蜗居: Housing for a Snail
As of today, December 7, 2009, the Chinese sitcom “Wo ju” or “snail-house” has been viewed 41.98 million times, up from just under 30 million yesterday, on Youku--one of the top streaming video sites in China. (Source: Youku website, www.youku.com, videos/sitcoms; the awkward translation into English is “Dwelling Narrowness”).
The popularity of the sitcom arises from its topicality, that is, the toils and troubles of buying a house for ordinary people in China today. Depending on statistics that are used to calculate, the average ratio of yearly income to housing price is somewhere around 40 to 1.
Wo Ju is based on a novel by the author Liu Liu published in 2007. The story is of two sisters, one of whom purchases a house with money borrowed from relatives and loans. In order to pay back the debt, the younger sister has an affair with a government official who pays off some of the money.
As with all television programs, it is flattering and appealing to its audience, which is why it is so popular with white-collar workers who are more likely to be on the Internet and watching Youku in the first place.
Yet the phenomenon of house slaves “fangnu” or 房奴 is alive and well in China today. The introduction of economy housing in Shanghai will have an effect, but given the large size and ability of consumers and investors to “play” the market, these will end up as investment and speculation targets without doubt.
Would be worthwhile to put the series into English, but there are no resources at the moment. Below I am pasting the summary in Chinese from Youku (http://www.youku.com/show_page/id_zcc16fae6962411de83b1.html):
蜗居
33 集全
简介: 郭海萍自从大学毕业留在上海生活便打定主意存够付首期的钱就买房子。但看来看去那些房子总不能令她称心如意，海萍就这样和丈夫苏淳在一间租住的只有十几平米大的小房子里生活了五年，两个人从恋爱结婚到女儿冉冉出世都是在这间小房子里度过。突然出生的孩子已经让夫妻俩手忙脚乱，再加上来帮忙的外婆这空间就显得更加拥挤，海萍只好让她妈把冉冉带回老... 郭海萍自从大学毕业留在上海生活便打定主意存够付首期的钱就买房子。但看来看去那些房子总不能令她称心如意，海萍就这样和丈夫苏淳在一间租住的只有十几平米大的小房子里生活了五年，两个人从恋爱结婚到女儿冉冉出世都是在这间小房子里度过。突然出生的孩子已经让夫妻俩手忙脚乱，再加上来帮忙的外婆这空间就显得更加拥挤，海萍只好让她妈把冉冉带回老家照顾，自己立刻回去上班，继续存钱准备买房子。女儿毕竟是自己身上掉下来的肉，海萍对冉冉的思念与日俱增。为了省钱存钱，她节衣缩食，甚至限制自己打长途电话的时间和回老家次数，但心里的那份记挂是怎样也限制不了的。与冉冉相隔千里的日子郭海萍熬了将近三年，这三年海萍省吃俭用过得很艰难。
终于，郭海萍等不下去了，因为冉冉已经快要不认识她了。为了把女儿接回身边，海萍决定要立刻买房子。可今时不同往日，上海的房价已经在日日攀高，他们两口子的存款离首付还有太大的距离。除了存款，海萍打算她和苏淳都再问各自的父母拿一部分钱，最后还差两万块她只好向妹妹郭海藻开口。比她小七岁的妹妹郭海藻与海萍一直相依为命不分你我，姐姐缺钱，海藻二话不说就把自己仅有八千块存款都给了她，不够的又问男朋友小贝把他们存着准备结婚用的钱也拿了出来。郭海萍选好了一套全新的房子，只等苏淳家里的那笔钱一到，首付就能交上了。苏淳心里很矛盾，他一面觉得家里条件不好存钱不容易，自己没尽到孝道不说还要再伸手向父母要钱，实在开不了口。可另一面又是老婆几次三番的催促，付了首付就能让他们从房子的困境中解脱出来。终究苏淳还是没有向家里要钱，向来老实本分的他选择了从朋友手里高息借贷，还瞒下了海萍钱的来历。苏淳如何也想不到自己情迫无奈借下的这笔钱，会给这个家给周围的亲人带来了多大的变化。当郭海萍知道已经交了房款首付的钱里有六万块是丈夫借来的高利贷时，她几乎要发疯了，绝望的海萍要与苏淳离婚。从小到大都是海萍在妹妹前面遮风挡雨，现在她彻底被房款的事弄得接近崩溃，海藻认为这次她必须站出来扶住姐姐不让她倒下。可小贝却不那么想，他没有同意再拿钱给海萍，还说这是海萍虚荣的代价。小贝不能理解海藻心里的感觉，从父母意外的背上违反计划生育的负累将她带到这个世界开始，郭海藻就是多余出的一条命，是因为姐姐才留下了她这条命，也是姐姐悉心照顾了她这二十五年，总之这份感情是让海藻为了姐姐去死她都愿意的。心急加上气愤的海藻咬着牙去找了宋思明借钱，其实她和这位宋先生只在应酬的场合中见过几次，但海藻一开口宋思明就爽快的答应了。这难住了郭家姐妹的六万块钱对于宋思明来说，根本不放会在眼里。此刻，他眼里只有郭海藻，这个令他魂牵梦萦的小女人，不过海藻并不知道这些。当时海藻只知道为了能帮姐姐解困，她不惜一切。
高利贷的钱虽然还了回去，但海萍心里的怨气并没有减退，苏淳也自知理亏。婚倒是没有离，但两口子陷入了从没有过的长期冷战。夫妻感情并没有影响到海萍工作的热情，宋思明有个叫MARK的外国朋友想找家教学中文，海萍想着尽快存钱还款便硬着头皮接下了这个差事。在海萍的努力付出下，MARK的中文水平有了很大突破，也排除了当初对海萍教学能力的疑虑，这令海萍大受鼓舞。可还没有时间喘口气，麻烦又来了，郭海萍租住的房子要被强制拆迁，必须得立刻找地方搬走。宋思明给了海藻一套空着的房子让海萍暂时住进去，正好也离MARK家比较近，方便她去上课。海萍和苏淳抱着重重的疑虑还是搬进了这套对他们来说富丽堂皇的公寓，一时间好像什么麻烦都没有了。海萍卯足力气开始她的新生活，工作兼职两不误。但与此同时，海藻也开始了一种她从未体验过的日子。在与宋思明意外的共度一夜之后，两人的交往从舒适变为尴尬。而现实中宋思明像是一个巨大的隐形人在后面结结实实的撑着她，海藻感受到了小贝如何也给不了她的那份支撑，这个沉稳又浪漫的男人已经在渐渐征服她的心。
