Tide Players: The Movers and Shakers of a Rising China

by Jianying Zha

  By then, most Chinese students there had lost their faith in communism, but Zhang wanted to side with the romantic Europeans. “The Chinese talked endlessly about Cultural Revolution sufferings while thinking about how to get their ‘eight big pieces’ home,” she said. (The “eight big pieces” refers to electronic housewares such as televisions, tape recorders, and washing machines, which were scarce in China then.) “I also experienced the life of the Hong Kong assembly lines. Communism was complex for me.”

  Then came the events at Tiananmen Square. “I stopped going to classes,” Zhang recalled. “For a whole semester, I was glued to the television. All the Chinese on campus were like that. As soon as news of the massacre came, we took the night train to London to demonstrate in front of the Chinese embassy. There must have been ten thousand of us there. That was the single most exciting moment in my college life.”

  Zhang wrote her thesis on privatization in China. “I was very skeptical,” she told me. “It was all about the problems privatization would cause.” After graduating from Sussex in 1991, Zhang worked on a master’s degree in economics at Cambridge. The other Chinese graduate students she met there were an ambitious group of young intellectuals; some of them had been involved in the 1980s reforms back home. When they got together, the future of China was a constant topic, and Zhang felt certain that her own future was in her homeland.

  While she was completing her master’s degree, Barings PLC sent scouts to Cambridge: their Hong Kong branch needed people to analyze privatization in China. Because Zhang had written her thesis on the topic, she was hired immediately. Going to Hong Kong, she figured, would be the first step toward moving back to China. She didn’t know that her Barings unit was about to be acquired by Goldman Sachs. By the summer of 1993, she found herself on Wall Street.

  As Zhang Xin was starting off as a young Wall Street analyst, Pan was embarking on a new business adventure in Beijing. One day, while he was having lunch with some local officials, he heard that the municipal government had just issued a document allowing the experimental creation of shareholding companies. Frantic preparations followed. Pan went to every official contact that the Vantone partners had in Beijing to shore up their support. He lobbied several state enterprises and enlisted them as co-founders of a new shareholding company. Finally, six months later, Beijing Vantone Industry, Ltd., was registered. The partners decided to put down 800 million yuan ($100 million) as the company’s capital. In Chinese, the word for “eight” rhymes with the word for “prosper.”

  But this was largely money on paper. Under the new regulations, the company had two months in which to raise the funds by floating shares. Pan placed a full-page ad in a Chinese financial newspaper. It caught the eye of the vice chairman of the State Stocks Security Committee, who alerted various officials. Pan was ordered to appear before a joint hearing at the System Reform Commission.

  Facing a roomful of officials, each holding a copy of the Vantone ad, Pan recalls sweat beading on his face: would he be found in violation of some rule? “Young man, relax,” one official said, and asked Pan about his company’s new stockholder’s certificate. Pan told the official that the company had printed on the certificate all the policy guidelines from the System Reform Commission. The official nodded approvingly: the Beijingers do things by the rules, better than those in Hainan. He took out a stock certificate made in Hainan: “Look, this is just a receipt they bought on the streets!” As it turned out, the experiment on shareholding companies had started a new national craze, and since China had no existing company laws, the officials had to make up the rules along the way. They were conducting hearings in an effort to find their bearings.

  Pan remembers listening to a moody song called “Like Wind, Like Fog, Like Rain” on the drive home; he says that it captured his state of mind exactly. He wasn’t at all sure how to play the Beijing market. But he wasn’t inclined to hold back, either.

  The company’s next project, Vantone New World Plaza, was a giant office-and-retail complex in the heart of Beijing. Pan attributes its success to the simple fact that advertising was a novelty in China. Vantone spent 10 million yuan on a marketing campaign—an astronomical figure then—and was able to take out big ads in major papers, such as the overseas edition of People’s Daily, Shanghai’s Wenhui Daily, and Hong Kong’s Dagong Daily. Prices for the Vantone New World Plaza soared to $6,000 per square meter, an unprecedented figure in Beijing. All the units sold while contractors were still breaking ground. Eventually, the company more than tripled its investment.

