Tide Players: The Movers and Shakers of a Rising China

by Jianying Zha

  “In this day and age,” Pan said, “only a real person, a controversial person, can attract others’ attention. Only then will people be concerned about you.” Pan cited as his inspiration an American who was even more famous than Donald Trump: Bill Clinton. Clinton’s media performance during the Monica Lewinsky scandal impressed him. “When he looked worn out, he still had to go to evening parties, face foreign reporters,” Pan noted. “The pressure must have been huge!”

  After a long, anxious wait, in late 1999, just as SOHO New Town was nearing completion, the mortgage bill was finally issued. In a way, this was a consequence of the Asian financial crisis, which convinced the Chinese government that it couldn’t rely entirely on foreign capital and exports, and that it was necessary to stimulate domestic consumer demand as well. At the sales office, people lined up through the night, and all two thousand units quickly sold. SOHO New Town became an instant landmark. Its modern, minimalist style established a trend, and Pan and Zhang became famous.

  “It’s an odd but telling phenomenon,” a Hong Kong businessman now living in Beijing said to me. “In Hong Kong, business tycoons are the true celebrities. At a glamorous gathering, tycoons get front seats, while movie stars are a bit on the sidelines. But Beijing’s celebrities are almost all movie stars and artists. Pan Shiyi and Zhang Xin are practically the only businesspeople.” His explanation was simple. “Most superrich people in mainland China cannot publicly explain their fortune,” he said. “Lai lu bu ming, ‘the origin is unclear.’ They have to keep a low profile. How can a member of the ‘princelings’ [the children of Party leaders] preen in the media after using Daddy’s influence to rake in millions? Or those who made it to the top through massive corruption and misuse of public funds? Pan Shiyi was poor, a nobody. Sure, they must have some connections, and you could question that first company loan in Hainan. But that’s nothing on the corruption scale.”

  There’s no doubt that corruption is endemic in the Chinese real estate business. For example, until recently land sales weren’t open; a bidder wasn’t entitled to know what anyone else had bid, and an underbidder could prevail by offering kickbacks to a few relevant officials. In August 2004, though, the government finally established new rules that call for open auctions in Beijing. “With the open-auction law, the government is saying to developers, ‘You have made a lot of money from nothing, now you must buy land with real money and compete with others, including foreign companies,’ ” said Keith Abell, the vice chairman and co-founder of GSC Partners, an investment firm based in New York. Abell has been visiting China regularly since 1979; he also happened to be Zhang’s boss at Travelers Group. In the 1990s, when a big American developer came to him wanting to go to China, Abell advised against it: “I told him, ‘You are not ready to do the things you must do to build in China—you aren’t some guy from Hunan.’ ” But, he said, the situation in China has improved a lot since then. Others in Beijing real estate are skeptical that the open-auction system will end corruption. Counterstrategies, they pointed out, are already being devised. “Instead of buying the land,” one of them explained, “a developer could just buy the factory or the company that’s using the land. That way, they could bypass the open auction and cut deals among themselves.”

  In the real estate community, Pan and Zhang are widely admired, but not because people think they’ve entirely escaped the usual mire of Chinese land transactions. How can anyone emerge from the mud completely clean? Now that Pan and Zhang are part of the establishment, though, they’re intent on rehabilitating the image of their profession; besides, well-funded businesses like theirs stand to benefit from greater transparency and clearer regulation. In both 2002 and 2003, SOHO China ranked first in individual project sales among Chinese real estate companies; in 2004, it paid more taxes than any other real estate company. The firm also bought the first piece of openly auctioned land within Beijing’s Central Business District, where it has built another project, called SOHO Shang Du: a 170,000-square-meter office and shopping complex. SOHO Shang Du is also one of Pan and Zhang’s most architecturally ambitious developments. Designed by the Australian Peter Davidson in a style that has been described as “fractal geometry,” its two main towers rise like iceberg shards. In January 2005, the image-conscious couple hosted a tsunami-relief fund-raiser on the Shang Du site, jointly organized by the International Red Cross, and donated a million yuan that day. Other developers later followed their lead.