Monday, December 07, 2009
Sunday, November 29, 2009
Cutting off Black Taxi’s Fingers
Sun Zhongjie, a company driver for a construction company in Shanghai, set off to pick up a co-worked getting off work on the night of October 14. Along the way, he was stopped by a man in the street who was shivering, said he had been waiting for 1 hour for a taxi, and was trying to get somewhere urgently. As the location was along his route, Sun agreed to take the man.
A key aspect of this, from my perspective, is that it occurred in the former Nanhui District of Shanghai, now absorbed into the increasing massive Pudong (with a population of over 4 million by the end of 2009). This is an area often called a “suburb” by geographers of China—it is far from the city center, and outside the “Outer Ring Road”. These areas are often sparsely developed, and have their own “district” taxis that are not allowed inside the Ring roads. Further, a license plate, which in Shanghai 2009 goes for over 30,000 yuan at auctions, is much cheaper if one buys one that is valid outside the Outer Ring only. That, plus a cheap QQ automobile, selling for about 20,000 RMB, allows one to operate a business as a “black” (illegal and unlicensed, not paying taxes) taxi driver. This occurs not only in Nanhui, but in Minhang, Songjiang, Zhabei, and other areas far from the center of “urban” Shanghai.
Another key aspect of the context for this incident is a current drive to eliminate black taxis before the World Expo by the Shanghai government. On the news nightly there are stories and reports about how black taxis clog the roads and are difficult to catch (since the passenger does not admit they are paying the driver, and the driver doesn’t admit he [mostly male] is being paid to drive.
Hence the method for catching black taxi drivers is to “fish” (diaoyu) for them. Typically, this means an enforcement officer will “hire” a taxi to take him somewhere, sometimes the traffic enforcement station, then pay the driver. After which, the officer arrests the driver and fines them 10,000 RMB.
On October 14, Sun was not a black taxi and did not solicit his rider. Instead, the passenger rode with Sun for a few kilometers, then threw money at him and took his keys. The company van was impounded in lieu of the fine.
Sun was distraught. At his dorm that night, to prove his innocence, he cut off his little finger.
The fallout has been a backlash against this type of “fishing” enforcement (it is literally fishing, 钓鱼, in Chinese but can be translated as entrapment in English).
Unmentioned, and in my mind more important, is unnecessary campaign to eliminate black taxis. In Shanghai, there are close to 50,000 taxis. The top five companies and their colors are Dazhong (aqua), Qiangsheng (yellow), Bashi (green), Haibo (blue), and Jinjiang (white). They are all owned by the local Shanghai government. There are also small company and individual proprietorship taxi companies. However, the taxis are concentrated in the city center—since center residents are wealthier, and there is more demand. The lack of sufficient transportation infrastructure and taxis in the “surburban” areas, outside the Outer Ring Road, outside the core urban area, leads to a need for black taxis.