  Zhang Xin made good money on Wall Street—a six-figure salary with various perks and benefits—but she detested the ethos of the place. “On Wall Street, all values seemed upside down,” she said. “People spoke crassly, treated others badly, looked down on the poor, and adored the rich. They’d do anything to get promoted. Whoever made the most profit was a hero, and everyone was fighting everyone else.” It reminded her of the Hong Kong assembly line. “The difference is, in Hong Kong the competition turns people into shortsighted mice, whereas on Wall Street it turns them into wolves and tigers.”

  “And then there were these so called ‘off-sites,’ ” she went on. “It was just another form of brainwashing and thought-copying, much like those Communist Party study groups.” In a company off-site, employees and their families would be flown to beautiful places like Paris and London to eat, shop, and trade snobby notes about clothing brands and children’s schooling. Wives would end up demanding their husbands make more money.

  Zhang did a lot of traveling. “I lived out of a suitcase, traveling to three cities per week, running around without knowing why I was doing all this,” she recalled. “I never had to use my judgment. The work had nothing to do with what I studied at school. In fact, I don’t see why they need all those highly educated people. It’s a waste of talent.”

  In 1994, she left Goldman Sachs to become an investment banker at the Travelers Group, where the work was less stressful but the travel remained intense. She yearned to move back to China. A Cambridge classmate suggested that she check out an “interesting” Chinese company called Vantone.

  On a flight to China, weary and bored, Zhang took out the prospectus that her classmate had mailed to her. It was Vantone’s mission statement. The title read like a manifesto—“Break through brambles and thorns, to the future we strive together”—and the text continued in the same exalted language. “It got me so excited!” she recalled. “The way these young intellectuals wanted to contribute to their country, their grand ideas about building enterprises—suddenly I found kindred spirits in all my romantic longings.” It was May 1994. As soon as her plane landed in Beijing, she arranged a meeting with the Vantone partners.

  Four days after Pan and Zhang were introduced, he proposed. “He’s extremely sensitive to opportunities,” Zhang said, smiling.

  From the beginning, though, their relationship was to be a business partnership as well as a personal one. Pan had some vague ideas about attracting foreign capital, but he didn’t know how to go about it. Zhang wanted to find a role for herself in China, but she didn’t know where to begin. She found everything about Vantone, including its muddle-headed, overreaching business style, endearing. When she was taken to a construction site on that first visit, she was awed. “I had never seen a huge open pit like that in my life,” she said. “It was gigantic, and suddenly a sensation flooded my veins: China, a great expanse of land and horizon. It was grand. And then I went on a trip with the guys, sailing down the Yangtze. They’d hold their board meetings on the boat, and I’d join them at mealtimes. It felt so different from Wall Street.”

  Zhang and Pan were married in October 1994. A year later, Pan decided to leave Vantone, and Zhang left Wall Street. She and Pan started their own company. They called it Hongshi. (It was renamed SOHO China in 2002.)

  “Feng Lun must hate me,” Zhang told me when I mentioned having met with the chairman of Vantone.

  “Because you’re th
e Yoko Ono who broke up the band?”

  Zhang laughed, but that was her point. Still, Pan’s old partners have flourished as well. At one of the busiest intersections in Beijing, Pan and Feng each beam from two giant billboards, their portraits about fifty yards apart.

  “East meets West” and “Local unites with foreign” was how the Beijing media touted the alliance. But tensions between hai gui and tu bie arose almost immediately. On their honeymoon trip to the Great Barrier Reef, they had a heated argument. Pan was enraged by his bride’s neo-Marxist ideas: how ignorant, how callous toward Chinese suffering she was! Zhang, for her part, was shocked by Pan’s lack of idealism. The relationship grew even stormier when they began working together in their own company. Zhang now says that 1996 and 1997 were the hardest years of her life: she and her husband fought daily.

