Taking pride of place on a feature wall facing the conference table where the Prestige interview takes place hangs a Chinese painting. Solely of calligraphy rendered in thick, stately brush strokes, it exults in Mandarin: 玄牝之门,人天地根 (Xuan Du Zi Men, Ren Tian Di Gen).
It borrows from Taoist literature, specifically the Tao Te Ching. Cursorily translated, it intones: An auspicious realm, of which mortals, heaven and earth take root.
The “realm” in question is the Yujiapu Financial District in Tianjin, a fairly recent development of a most ambitious scale — a staggering 3.86sq km to be exact (about twice the size of Monaco) — now resonating in the media as potentially the world’s biggest financial city.
And Prestige is in its innermost sanctum, within the confines of the corporate office of Li Bo, chairman of the Tianjin Innovative Financial Investment (Tifi), a state-owned enterprise with a registered capital of six billion yuan (S$1.2 billion) and current total assets of 37 billion yuan. In managing Yujiapu’s planning, development, construction, investment and operations, Tifi is expected to drive upwards of 200 billion yuan into this project. This will be channelled into 120 plots of mixed land use, spanning 9.5sq km. All around us, skeletal skyscrapers — 47 of them at last count — are in various stages of completion.
“You’re looking at the face of modern China,” the chairman smiles and then continues confidently. “Something unique only to 21st-century China.”
By the end of the year, Phase One would be completed, slightly delayed — due to a railwork snafus between Beijing and Tianjin — but altogether still on track. Already, nine of the 12 skyscrapers from this first stage are launched. “Our first victory is in sight!” Li says in triumph.
The idea took root as early as 2006, a time of unprecedented prosperity as it was then that China superseded the UK to become the world’s fourth-largest economy. Yujiapu was earmarked by the State Council as a pilot investment city to drive the economic growth in north China (but more on that later). The next two-and-a-half years were spent on feasibility studies, investment planning and consulting with world financial experts. The Tianjin municipal government also led delegations abroad to promote Yujiapu. In 2009, the ground broke.
“A financial district of such a scale and complexity is rare,” Li points out. Tifi’s next step is to provide support, service and infrastructure to businesses already invested with them and to “prioritise opportunities for them to flourish”. But it is still charging full throttle ahead to attract more investments, both foreign and domestic, “hopefully in as short a time as possible”.
And it seems to be pulling out all the stops to achieve this by making Yujiapu sound as attractive as possible. In official press releases, it boasted that on completion by 2020, it will become the world’s largest financial district.
Given that Manhattan’s Wall Street is a mere 1.1km eight-block district, while London’s Canary Wharf is 1.3sq km, this sounds like a huge brag. But Yujiapu has walked a walk that is as big as its talk. Since its groundbreaking and within a span of five years, Li says it has attracted — with attractive tax holidays notwithstanding — a total registered capital of 90 billion yuan, from about 600 domestic and foreign businesses, including French energy firm GDF Suez and Boston-based private equity firm Thomas H Lee, which is setting up a five-billion-yuan fund. It has also secured joint-development foreign investments from high-profile investors such as Tishman Speyer (investing six billion yuan for the Tishman Speyer Finance Plaza to be built in Yujiapu) and the Rockefeller Investment Group (for the Rose Rock International Finance Center).
With such ambitions, it has certainly attracted the attention it desires. But it has also unwittingly roused up a zealous media frenzy, largely consisting of Western press, all ready to pounce. After all, Yujiapu isn’t the first city to have such grandiose ambitions. But is it the city-equivalent of the boy who cried wolf? After all, any journalist on the China beat long enough would know that the country already has the repute of excess capacity glut, assembling pop-up cities only to fade away as ghostly shells. As at 2013, millions of investment dollars has already been spent on big city spaces, such as the Lanzhou New Area, Chenggong town in Kunming and Tianducheng in Hangzhou. Among these 20 or so new projects in various second, and third-tier zones, some have thrived but most have not. The most spectacular failure so far? The inner Mongolian city of Ordos, where only two percent of its buildings are occupied eight years after completion.