Instead of satisfying this need, the campaign is targeted at eliminating the supply. This lead to the loss of Sun Zhongjie’s finger, as overzealous enforcement of something demanded by ordinary people and operated by hardworking black taxi drivers (mostly migrants) lead to a tragedy.
Background of story from China Daily:
http://english.people.com.cn/90001/90782/90872/6794803.html
A key aspect of this, from my perspective, is that it occurred in the former Nanhui District of Shanghai, now absorbed into the increasing massive Pudong (with a population of over 4 million by the end of 2009). This is an area often called a “suburb” by geographers of China—it is far from the city center, and outside the “Outer Ring Road”. These areas are often sparsely developed, and have their own “district” taxis that are not allowed inside the Ring roads. Further, a license plate, which in Shanghai 2009 goes for over 30,000 yuan at auctions, is much cheaper if one buys one that is valid outside the Outer Ring only. That, plus a cheap QQ automobile, selling for about 20,000 RMB, allows one to operate a business as a “black” (illegal and unlicensed, not paying taxes) taxi driver. This occurs not only in Nanhui, but in Minhang, Songjiang, Zhabei, and other areas far from the center of “urban” Shanghai.
Another key aspect of the context for this incident is a current drive to eliminate black taxis before the World Expo by the Shanghai government. On the news nightly there are stories and reports about how black taxis clog the roads and are difficult to catch (since the passenger does not admit they are paying the driver, and the driver doesn’t admit he [mostly male] is being paid to drive.
Hence the method for catching black taxi drivers is to “fish” (diaoyu) for them. Typically, this means an enforcement officer will “hire” a taxi to take him somewhere, sometimes the traffic enforcement station, then pay the driver. After which, the officer arrests the driver and fines them 10,000 RMB.
On October 14, Sun was not a black taxi and did not solicit his rider. Instead, the passenger rode with Sun for a few kilometers, then threw money at him and took his keys. The company van was impounded in lieu of the fine.
Sun was distraught. At his dorm that night, to prove his innocence, he cut off his little finger.
The fallout has been a backlash against this type of “fishing” enforcement (it is literally fishing, 钓鱼, in Chinese but can be translated as entrapment in English).
Unmentioned, and in my mind more important, is unnecessary campaign to eliminate black taxis. In Shanghai, there are close to 50,000 taxis. The top five companies and their colors are Dazhong (aqua), Qiangsheng (yellow), Bashi (green), Haibo (blue), and Jinjiang (white). They are all owned by the local Shanghai government. There are also small company and individual proprietorship taxi companies. However, the taxis are concentrated in the city center—since center residents are wealthier, and there is more demand. The lack of sufficient transportation infrastructure and taxis in the “surburban” areas, outside the Outer Ring Road, outside the core urban area, leads to a need for black taxis.
Instead of satisfying this need, the campaign is targeted at eliminating the supply. This lead to the loss of Sun Zhongjie’s finger, as overzealous enforcement of something demanded by ordinary people and operated by hardworking black taxi drivers (mostly migrants) lead to a tragedy.
Background of story from China Daily:
http://english.people.com.cn/90001/90782/90872/6794803.html
Disney’s Land in Shanghai
The area of land approved for Disneyland in Shanghai is contained in a document issued by the Shanghai Municipal Planning and State Land Resources Administration Bureau. The document is numbers Shanghai No. 480, and targets the area of Chuansha Town (this area is close to Shanghai Pudong International Airport, and is only known to me because if you take a taxi from Pudong International and say that you are going to “Chuansha”, the taxi queue manager will give the driver a ticket to skip the queue upon return since Chuansha is too close to the airport, and taxi drivers wait from 4 to 8 hours for a customer from the airport).
An announcement on the document can be found here (in Chinese):
http://www.shgtj.gov.cn/ghsp/ghxk/ghxkz/200911/t20091126_333459.htm
According to publication, the total area is 4.12 million square meters, of which 2.23 million are awaiting requisition, meaning that people are still living there. Interesting, after the public announcement of Shanghai Disney, there has apparently been a flurry of building in the area designated for development. Farmers in area view this as an opportunity to increase the amount of compensation owed them, since compensation for relocation is often based on the total area of housing.