  In some ways, it was a clash between East and West. Zhang might have felt like an outsider on Wall Street, but in the world of Chinese business she was seen as so Westernized that she was practically a foreigner. She wanted regular staff meetings where everyone was informed about company issues and could contribute suggestions, because, she insisted, democracy was the way to manage and solve problems. But Pan’s experiences had convinced him that the way to run a company was to follow his own instincts: no questions, no explanations, no overlapping voices. “A country needs democracy, but a business needs autocracy, or it’ll go down the tubes,” he told his staff.

  Relations between Zhang and her husband’s old employees, who had followed him from Vantone, were also delicate. These men viewed Pan’s “foreign wife” with suspicion and jealousy, and Zhang found little sympathy for her ideas about quality and detail. Every time she rejected something that was done by her staff—and in the beginning she found 99 percent of the work “not up to the standard”—she’d get the same response: “You don’t understand the Chinese situation.” The Chinese situation, evidently, required a kind of “make-do” mentality. Gradually, Zhang began to doubt her experiments in workplace democracy. It seemed to result in people talking rather than working, and, she discovered, once the sense of hierarchy was weakened, it was hard to order people around. She began to feel defeated.

  To Beijingers, the names Pan Shiyi and Zhang Xin are linked to one large apartment-office complex, SOHO New Town. This was Hongshi’s first major project, and it hadn’t looked promising. The land belonged to a large liquor factory, and the stench was detectable from a great distance. Pan and Zhang went to survey the site on a rainy day, and, plodding through the mud and holding her nose, Zhang decided that it was too unpleasant to build on.

  Pan had a different view. The land was on a major avenue in the fast-growing Chaoyang district, near an area with a concentration of foreign embassies, international hotels, and shopping plazas. Traditionally, Beijing had developed along the north-south axis, but a recent trend suggested a rapid expansion toward the east side. New subway lines and highways were due to open in two years; plans to clean up the foul-smelling river nearby were under way. The zoning restrictions were less exacting than they were in the city center, so it would be possible to build much higher. Pan was also betting on a policy breakthrough: so far, the government had not permitted personal mortgages on housing, but he figured that it would do so within a few years, by which time construction would be finished. Personal bank loans meant that more people would be able to afford his upscale apartments. In short, instinct told him that location and timing, the two crucial factors in real estate, were both on their side.

  At that time, most Chinese developers were chasing quick money, and a project was often bought and sold many times before a single brick was laid. Contemptuous of this trend, Zhang intended to go international: she wanted to attract major foreign investors and build something grand, like Hong Kong’s Pacific Place. Pan was skeptical: he thought that would involve too many moving pieces and too much time. But he gave in, trusting his wife’s expertise in raising foreign capital. So Zhang set to work, turning down small investors in order to focus on major backers. After nearly two years of negotiations, GIC, a Singapore government company that manages the country’s foreign reserves, finally agreed to bankroll the project.

  Then, in July 1997, the Asian financial crisis struck, and the deal was suspended. Pan was furious, telling Zhang that if they had worked with small investors they would have finished building long ago. “You and your Wall Street strategies,” he roared. “It’s like discussing warfare on paper!” Zhang packed her suitcase and flew west to see her old friends. Pan went to Japan to cool down. Both assumed the marriage was over.

  In England, Zhang stayed at a friend’s country house. Despite the beauty and tranquility of the place—trees, horses, a pond—she felt restless: life in the West had lost its allure. If she didn’t return to China now, she decided, she never would. And if she was to be with Pan, they had to figure out another way to work together.

  She called him, and they had a long talk. “I will step down,” she offered. “You do it yourself.” And, she said, she wanted to have a child. This was, Zhang says, the most “rational” decision she had ever made in her life. “It was as though I gave myself a hard shove on the back.”

  She returned to Beijing and was soon pregnant with the first of her two sons. Pan took full command of the business. Working with small investors, he signed up contracts building by building. Meanwhile, the couple commissioned Yung Ho Chang, the architect who would later design the packed-earth house for the Commune by the Great Wall, to build a country house for them on the city’s outskirts.