  Hung Huang, the magazine publisher, sounds almost rapturous when she speaks about China’s first generation of self-made millionaires. (According to a recent survey, she told me, there are more millionaires in China now than there are in France.) “China has produced thousands of Horatio Alger stories,” she said. “Look at Pan Shiyi and Zhang Xin: a peasant’s son, a girl who used to work in a Hong Kong sweatshop. I just love it! Pan Shiyi is the Donald Trump of China. This kind of success story was unthinkable ten years ago.”

  Not everyone shares this sunny perspective. A Hong Kong-based scholar and critic who writes on architecture and urban culture charges Zhang Xin and Pan Shiyi with being the self-satisfied creators of a new kitsch; in his view, the lifestyles and buildings they promote are nothing but superficial, sterile trend-mongering. “This could be dangerous if people start thinking that’s real culture,” he said. Pan and Zhang have also been condemned for making the basic necessity of shelter increasingly unaffordable. “Aren’t they responsible for Beijing’s absurdly high housing prices?” the critic asked.

  Certainly when Pan’s former Vantone partners described him as a “real estate genius” and “the most successful private developer in Beijing,” they were referring not to the quality of his buildings but to his knack for selling them at such high prices. In interviews, Pan has been happy to talk about how he had been the only person at the company sales meeting to insist on setting a high price for the Vantone New World Plaza. “They all stared at me as if I was a madman,” he said. But he got his way, and, in the end, he recalled, the profits were so huge that at a company gathering afterward, “the men’s eyes were all glazed, as if they were drunk.”

  Pan once said, “A businessman should be greedy by nature, but he must also be rational.” He has, it would appear, been at once greedier and more rational than his colleagues. That’s probably why he has consistently focused on upmarket construction: it’s more lucrative as well as more glamorous. (He talked about waiting for the government to open up the secondhand housing market, and he had a vision of a social pyramid: the rich would buy his upscale homes and sell their old homes to those who are less well off.)

  “He’s someone who can change himself swiftly in a new environment,” Feng Lun, Vantone’s chairman, said. Similar things might be said of Zhang. But it’s also plain that she’s the one who has had to change more in order to thrive in China, and this reflects a common pattern in the relations between the cosmopolitans and the locals—between, in turtle terms, the hai gui and the tu bie. Though well trained, confident, and in demand, hai gui usually go through a period of readjustment, because the foreign ideas and manners they picked up from years of living abroad often create tension with the settled Chinese way of doing things. As one of my hai gui friends put it, “Hai gui will bring in some new ideas, new concepts, but tu bie know the rules of the game, and they know how to make it happen, or not happen.”

  Still, without Zhang, I wonder if it would be possible to distinguish Pan’s buildings from those of other developers, like Feng Lun. “In the tide of globalization, it’s hopeless to stress a particular regional character,” Zhang said to me in one of our conversations. “But I feel that we should at least stop for a minute and think about our own contemporary character, our modern identity. All past dynasties left something special in Beijing: the Great Wall, the Summer Palace. We are so eager to build our big cities, but ten years from now we might be shocked by what we build, and it’ll be too late. What we are doing in Beijing is an effort to leave something that we won�
��t be ashamed of.”

  By now, Pan and Zhang represent both the advantages of a tu bie-hai gui partnership and the difficulties. They have two sons, named Rang and Shao, or Concession and Less. The names were Pan’s idea: these are ancient virtues in Taoism. Yet there are subtle signs of tension. On an evening that I was to have dinner with Zhang, we were talking in her office when Pan sauntered in from his office at the opposite end of the SOHO tower. We all stood chatting together for a while. Before leaving, Pan said, in a jesting tone, “So, nothing to do with me this evening?”

  “Go off,” Zhang replied dryly. “Don’t think you are so important!”