Story from Shanghai Daily on Shanghai farmers building on Disney’s land, post-announcement: http://www.shanghaidaily.com/sp/article/2009/200911/20091112/article_419234.htm
This should dispel the idea that farmers being kicked off there is a one-sided process where innocent rural subjects are deprived of land and life by a totalitarian or authoritarian government. Clearly there are multiple tactics, illegal in this case, that farmers adopt to slow and make difficult the process of urban development.
An announcement on the document can be found here (in Chinese):
http://www.shgtj.gov.cn/ghsp/ghxk/ghxkz/200911/t20091126_333459.htm
According to publication, the total area is 4.12 million square meters, of which 2.23 million are awaiting requisition, meaning that people are still living there. Interesting, after the public announcement of Shanghai Disney, there has apparently been a flurry of building in the area designated for development. Farmers in area view this as an opportunity to increase the amount of compensation owed them, since compensation for relocation is often based on the total area of housing.
Story from Shanghai Daily on Shanghai farmers building on Disney’s land, post-announcement: http://www.shanghaidaily.com/sp/article/2009/200911/20091112/article_419234.htm
This should dispel the idea that farmers being kicked off there is a one-sided process where innocent rural subjects are deprived of land and life by a totalitarian or authoritarian government. Clearly there are multiple tactics, illegal in this case, that farmers adopt to slow and make difficult the process of urban development.
Denouement on Yide and Zhou Xiaodi
Once ranked on the Hurun Report as one of China’s biggest philanthropists, Zhou Xiaodi has finally been sentenced to serve 14 years in jail as the result of real estate dealings in Shanghai. The sentence was handed down on November 5, 2009.
See the news article from the Shanghai Daily here:
http://www.shanghaidaily.com/sp/article/2009/200911/20091105/article_418540.htm
Interestingly, as well, is that his sentence included a fine of 300 million RMB, or 44 million USD.
The story dates from the days of rural Shanghai and lax oversight of property market in Shanghai. In 2001, Zhou’s real estate company “bought” land from Shanghai County (which was subsequently abolished and absorbed by Pudong New Area) in the Sanlin area. This area has been left undeveloped for 8 years, precisely because of dealings overtaken by Zhou. His position of influence with the local government allowed him to elude government land development requirements.
After his obtaining of the use rights for the Sanlin area, Zhou then sold off parts of the land to investors from Zhejiang and Jiangsu, keeping only one part of the land—designed as land for housing people dislocated by the Shanghai Expo—for himself. Despite paying for their shares in a Shanghai property market often closed to outsiders, the Jiangsu and Zhejiang investors were never given legal rights to build on the land. Years later, Zhou again sold the right to develop and manager property on the land.
In total, Zhou made hundreds of millions of RMB as a result of obtaining land use certificates from the government. The spectacular thing is that Zhou did not invest any of his own money, or actually do anything with the Sanlin land, in making this money.
His legal troubles occurred when he hired migrant workers to beat a representative from the Zhejiang investor who was trying to get compensation from their investment back. Yin Minghua, the victim of the beating, had already helped the Jiangsu investor sue for a return of their original investment. A full investigation was undertaken but has not been publicly disclosed due to the connections to multiple levels of city government, importantly including the PSB, to the case.
As is often true of wealthy entrepreneurs in China who obtain their wealth by shady means, Zhou undertook a multitude of socially responsible actions. Besides donating large amounts of money, which put him on the Hurun list, he also set up a university and hospital, both affiliated with prestigious institutions in Shanghai, in Pudong.
Zhou’s company still has a website that can be found here:
http://www.zhougroup.com/english.htm
See the news article from the Shanghai Daily here:
http://www.shanghaidaily.com/sp/article/2009/200911/20091105/article_418540.htm
Interestingly, as well, is that his sentence included a fine of 300 million RMB, or 44 million USD.
The story dates from the days of rural Shanghai and lax oversight of property market in Shanghai. In 2001, Zhou’s real estate company “bought” land from Shanghai County (which was subsequently abolished and absorbed by Pudong New Area) in the Sanlin area. This area has been left undeveloped for 8 years, precisely because of dealings overtaken by Zhou. His position of influence with the local government allowed him to elude government land development requirements.
After his obtaining of the use rights for the Sanlin area, Zhou then sold off parts of the land to investors from Zhejiang and Jiangsu, keeping only one part of the land—designed as land for housing people dislocated by the Shanghai Expo—for himself. Despite paying for their shares in a Shanghai property market often closed to outsiders, the Jiangsu and Zhejiang investors were never given legal rights to build on the land. Years later, Zhou again sold the right to develop and manager property on the land.
