Tuesday, August 11, 2009

Pan Shiyi, Land Kings, and Drunk Driving


Pan Shiyi: Central SOEs Becoming Land Kings is Like Driving Under the Influence


Couldn’t resist translating this one. Today’s Oriential Morning Post, August 11, 2009. Pan Shiyi is prolific blogger and commenter on real estate industry (as well as being Chairman of Soho China (Hong Kong listed, code 00410)). BTW, here is link to Pan’s blog:
Unfortunately, only in Chinese. Very interesting cartoon posted today related to government departments conducting land auctions above the table and “behind closed doors business” under the table. (See http://pan-shiyi.blog.sohu.com/129352411.html)

OMP Reporter Liu Xiuhao

Having just returned from an observation trip, the chairman of SOHO China (HK 00410) yesterday renewed his regular Internet chats. In regards to the recent appearance of multiple land kings, Pan Shiyi again said something amazing, that these companies are “creating a bubble for short-term benefit.”

Pan Shiyi expressed that the main reason for the appearance of land kings is that for some large SOEs, in the current background, it is easy to obtain financing and their costs are low. But, turning land into sales revenue and profit requires specialized knowledge and experience, requires a grasp and understanding of the market. These large, state-owned enterprises that have suddenly entered the real estate industry must be very careful about this to avoid an enormous waste of social wealth.

In comparing this phenomenon to the recent tragedies from car accidents, Pan Shiyi commented, “there are a large portion of car accidents that are caused by drinking and driving. Some people will disregard their health and other people’s lives in order to gain a moment of happiness. This is the same principle as the market.” “Some enterprises will create a bubble in order to gain short-term benefit. In the long-term, this bubble will certainly pop.”

While Pan Shiyi was abroad, the news of SOHO China acquiring Shanghai Donghai Plaza, owned by Morgan Stanley, was repeatedly hyped. The latest version was a lawyer’s letter that said Donghai Plaza has many problems so its sales has hit at an impasse.

But Pan Shiyi’s answer to this news twisted around the issues. He said: “At present I have not received any lawyer’s letter. I have only seen a public letter and some complaint files to the government departments of SMDRC [Shanghai Municipal Development and Reform Commission] addressing my company through media outlets. I only have four characters [two words] to respond to this issue: No comment.”

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