Investment Updates News
- Going out west in China: a new home for locals and foreign investors?
Date: 12-Oct-2007 Sources: (People's Daily)
Is it a good idea for foreign investors to tap into the market in less-developed regions in China? Yes, it is a bumpy road; but it is worth the money and efforts, reported the CEO of a UK-based company working on development projects in northwest China. For the environmental improvement made by his development he has been offered the Friendship Award, the highest honor awarded to international experts annually by the Chinese government.
Martin Wragge is one of fifty winners of the award in 2007. On September 30, he and the winners met with Chinese Premier Wen Jiabao; and were invited to the grand reception banquet hosted by the State Council, attended by top Chinese leaders including President Hu Jintao, to mark the 58th anniversary of the founding of the People's Republic of China. Altogether 949 experts from 56 countries have won the award since 1991, when it was established.
Mr. Wargge's LRPS China, a wholly-owned subsidiary of the UK-based China Development Company, has a 4.5 billion yuan mega-development in Yinchuan, the capital city of Ningxia Hui Autonomous Region, in China's less developed northwest region.
The Forest Park, as the development is called, used to be a desert, covers some 180 hectares of land; and stands between the old section and the new one in Yinchuan. Construction began in 2003, but marketing was very difficult until 2006, when the beautiful, 100-hectare public park was finished. Water was diverted from the Yellow River, and trees were planted. The park has made a great difference in the local environment.
It also did so for its own market performance. LRPS China has sold 70 percent of 1,000 apartments and 434 villas in its first phase. It will offer another 2,000 apartments and a water-front shopping center in 2009. Half of buyers are from neighboring areas like Inner Mongolia and Shanxi. The shopping center is designed to be middle-market. 'You can't imagine how much cash those Chinese are holding,' Mr. Wragge said.
As any other foreign capital, LRPS is attracted to the rapid growth of China's economy. 'There is huge growth potential here,' said Mr. Wragge. Another 'particular' reason is that most of the shopping centers in China, he thinks, are 'incorrectly designed.' He is confident that they will build 'one of the best shopping centers in China.'
What he looks at are second- or third-tier cities in China. The advantage for business there, of course, is the lower cost. However, the risk is in the lower prices, which mean a lower margin. The government's efforts to slow down the economy is having an impact on real estate business.
What has brought Mr. Wragge to Ningxia and Yinchuan is the 'most dynamic management style' he has ever seen 'anywhere in the world.' He found himself dealing with people (local head provincial and municipal officials) 'who have the vision, see the vision and just do it; just go and do it.' It is in contrast with his experience in western countries where 'so many committees and decision-making levels' slow down the process. He has been in Yinchuan for five years and witnessed how rapidly the city has been growing over the years. 'My impression is that Hu Jintao is bringing in newer and younger leadership everywhere in China,' he said.
Therefore, he believes it is a good idea to invest in China's western regions if you are 'fortunate enough to go to cities with this kind of dynamic management style.'
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