The media derision have been sporadic but incessant: From somewhat offhand (described as “a pocket” — alluding to the river oxbow-shape of Yujiapu’s mass of coastal salt flats — “that must be filled” with investments) to outright disparagement (“Manhattan knock-off”, one says).
The most scorching? That it has already been labelled as the biggest future ghost city the world will soon see. “Devoid of life, post-apocalyptic”, they charged. Near print time, a June report by Bloomberg alleged that Yujiapu as “China’s own Big Apple may be rotting from the core”, with a movie comparison to the desolate city which actor Will Smith drove through in utter solitude in I Am Legend.
But Li seems unworried. “When construction began in Pudong, many people questioned how such a project could be possible,” he muses. Just last year, Reuters ran a story with a photo comparison of the bustling Shanghai metropolis to Pudong in 1987, over 20 years ago when it was mere countryside farmland.
Which is exactly Li’s point. “What everyone felt was unimaginable in the past, is today’s reality,” he says. “Human nature tends to dismiss what cannot be seen, and which is not already existing. Moreover, our project is not small. That makes it harder for people to trust in the viability of it all.”
On paper, from a geo-economic standpoint, Yujiapu seems to be different from those new cities that have failed before it. For one, it is well-positioned geographically, served by the Port of Tianjin, the only incentivised Free Trade Zone in northern China, with special preferential policies approved by the State Council to attract foreign and domestic investments. In addition, Tianjin is one of China’s most historically important seaports. Buoyed by lucrative marine industries from the Bohai hinterland in the north, Tianjin tied with Chongqing as the fastest growing city in China in 2011 with its GDP at 16.4 percent, way above the national growth rate of 9.2 percent. The last financial year struck 17.6 percent, says Li.
In spite of this, the foreign media often views any new massive Chinese development as a runaway investment and it seems Yujiapu is painted with the same denigrating brush. While dismissive, some observers also speculate, grudgingly, that if it succeeds while others have not, it could be because of powerful backers, or some political agenda. Or both.
When queried on this, Li says: “Foreign media like to think that this project is entirely determined by the government — it is not.” Major planning decisions might have required political approvals, he explains, but the size of its development and scale of investments are largely guided by market laws.
Yet industry observers cannot help but predict that the central government is unlikely to let a project like Yujiapu fail. Where historical precendence goes, an oft-quoted example is Shanghai’s Lujiazui new financial area, where the municipal government had strong-armed several state-owned enterprises (SOE) to come in as the first anchor tenants in major buildings. [Ed’s note: The World Bank estimates that in 2008, SOEs controls as much as 30 percent of the 208 trillion yuan assets of the industrial and service sectors in China.]
Moreover, Tianjin is close to the seat of power that is Beijing and directly under central government administration. In fact, the project is closely associated with Zhang Gaoli, then Tianjin’s Communist Party secretary, now one of China’s formidable seven-member Central Politburo Standing Committee. Zhang is also one of the top leading economists in China, handling the day-to-day affairs of the country’s economy.
A native of Tianjin, Li graduated from Tianjin University with a major in Architecture and from Nankai University, a major in Regional Economics. Both disciplines have undoubtedly equipped him well in his current role as a city-operator.
“Growing up, I’ve always been interested in architecture — you know, building things,” he reminisces. “But still, I can’t say that what I’m doing now is easy as pie.”
In 2006, he joined the Tianjin Economic-Technological Development Area (Teda) as its deputy general manager, with roles in real estate development and corporate management. His proudest achievement then? “As the manager of the Teda football team,” he jests.
His modesty belies his association with the success that is Teda, established in 1984 (with endorsement by Deng Xiaoping, no less) as a special administrative zone in northern China. On its report card: Investments from Fortune 500 companies, including Airbus, Motorola and Nestlé.
