your business in China?

A: China’s real estate market has matured but is still heavily controlled by government policies. Currently, the government intends to introduce a long-term housing mechanism that provides comprehensive policy plans with enhanced transparency. This is a welcome move because property development is a multi-year investment and clarity of the regulatory environment is important for effective business decision-making. It would be helpful if the government could provide details about the timing and scope of its residential property tax program, as well as the renewal mechanism for land use rights upon expiry of present lease terms.

Q: What’s the best part about doing business in China? What’s the most difficult?

A: China’s stable macro-economy and a fast-expanding middle class offer enormous business opportunities. The government has vowed to continue to deepen economic reform, open up market access and enhance its business environment.

Recently, the State Council announced a range of measures to liberalize the services sector, making more business areas accessible for foreign companies. This year, many cities are striving to improve their investment environment, rolling out plans to reduce bureaucracy and strengthen the protection of intellectual property rights. These efforts should further enhance China’s competitiveness as an investment destination.

The difficulties that developers have encountered are related to the market control policies, such as restrictions on the issuance of pre-sales permits, which greatly affect residential sales and profit projections due to immense uncertainties in planning for sales launches. In addition, the property business also has to cope with a tight credit environment due to government deleveraging policies, as well as frequent changes in housing market regulation.

Q: How would you characterize the business climate in China, and what advice would you give for sustainable development of the real estate industry?

A: Overall, China’s business climate has continued to improve, and the government has remained vigilant in preventing a property bubble despite persistent price rises. There have also been growing efforts by local government to provide transparency in land sales schedules and to address the problem of supply-demand imbalances.

The introduction of a long-term housing market mechanism is a step in the right direction to ensure sustainable development of China’s real estate industry. Continued efforts to improve policy transparency and provide a level playing field for healthy competition would make the real estate market attractive to both domestic and international investors.


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