In total, Zhou made hundreds of millions of RMB as a result of obtaining land use certificates from the government. The spectacular thing is that Zhou did not invest any of his own money, or actually do anything with the Sanlin land, in making this money.
His legal troubles occurred when he hired migrant workers to beat a representative from the Zhejiang investor who was trying to get compensation from their investment back. Yin Minghua, the victim of the beating, had already helped the Jiangsu investor sue for a return of their original investment. A full investigation was undertaken but has not been publicly disclosed due to the connections to multiple levels of city government, importantly including the PSB, to the case.
As is often true of wealthy entrepreneurs in China who obtain their wealth by shady means, Zhou undertook a multitude of socially responsible actions. Besides donating large amounts of money, which put him on the Hurun list, he also set up a university and hospital, both affiliated with prestigious institutions in Shanghai, in Pudong.
Zhou’s company still has a website that can be found here:
http://www.zhougroup.com/english.htm
Friday, August 14, 2009
Mr. Tao or Mr. Tan -- An Investigation of Corruption in Shanghai
这个处长收了29套房 全登记 在母亲名下 还说是经商所得
This Section Chief Took 29 Housing Units
All Were Registered in His Mother’s Name
He Said, Everything was Earned in Business Dealings
August 14, 2009
Oriental Morning Post, Page A2-3
http://epaper.dfdaily.com/dfzb/html/2009-08/14/content_152222.htm
[Mr. Tao -- reference is the name of the person under investigation;
Mr. Tan -- an invented reference to tanwu, the Chinese word for
embezzlement.]
Investigators accuse Tao Jianguo of using the advantage of his position from 1999 to 2008 to seek benefits for others, in total taking bribes of 1.06 million yuan and 29 units of property worth 13.79 million yuan from real estate developers. In court, Tao Jianguo admitted, he “took the stated money,” but he argued that all permits went through proper legal auditing, and the money he received was from business dealings.
OMP Reporters, Gu Wenjian and Jia Shuangshuang
Interns, Wang Liangchen and Xu Shaoming
The investigation into Section Chief Tao Jianguo, head of the planning and construction section of the Shanghai Waigaoqiao bonded area management committee, for taking bribes worth over 14.85 million yuan (including 29 units of housing) by the Pudong New Area people’s protectorate has come to an end. Yesterday, there was a hearing on the case at the No. 1 Intermediate People’s Court of the Municipality. In court, Tao Jianguo did not admit to “being bribed”, and instead alleged that the source of the bribery funds was “earnings from business dealings”. As for his behavior at his post before the case, Tao Jianguo emphasized that he “audited according to the law”, and that he “did not use his post to conduct business”. It is reported that the hearing will continue for another two days before a date is set for announcing the decision.
Accepted over 14.86 million yuan
Yesterday 9:45 am, No. 1 Intermediate People’s Court of the Shanghai Municipality
Tao Jianguo is wearing glasses while in the defendant’s dock, his expression is haggard.
From 1999 to 2008, Tao Jianguo successively held the positions of assistant to the section chief and vice-section chief, city and town construction management section (village and town planning section) of the Shanghai Pudong New Area bureau of rural development, and of responsible party and vice-section chief, planning construction and environmental management section of the Waigaiqiao functional regions management committee, Shanghai Pudong New Area. However, Tao Jianguo used the advantages of his post to seek benefits from others in his work as the examiner and approver of land construction planning certificates and construction engineering planning certificates in construction and engineering projects undertaken in his area of jurisdiction.
It is understood that Tao Jianguo accepted total bribes of 1.06 million yuan from a company representative surnamed. Hong of Shanghai Shen’gang Real Estate Company, Limited and Shanghai Xingdu Real Estate Development Company, Limited, as well as other companies’ representatives surnamed Xu, Lu, and Zhang. He also accepted 29 units of property as a bribe from a person surnamed Hong, with a value of over 13.79 million yuan. Because the bribery amount from people including the one surnamed Hong is large, this has been called “the biggest suspected bribery case in Shanghai for 2008” by investigators.
Property registered under mother’s name
In 4 actual instances of accepting bribes, the biggest amount came from a person surnamed Hong for 690,000 yuan and 29 units of property.
The indictment reads that from 2000 to 2008, Shanghai Shen’gang Real Estate Company, Limited and Shanghai Xingdu Real Estate Development Company, Limited developed projects including Shuguang Gardens, Shuguang North Gardens, and Shuguang East Gardens, as well as the Chuansha Town Wangqiao market for exchange of production materials and the Heqing Town petty commodity market. After receiving multiple bribes from a person surnamed Hong, Tao Jianguo provided assistance in the examination and approval of the Planning Permits for Land for Construction Use and of the Planning Permits for Construction Projects.
