To be a billionaire in China: Soho story

Billionaires List
China Developer's Lament
Gady Epstein
Forbes Magazine, March 29, 2010

Zhang Xin and her husband are the most familiar faces of a real estate boom in China. That doesn't make them a popular couple.

Chinese property prices were soaring to record highs late last year, defying gloomy predictions, when the alarm about a real estate bubble sounded from a most unlikely source: developer Zhang Xin, the 44-year-old chief executive of Soho China."If you look at the central areas of Shanghai, Beijing, Shenzhen and Guangzhou, prices have doubled," Zhang says. People rush to build and sell more property to speculators, though there is no apparent need for more buildings, and the bubble keeps growing, she says: "For the country, I think it's very dangerous."

The irony, not lost on Zhang, is that few private citizens could serve as better symbols of the China bubble than she and her husband, Soho Chairman Pan Shiyi. (He transferred his shares to her in 2005.) Last year they made the biggest land purchase in Beijing by a non-state-owned company, at $586 million for 12 acres, and also broke ground on their most ambitious architectural effort yet, the Zaha Hadid-designed Soho Galaxy. They are, if not speculators, certainly enablers of those folk.

Declares Zhang: "My role as a producer is to produce. I happen to know that they don't need it so much. But it still doesn't stop me from producing so long as they are queuing up outside and want the product."

This is the Chinese economy in a nutshell--sellers selling a product for which there's no natural demand, buyers buying whether they need it or not. In a market boosted by government-directed lending, both sellers and buyers have been getting only more ambitious and frenzied.

For the seller, at least, this is perfectly rational. To not get in while the economy is hot means missing easy profits. Even as Zhang the Cambridge-educated leftist argues the real estate bubble is disserving the nation, Zhang the Wall Street-trained executive can argue reasonably that not participating in it would be disserving her shareholders. Sales at Soho China nearly doubled last year to $2 billion.

As Zhang wonders where her country is heading, the tycoon is at the peak of her capitalist career, 15 years after she cofounded the company that became Soho. Fifteen years from now, will Soho China's many skyscrapers in the Beijing's skyline be admired? Or will they be scorned as icons of short-cut capitalism, built cheaply and sold for piles of cash to mining magnates and corrupt officials?