  Zhang shuttled back and forth to supervise the work being done on the house, meeting and talking regularly with Chang. For him, architecture was the family business; his father had designed the National Museum of Revolutionary History on Tiananmen Square. But the son was American-trained and had an eclectic, postmodern sensibility, with particular emphasis on the cultural dimensions of architecture. Stimulated by their conversations, Zhang delved into piles of architecture books.

  “It was like taking a seminar,” Zhang told me. And she was delighted with the house, which she and Pan decided to call Mountain Whispers: tall steel columns, stone walls, large windows—cavernous yet flooded with light. It was to be the family’s weekend retreat. Her experience with Chang also awakened her to the possibilities of architecture. She looked back at all the buildings she had seen in Hong Kong, Europe, and America. Hong Kong, a city of dense population and high-rise apartment towers, was an especially useful reference: behind that ultramodern cityscape, every inch of space had been carefully calculated. Could this be achieved in Beijing?

  Pan Shiyi was too smart a businessman not to make full use of Zhang. So, before the SOHO New Town construction began, he worked out a division of labor: he would take charge of financial affairs (contract negotiations, fund-raising, sales, government relations), and she would handle decisions on architectural design, project management, and foreign relations. This time, Zhang proved to be well suited to the job. “She is moody, romantic, but a very shrewd businesswoman,” Hung Huang, a hai gui friend of Zhang’s and the publisher of several trendy Beijing lifestyle magazines, said. “It’s a potent combination.”

  For SOHO New Town, Zhang sought out young local designers and urged them to be bold. This resulted in a series of features for which the complex eventually became famous. The apartments had large living rooms but small bedrooms and no balconies—the opposite of traditional Beijing apartments. They had floor-to-ceiling windows, which traditionalists considered unsafe, and fine-finish woodwork, rather than the usual unfinished “white box” surfaces. Instead of the traditional gray, the color scheme was vibrant; red, yellow, green, and purple were used on the façade of every tower. At the same time, there were no costly, showy materials like granite and stainless steel. Some apartments had sliding walls, so that they could easily be adapted as office spaces. The concept of “SOHO”—Small Office, Home Office—was adopted with an eye to the growing number of small priva
te companies in Beijing.

  And then, to give the place an “artistic” feel, Zhang commissioned Ai Weiwei, a conceptual artist and an eminence in Beijing’s avantgarde circles, to organize a group of installations on the grounds. Ai had lived in New York City for years before moving back to Beijing. His reputation as an inveterate troublemaker would have scared off most developers, but Zhang gave him a budget and promised him total freedom. Ai didn’t disappoint her. Right on schedule, more than a dozen witty, stylish, and very “modern” sculptures and installations were placed in various public areas inside the towers, helping to attract the young, affluent cosmopolitans Pan and Zhang were targeting.

  Then, just before construction was completed and the sales campaign could be properly launched, Deng Zhiren, Pan’s sales chief, went to work for another company. Soon, Deng was hiring away much of Hongshi’s sales team and bad-mouthing Pan publicly. Pan and Zhang rushed to prepare statements and called for press conferences before more damaging stories could be aired. But suddenly developers, journalists, and even people who had already bought apartments in SOHO New Town were criticizing the project: the high prices, the uncertain quality. One rival developer, Ren Zhiqiang, the president of the Beijing Huayuan Group, called the SOHO New Town project “junk houses that should be bombed.” He went on television to complain that the SOHO design had received three points, a very low score, at the Municipal Housing Committee review. “It barely passed it,” Ren said indignantly. “But he gets a three-point product sold at a five-point price and makes a ten-point impact.”

  How to respond to the onslaught? “A hero would draw his sword and commit suicide,” Pan said with a sly smile, and his next move certainly looked suicidal. In the midst of the crisis, an elegantly printed volume collecting all criticisms of Pan and the SOHO project arrived at Beijing’s bookstands—published by Pan himself. The strategy worked: the more their opponents criticized their project, the more Pan and Zhang were able to defend and explain their ideas, and the more they talked to the press, the more persuasive they seemed. Until now, nobody in the real estate business had seemed as educated and knowledgeable, and certainly nobody was as media-friendly. No other housing project had ever enjoyed as much coverage.