During the hearing Tao Jianguo revealed that among the 29 units of property there are townhouses, storefronts, and apartments. Besides the townhouse that is used as a residence, most of the property is rented out. All 29 units of property are registered under the name of Tao Jianguo’s mother. Tao Jianguo explained this by saying that, after 2003, because civil servants were not allowed to start companies or engage in related business activity, and because he worried about breaking principles, he transferred the titles to his mother’s name. “My mother didn’t know there was so much property under her name,” Tao Jianguo said.
On August 27, 2008, Tao Jianguo was accused of double designation by departments of the Commission for Inspecting Discipline. On September 3, Tao Jianguo was detained on the suspicion of accepting bribes by the Pudong prosecutor’s office, and he was arrested on the 12th of that month.
The “proceeds from business dealings” argument
Yesterday during the hearing, Tao Jianguo “objected” to most of the accusations.
Tao Jianguo said that he had participated all along with Shanghai Shen’gang Real Estate Company, Limited and Shanghai Xingdu Real Estate Development Company, Limited in business. The 690,000 yuan from someone surnamed Hong and the 29 units of housing were all “proceedings from business dealings”.
In explaining his participation in the business activities of the two above companies, Tao Jianguo said that although he did not have a position in either of the two companies, he did participate in the operations of the board of directors, and engaged in “establishing of company projects” and “establishing of land and property sales companies”, as well as the work of founding and disbanding companies. In addition, Tao Jianguo described in his own words how he adopted a method of “real estate mortgage” and infused financing into Xingdu Company that had yet to be founded.
Tao Jianguo argues that of the 690,000 yuan that the person surnamed Hong gave him, 490,000 yuan was severance pay from Shen’gang Company, and the other 100,000 yuan was a subsidy from the yearly meeting of the board of directors. As for the 29 units of property under suspicion, they were dividends of 5 shareholders resulting from business operations, and are the result of investment. “The townhouse is one unit of the shareholder’s portfolio, and the geographic positions are all in one place,” Tao Jianguo said. “Many of my family have participated in the finance and sales company operations of Shen’gang Company.”
Tao Jianguo thinks that while planning permits for land for construction use and for construction projects are under his jurisdiction, he all projects were examined and approved according to the law and he did not use “the advantage of his post”, and his income is from “proceedings from business dealings”.
He said that in course of the examination and approval, from the submission of application materials to the auditing, and then to the approval and issue of permits, the entire process takes 10 working days. He was only responsible for providing opinions on the auditing and had no relationship with real estate developers.
Investigators think that Tao Jianguo, as an employee of the state, used the advantages of his post to gain benefits for others and received illegal financial gains of over 14.85 million yuan, a violation of the law.
His lawyer argues:
There is no reason for him to take bribes.
According to the indictment, a person surnamed Hong is the biggest briber in the bribery case against Tao Jianguo. It is understood that the two met in 1997. Tao Jianguo argues that he did not accept bribes, and instead he was a shareholder of two real estate companies and the money was the legal outcome of business dealings. Because state civil servants and their immediate families cannot be shareholders in companies, they use the names of their relatives to invest. But the person surnamed Hong denied the above facts when testifying to the authorities. He said that he doesn’t know “Tao Jianguo’s relatives”.
Tao Jianguo’s lawyer thinks that Tao Jianguo is an invisible shareholder, and that he used his relatives’ names to hold shares in the companies. As for the “generosity” of the person surnamed Hong, the defendant’s lawyer said that Tao Jianguo is only one of many section-level officials responsible for the chain of examination and approval of planned real estate projects. His grade is not high. Hence, he lacks sufficient decision-making authority. So he has no reason to “wantonly accept bribes”.
The defendant’s lawyer thinks that, while Tao Jianguo had a large amount of property, it was not “bribery”, and in fact this precisely corroborates that Tao Jianguo participated in the business operations of the companies. And for this reason, he was entitled to receive property and cash. But according to the testimony of the person surnamed Hong, Tao Jianguo not only accepted bribes, he actively “sought bribes”.
Pudong Commission for Inspecting Discipline:
Because of the property the case was brought
Yesterday, a reporter sent a telegram to the construction planning and environmental management section of the Waigaoqiao Functional Regions Management Committee. A worker at this section said they were “not clear” about this issue. Nor did they leak any details about related particulars.
A worker in the Pudong New Area Commission for Inspecting Discipline said that the Tao Jianguo case began because of a “property” problem, and the “relationship” with Shanghai Shen’gang Real Estate Company, Limited and Shanghai Xingdu Real Estate Development Company, Limited. But after the investigation, the Commission for Inspecting Discipline thinks that Tao Jianguo was not a “shareholder” of either of the companies.
