China Vanke taps UK real estate market

Vanke, one of China's top real-estate developers, is in talks with several developers in the UK to tap into the local real estate market.

Wang Shi, Vanke's Chairman, spoke to 91kudian.com at the Asia Business Forum held in London on January 30, 2015, which is sponsored by London Business School.

Wang said that Vanke didn't come to the UK in search of high profits but to learn how a mature housing market works. "In UK, the main revenue of real estate companies comes from their housing property services (including rental and service fees) and this accounts for a major slice of their profits, unlike China where profits come mainly from selling houses."

Vanke is trying to learn how real estate financial services function in a mature market as well as studying fund-raising systems and services. It is seeking UK partners for its overseas residential and commercial investment plans. As negotiations are ongoing, Wang didn't provide further details about its current plans.

Focused on residential property development, Vanke reported sales revenues of 215.13 billion yuan (US$34.6 billion) in 2014, a 25.9 percent year-on-year growth, according to the Shenzhen Stock Exchange.

As an advocate of green buildings, Vanke promised to cut carbon emissions by 5.3 million tons by 2018.

Wang praised British government building emissions plans. "It's difficult to imagine the plan that the UK government will introduce in 2016, when its policy that all new buildings should produce zero carbon emissions comes into force. China should learn from this."

He revealed that Vanke is collaborating with the UK's Building Research Establishment (BRE) on the sustainable construction of buildings. The BRE have a long history of helping to design and construct buildings that reduce environmental impact and they are internationally recognised for their cutting-edge sustainability initiatives.

"This collaboration will enable us to share knowledge and expertise in sustainable building in order to drive innovation in China's construction industry."

Wang is not so optimistic about China's housing market. "There is a big bubble in China's second-tier cities, as well as in house prices in Beijing and Shanghai. The difficulty the Chinese housing market is now facing is just the beginning. Whether or not house prices go down will depend on government policies."

Wang noted that an expansionary monetary policy in a deflationary environment would sustain the bubble in China's real estate sector.

"The biggest risk is in China's second and third-tier cities because they have less economic resources. Vanke will focus on projects in coastal cities in Southeast China."

Wang mentioned that Vanke's goal is to have 15-20 percent of its investment in foreign countries, to balance its risks.

"There are three reasons why we invest abroad: firstly, we go to industrially developed countries to learn and prepare for China's urbanization; secondly, we like to balance our investments; thirdly, we follow our customers: as Chinese buyers go to the U.S., so do we."

Vanke won't invest in Turkey or Spain, as even though it might be very profitable, the risks are too huge. Wang explained: "This is the company's strategy. Vanke is not an opportunist company seeking quick profits, but one that studies and learns how to survive in a mature housing market."

So far, Vanke has housing projects in America and Singapore. "The housing projects in America are being sold now, and have had a good market response."

Wang said that Vanke has 60 million customers, including 10 million house buyers and 50 million clients using Vanke's services.

When Wang Shi gave his talk at the Business Asia Forum, his ideas about the environmental impact of big companies came to the fore, perhaps because of his love of the outdoors, having twice climbed Mt Everest amongst other conquests.

He talked about climate change, and how he feels the planet getting warmer, especially during his outdoor trips around seven continents. This made him think about what the environmental footprint of his company was.

So, Wang Shi decided to visit the Beijing office of Greenpeace, much to the surprise of the head of Greenpeace, as China's huge companies usually avoid all contact with them.

After this, Vanke started making "green buildings," and invested in the research and development of more globally sustainable operational methods.

Wang Shi recalled the importance of the 2009 climate change conference in Copenhagen, when then Chinese Premier Wen Jiabao committed to a 25% reduction in carbon density by 2020.

This forced China's mainstream media to change their position and advocate environmental protection. Before this, they argued that as China was a developing country with a huge population it needed rapid GDP growth so imposing emission limits would be unfair.

After 2009, Vanke initiated the first of many top-level green projects. Wang Shi asks: "as we are all human beings, how [do we] take responsibility for the earth?"

Wang Shi also brought up "APEC (Asia-Pacific Economic Cooperation) Blue", the infamous occasion when Beijing's leaders did all they could to make sure the skies were clean (made blue) for this summit, including measures such as controlling traffic and shutting down offices and schools for a week.

However, taking a longer view, Wang Shi stated that the real gain at "APEC Blue" was the breakthrough deal struck between America and China to cut China's carbon omissions by 26-28 percent by 2025.

Wang explained how Al Gore, former Vice President of the US, came to Beijing during APEC Summit and personally sought a one-on-one meeting with him. He was surprised that Gore knew so much about him -- even about his family experiences during the Cultural Revolution -- Wang thinks that Gore could see the potential for a carbon emissions reduction deal between China and America and so focused on him.

Wang also joked about how his plans to climb Mt Everest five times came to a halt when an 80 year- old Japanese man climbed Mt Everest. Wang decided that at 59, his title of "the oldest Chinese man to climb Mt Everest" was enough. He said he has recently enjoyed scaling "academic mountains" more than physical mountains.

《China Vanke taps UK real estate market》永久阅读地址: http://91kudian.com/yingyu/19937/