  But he showed up anyway, while we were in their SOHO New Town apartment. “We keep a home for ourselves in every place we build,” Zhang told me. The apartment is a duplex, spacious and comfortable, furnished with IKEA-style furniture, track lights, and plants—a typical yuppie home. And dinner was simple: porridge, stuffed pork naan, a couple of pickled dishes, a green leafy vegetable. The three of us chatted for a while, and I brought up the subject of hai gui. “You know,” Pan said, half teasing, “if you write only about hai gui, you’ll hurt us tu bies’ feelings.”

  Later that evening, I asked Zhang if she had had to make many “accommodations” when she returned to China.

  “Yes,” she said. “As a matter of fact, for a very long time I was basically shedding the baggage I carried back from abroad. I had to de-educate myself.”

  She admitted that moving back changed her from a romantic to “a market advocate.” But the arrogant new rich in China, she said, made her wonder about her own role. Has her work helped make people more civilized, or just more materialistic? She once wanted to be an intellectual, someone with a sense of social responsibility. But now she is viewed as a rich person, and in China today the rich are assumed to be devoid of social ethics or public spirit.

  It was midnight. We had been sitting at a long glass table out on the deck, a large walled-in terrace garden that Zhang calls her “courtyard in the sky.” The apartment was dark inside. The boys had gone to bed hours earlier. Pan was nowhere to be seen. The night had grown chilly.

  I brought up the issue of land sales, of the pervasiveness of corruption, of “gray areas” in Chinese business and life. I asked her how she felt about all this, having lived in the West for years.

  “Each side has its own ways,” she said carefully. “Westerners have a simplistic understanding of China: whatever can’t be clarified must be guanxi. The West doesn’t understand that government in China is not as lean and efficient as it is in the West. There are too many governmental bodies: city, county, township, even a neighborhood is a government. It’s all a messy tangle. Many things in China are vague. Some of our clients walk in and buy a dozen apartments in one shot. You don’t know where they got the money. You just know some Chinese have a lot of it. It’s a waste of time to try to clarify everything. I used to argue with Pan about it, because by nature I have a very low level of tolerance for vagueness. I’m not one who can fish in murky water. Pan is totally comfortable with murkiness. That’s his normal state. And I’ve learned to tolerate it.”

  Postscript

  In 2007, Pan and Zhang took their company public and got SOHO China listed on the Hong Kong Stock Exchange. Since 2005, the company has shifted its business focus from building upscale residential housing to developing upscale commercial space, which has a higher profit margin. With a concentration in the Central Business District, in 2009 SOHO China enjoyed the highest contracted sales among real estate development companies in Beijing.

  After the 2008 global financial crisis, much of the Chinese government stimulus fund went into real estate. Housing prices in Chinese cities soared despite widespread criticism and warnings of a debt-driven bubble. Pan and Zhang have also talked publicly about the bubble, even as their own business reaped its benefits. In 2010, the government intervened with policy measures meant to put the brakes on the overheated housing market, yet powerful state-owned companies continued to drive up prices by outbidding private developers for land. The new policies, however, would not affect upmarket commercial developers like SOHO China. At the time of this writing, the company had two major projects under construction in Beijing, both designed by Zaha Hadid. Meanwhile, it is poised to expand to Shanghai, having acquired a choice plot of land in the Bund area in June 2010.

  Zhang Xin has been ranked on the Forbes list of the world’s top ten self-made richest women, with an estimated fortune of $3.8 billion. Besides their numerous houses in China, the family also owns apartments in London and New York, where they spend part of the summer. In recent years Pan and Zhang have found their faith in Bahai. Workshops are offered in their company for employees wishing to study the religion.

  Zhang feels pessimistic about China’s future these days. After she opened a weibo, the Chinese version of a Twitter account, late in 2009, she said she was shocked by how Chinese hated the new rich like her and her husband, and at how much anger and negative sentiment percolated on the Internet. When we met recently, Zhang admitted that she had been disconnected from “the real China” until she opened her weibo and read the daily postings. Now she seriously worries that the country is heading toward a major crisis.