This Section Chief Took 29 Housing Units
All Were Registered in His Mother’s Name
He Said, Everything was Earned in Business Dealings
August 14, 2009
Oriental Morning Post, Page A2-3
http://epaper.dfdaily.com/dfzb/html/2009-08/14/content_152222.htm
[Mr. Tao -- reference is the name of the person under investigation;
Mr. Tan -- an invented reference to tanwu, the Chinese word for
embezzlement.]
Investigators accuse Tao Jianguo of using the advantage of his position from 1999 to 2008 to seek benefits for others, in total taking bribes of 1.06 million yuan and 29 units of property worth 13.79 million yuan from real estate developers. In court, Tao Jianguo admitted, he “took the stated money,” but he argued that all permits went through proper legal auditing, and the money he received was from business dealings.
OMP Reporters, Gu Wenjian and Jia Shuangshuang
Interns, Wang Liangchen and Xu Shaoming
The investigation into Section Chief Tao Jianguo, head of the planning and construction section of the Shanghai Waigaoqiao bonded area management committee, for taking bribes worth over 14.85 million yuan (including 29 units of housing) by the Pudong New Area people’s protectorate has come to an end. Yesterday, there was a hearing on the case at the No. 1 Intermediate People’s Court of the Municipality. In court, Tao Jianguo did not admit to “being bribed”, and instead alleged that the source of the bribery funds was “earnings from business dealings”. As for his behavior at his post before the case, Tao Jianguo emphasized that he “audited according to the law”, and that he “did not use his post to conduct business”. It is reported that the hearing will continue for another two days before a date is set for announcing the decision.
Accepted over 14.86 million yuan
Yesterday 9:45 am, No. 1 Intermediate People’s Court of the Shanghai Municipality
Tao Jianguo is wearing glasses while in the defendant’s dock, his expression is haggard.
From 1999 to 2008, Tao Jianguo successively held the positions of assistant to the section chief and vice-section chief, city and town construction management section (village and town planning section) of the Shanghai Pudong New Area bureau of rural development, and of responsible party and vice-section chief, planning construction and environmental management section of the Waigaiqiao functional regions management committee, Shanghai Pudong New Area. However, Tao Jianguo used the advantages of his post to seek benefits from others in his work as the examiner and approver of land construction planning certificates and construction engineering planning certificates in construction and engineering projects undertaken in his area of jurisdiction.
It is understood that Tao Jianguo accepted total bribes of 1.06 million yuan from a company representative surnamed. Hong of Shanghai Shen’gang Real Estate Company, Limited and Shanghai Xingdu Real Estate Development Company, Limited, as well as other companies’ representatives surnamed Xu, Lu, and Zhang. He also accepted 29 units of property as a bribe from a person surnamed Hong, with a value of over 13.79 million yuan. Because the bribery amount from people including the one surnamed Hong is large, this has been called “the biggest suspected bribery case in Shanghai for 2008” by investigators.
Property registered under mother’s name
In 4 actual instances of accepting bribes, the biggest amount came from a person surnamed Hong for 690,000 yuan and 29 units of property.
The indictment reads that from 2000 to 2008, Shanghai Shen’gang Real Estate Company, Limited and Shanghai Xingdu Real Estate Development Company, Limited developed projects including Shuguang Gardens, Shuguang North Gardens, and Shuguang East Gardens, as well as the Chuansha Town Wangqiao market for exchange of production materials and the Heqing Town petty commodity market. After receiving multiple bribes from a person surnamed Hong, Tao Jianguo provided assistance in the examination and approval of the Planning Permits for Land for Construction Use and of the Planning Permits for Construction Projects.
During the hearing Tao Jianguo revealed that among the 29 units of property there are townhouses, storefronts, and apartments. Besides the townhouse that is used as a residence, most of the property is rented out. All 29 units of property are registered under the name of Tao Jianguo’s mother. Tao Jianguo explained this by saying that, after 2003, because civil servants were not allowed to start companies or engage in related business activity, and because he worried about breaking principles, he transferred the titles to his mother’s name. “My mother didn’t know there was so much property under her name,” Tao Jianguo said.
On August 27, 2008, Tao Jianguo was accused of double designation by departments of the Commission for Inspecting Discipline. On September 3, Tao Jianguo was detained on the suspicion of accepting bribes by the Pudong prosecutor’s office, and he was arrested on the 12th of that month.