In 2009, Li assumed office to chair Tifi, as the chief driver for the Yujiapu project.
In the beginning, it was “not easy”, he says. In fact, even Li did not know where the city was when he first accepted the appointment. “Yujiapu? Where in the world is that?” he remembers asking himself. “Its location is excellent, but all this while, no one knew about it: Not the world at large and not even the people of Tianjin. I myself grew up in Tianjin and even so, I didn’t know where Yujiapu was!” Changing people’s perception, as he discovers, became one of his greatest challenges. “And there’s still a lot of work to do,” he says.
Also a woe is China’s relatively young financial system, which is still not sufficiently robust to handle the real pace of the national economic growth. Specifically, the pace of liberalising China’s capital controls and marketising interest rates have not kept up with industrial demands, especially in an open global market.
“It’s mismatched,” he admits. “And we need reform.”
And this is precisely Yujiapu’s raison d’etre: It is also built to be a driver for national financial reform. And it isn’t built to do this alone, but with the two established special economic zones (SEZ), Shanghai and Shenzhen.
Which also leads to another of Li’s contentions: The shallowness of the foreign media assessments. Much talk has been about the fact that if Yujiapu were to become the world’s biggest financial city, it has to dethrone one of the other two SEZs in China. This is erroneous, Li says.
“People tend to think of Yujiapu as a stand-alone, singular entity. It is not,” Li says. “That is the media’s impression. Foreign analysts tend to forget that we do things differently here. Yujiapu is just one of three pillars that we are erecting — together with Shenzhen and Shanghai — to contribute to China’s financial system as a whole.”
This could all just be a miscommunication. In some older Tifi reports that Prestige managed to secure, it was stated that up until as recently as 2010, there were never any official descriptions issued in English on the development plans of China’s reforms, after the launch of the first two SEZs of Shanghai and Shenzhen.
And now, what Li will have us understand is this: After the first two in northern China, the Bohai Circle has been identified by China’s State Council as the third SEZ for the region. Within the Bohai Circle resides northern cities such as Beijing, Tianjin and provinces such as Liaoning, Shanxi and Henan. At its centre is an area demarcated as the Tianjin-Binhai New Area (TBNA) — Li calls this area its “dragon head” or pilot zone — to drive future financial reform. The aforementioned Teda is the special administrative area within TBNA.
Within the area, nine functional zones are designated to support northern China’s economic reform in major industries such as manufacturing, aviation and shipping. Yujiapu is designated as its ninth zone — a central business district for the northern region — with Li also doubling as board chairman of the Tianjin-Binhai New Area Central Business Development (TBNA-CBD) Investment Corporation.
“Think about it: China is such a huge country, how can we only have one financial pillar to hold up the entire system?” he says. “We’re all clear that Shanghai will still remain the national financial centre. Beijing as capital will function as the national legislator, and headquarter-city of major banks and financial institutions. And Shanghai is best poised to play the role of an international financial hub. As for Shenzhen, as China’s most successful SEZ to date and with its proximity to Hong Kong, it is able to serve the Asian region as a hub. Tianjin, with the financial component that is Yujiapu, is the regional economic centre for northern China. When we develop a financial system for China’s reform, we develop it as a whole.”
The products and services created in Yujiapu will help reform the financial infrastructure. “It is here that we can first test out new ideas,” he says. Such ideas will include financial experiments for mix-operation financial sectors, industry investment funds, foreign exchange administrative policies, offshore financing, venture capital investments and multi-ownership financial enterprises, as well as a series of exchanges, including commodity exchange, climate exchange for trading greenhouse gases, and a private equity exchange.
“Why Tifi is named ‘Innovative’ is not for naught,” he says. “We are into the new and the innovative.”