  In 2005, the SOHO China Foundation was established. The foundation’s donations have been modest but slowly increasing: 2 million yuan ($250,000) for the Sichuan earthquake relief effort; 1 million yuan ($125,000) for a migrant training initiative; 10 million yuan ($1.25 million) for building rural school facilities. Its main charity project so far is an aid program in Gansu, Pan’s hometown region, where it has funded the construction of thirty-five school toilets and provided teacher training for a student character-building course.

  To date, most of the first-generation Chinese millionaires, including Pan and Zhang, have not turned to serious philanthropy. Their support for education and poverty-alleviation causes has been minor in scale. The public image of real estate developers as selfish robber barons persists. After hearing a good deal of sneering comments about Pan and Zhang as a slick, media-savvy, self-enriching couple, I wondered whether and when they might do something significant to prove these criticisms wrong. Do they find stories of great American entrepreneurs-turned-philanthropists such as Rockefeller, Carnegie, and MacArthur inspiring, despite the differences in their social, political, and religious culture? In this age of globalization, China’s new rich have been influenced by and have emulated their wealthy Western brothers and sisters in so many ways, but will they someday also follow contemporary examples of iconic figures like Bill Gates and Warren Buffett?

  Buffett and Gates have made world headlines for calling on Western tycoons to publicly promise to donate their fortunes either during their lifetimes or in bequests after their deaths. So far, forty people have taken the pledge. At least one Chinese multimillionaire, Chen Guangbiao, a self-made entrepreneur known as China’s number-one donor, has said he will heed the two men’s call by giving away his entire fortune, an estimated $735 million, to charity upon his death. “I don’t want to become a slave to my wealth,” Chen told CNN.

  On September 30, 2010, Gates and Buffett hosted a muchtalked-about dinner in Beijing, inviting fifty of China’s richest entrepreneurs to discuss philanthropy in China. Pan Shiyi and Zhang Xin attended, as did Feng Lun, the Vantone chairman. Pan praised the American duo as “setting a fine example for entrepreneurs around the world.” Zhang wrote in her weibo that “American philanthropy is very mature, especially the Gates [Foundation]. We’ve only started and have a lot to learn.”

  But faced with media criticism that China’s superrich is too miserly to measure up to Western philanthropic standards, Feng Lun’s response has been the most interesting. He reminded the public about the unique history and circumstances of China’s entrepreneurial class: in 1956, its entire wealth was nationalized by the young People’s Republic, or, as Feng put it, it was “统统裸 捐给国家了,” a “total, stripped-naked donation to th
e state,” which, ironically, resulted in decades of impoverishment for the entire society. Today, Feng said, Chinese entrepreneurs “should not only have good hearts, but also have good management of good deeds.” However, he said, we need not feel morally inferior to the Western tycoons, because “we have started philanthropy earlier than them.” He noted that Bill Gates set up his foundation twenty-five years after he started his company, and Buffett got into serious charity only after his company had made money for fifty years. But China’s entrepreneurs have typically established their charity foundations within ten to fifteen years of founding their own business companies, even though Chinese law in this area is still quite primitive. At the present, China already has over six hundred private charity foundations, the majority of them by private entrepreneurs. Vantone registered its own foundation in 2008, and Feng himself has also played an active role in SEE, a major environmental foundation funded by over a hundred Chinese entrepreneurs.

  Peng Jianmei, director of the China People’s Charity Donation Information Center (中民慈善捐助信息中心), expressed a similar view. “Based on our annual account of donation from the business sector,” she told reporters, “private companies have given more than state companies, and indigenous companies have given more than foreign companies. There are many large-scale foreign companies in China, such as McDonald’s, Nescafe, Carrefour, IBM, and so on, but their donation have not been in proportion with the profit they have made in China. This means that foreigners don’t necessarily have stronger ideals about values than Chinese. And Chinese entrepreneurs don’t need others to ‘persuade’ them, because they have been doing so all along.” She admitted, however, that America has better laws to protect donations and donors, whereas China is still in the process of drafting its laws on charity. So this is not a problem of the individuals but of the whole society.