To be frank, the development and construction of buildings in China is not a difficult thing,” says Li, alluding to China’s construction and land development muscle as evident in the multiple cities being erected over the last 15 years. “Our technology is mature, our construction power is very strong. But when it comes to overall management, as well as all its ancillary facilities and services, we are not. In this regard, we are also learning a lot from the Singapore model,” he says, referring to the nearby Sino-Singapore Tianjin Eco-City within TBNA, which they have used as a case study. As of 2010, it was certified by Apec (Asia-Pacific Economic Cooperation) as its first low-carbon model town.
“It is not enough to just have big beautiful buildings. Because as the city grows, more people will settle here and these are people from high-end services and also financial personnel, they will have very sophisticated appetites for culture,” he says. “Our next step as an operator is to introduce the software. This is crucial because finance will give it its body, but culture will give Yujiapu its soul.”
Recent years have seen Tifi score measurable success in signing memorandums of understanding with cultural institutions — both from overseas and from China itself. Already in the bag is New York’s Lincoln Center, which will help build the multimillion-dollar Yujiapu Arts Centre in 2015. Of especial pride, he says, is an MOU to open the first Julliard Institute outside its New York City campus. Also in the pipeline are plans for museums, food-and-beverage, entertainment and mass media concepts. They are also already in talks with CJ Group, the parent company of CJ E&M Film Division, South Korea’s biggest entertainment company.
“If you ask me, this is our advantage of being a latecomer,” he says. “We learn from everybody’s mistakes so we can just concentrate on building an unprecedented world-class city.”
By the end of the interview, Li has turned pensive. “It might not be a bad thing, you know, to label us as the Chinese Manhattan,” he says. “After all, there are many things to learn from New York City, in terms of urban planning, design, development…to see how it has morphed into the modern city it is today.”
“We can’t blame the foreign media for not fully understanding our ideas. After all, they only see things at the surface.”
Perhaps the world is only just warming up to the idea of familiarising themselves with the reticent ways the Chinese work.
As recent as 2012, Chicago-based global property agent DTZ, beleaguered by the property crash, was in dire need of a bail-out. Previously valued at about £500 million, it was just about to accept an offer from an Australian bidder, the UGL Group, when an anonymous offer worth millions more to DTZ’s shareholders (£50 million) and its creditors at RBS (£40 million) came in. For the Chicago company itself, on the table was £10 million in working capital, packaged with a credit line worth £30 million to rebuild the company, as well as a Class-A office space.
Finally, the UK’s Telegraph exposed the unknown bidder — it was Tifi, which had been eyeing DTZ as early as 2010. If the deal had been successful, it would have been able to draw on the US firm’s expertise to help create the integrated real estate development in Yujiapu that it so needed. Currently, Savills has been engaged in a joint venture to do so, says Li.
“[The media] can flog us all they like, but that only makes us move ever closer to our goals in the right direction,” he says. “All this motivates us.”
“In any case, we’ll have to thank them for [the coverage] — it saves us a lot of efforts in public relations and marketing to the world as to what we are.”
In between takes for the photo shoot for this story, I ask the chairman whether the perpetual firefighting in the press reflects the innate inability of the foreign media to comprehend something beyond their culture. Doesn’t it frustrate him?
Li gazes away at something for some duration, slowly adjusts his jacket, then walks back to his shoot, saying nothing.
Perhaps this is the unspoken body language of polite government officials, the arcane art of answering without answering. So I turn to see what he was looking at: It’s the calligraphy painting, the first thing that caught my eye before we settled into the interview at the conference table earlier.
On careful re-reading, I realise I had missed an inconspicuous footnote earlier. “As inspired by the shape of the Yujiapu Financial District,” it says. The literature on the painting mentions Xuan Du, an elegant euphemism which refers to a womb, alluding to the drooping U-shaped landform of Yujiapu. Read in this light (as with some Chinese phrases, depending on how the characters are being juxtaposed), it could also mean: “A womb, from which all things living — mortals, heaven and earth — gestate.”
Yujiapu is not a pocket — like what has often been commonly perceived, something that needs to be filled in order to fulfil its function — but a womb, out of which all things birth.
Yet again, the pundits may have gotten it wrong.
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