The “proceeds from business dealings” argument
Yesterday during the hearing, Tao Jianguo “objected” to most of the accusations.
Tao Jianguo said that he had participated all along with Shanghai Shen’gang Real Estate Company, Limited and Shanghai Xingdu Real Estate Development Company, Limited in business. The 690,000 yuan from someone surnamed Hong and the 29 units of housing were all “proceedings from business dealings”.
In explaining his participation in the business activities of the two above companies, Tao Jianguo said that although he did not have a position in either of the two companies, he did participate in the operations of the board of directors, and engaged in “establishing of company projects” and “establishing of land and property sales companies”, as well as the work of founding and disbanding companies. In addition, Tao Jianguo described in his own words how he adopted a method of “real estate mortgage” and infused financing into Xingdu Company that had yet to be founded.
Tao Jianguo argues that of the 690,000 yuan that the person surnamed Hong gave him, 490,000 yuan was severance pay from Shen’gang Company, and the other 100,000 yuan was a subsidy from the yearly meeting of the board of directors. As for the 29 units of property under suspicion, they were dividends of 5 shareholders resulting from business operations, and are the result of investment. “The townhouse is one unit of the shareholder’s portfolio, and the geographic positions are all in one place,” Tao Jianguo said. “Many of my family have participated in the finance and sales company operations of Shen’gang Company.”
Tao Jianguo thinks that while planning permits for land for construction use and for construction projects are under his jurisdiction, he all projects were examined and approved according to the law and he did not use “the advantage of his post”, and his income is from “proceedings from business dealings”.
He said that in course of the examination and approval, from the submission of application materials to the auditing, and then to the approval and issue of permits, the entire process takes 10 working days. He was only responsible for providing opinions on the auditing and had no relationship with real estate developers.
Investigators think that Tao Jianguo, as an employee of the state, used the advantages of his post to gain benefits for others and received illegal financial gains of over 14.85 million yuan, a violation of the law.
His lawyer argues:
There is no reason for him to take bribes.
According to the indictment, a person surnamed Hong is the biggest briber in the bribery case against Tao Jianguo. It is understood that the two met in 1997. Tao Jianguo argues that he did not accept bribes, and instead he was a shareholder of two real estate companies and the money was the legal outcome of business dealings. Because state civil servants and their immediate families cannot be shareholders in companies, they use the names of their relatives to invest. But the person surnamed Hong denied the above facts when testifying to the authorities. He said that he doesn’t know “Tao Jianguo’s relatives”.
Tao Jianguo’s lawyer thinks that Tao Jianguo is an invisible shareholder, and that he used his relatives’ names to hold shares in the companies. As for the “generosity” of the person surnamed Hong, the defendant’s lawyer said that Tao Jianguo is only one of many section-level officials responsible for the chain of examination and approval of planned real estate projects. His grade is not high. Hence, he lacks sufficient decision-making authority. So he has no reason to “wantonly accept bribes”.
The defendant’s lawyer thinks that, while Tao Jianguo had a large amount of property, it was not “bribery”, and in fact this precisely corroborates that Tao Jianguo participated in the business operations of the companies. And for this reason, he was entitled to receive property and cash. But according to the testimony of the person surnamed Hong, Tao Jianguo not only accepted bribes, he actively “sought bribes”.
Pudong Commission for Inspecting Discipline:
Because of the property the case was brought
Yesterday, a reporter sent a telegram to the construction planning and environmental management section of the Waigaoqiao Functional Regions Management Committee. A worker at this section said they were “not clear” about this issue. Nor did they leak any details about related particulars.
A worker in the Pudong New Area Commission for Inspecting Discipline said that the Tao Jianguo case began because of a “property” problem, and the “relationship” with Shanghai Shen’gang Real Estate Company, Limited and Shanghai Xingdu Real Estate Development Company, Limited. But after the investigation, the Commission for Inspecting Discipline thinks that Tao Jianguo was not a “shareholder” of either of the companies.
Tuesday, August 11, 2009
Pan Shiyi, Land Kings, and Drunk Driving
潘石屹：央企拿地王好比酒后驾车
Pan Shiyi: Central SOEs Becoming Land Kings is Like Driving Under the Influence
http://epaper.dfdaily.com/dfzb/html/2009-08/11/content_151251.htm
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:
http://pan-shiyi.blog.sohu.com/
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.”
Pan Shiyi: Central SOEs Becoming Land Kings is Like Driving Under the Influence
http://epaper.dfdaily.com/dfzb/html/2009-08/11/content_151251.htm
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:
http://pan-shiyi.blog.sohu.com/
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.”
Central Shanghai: Land Cost is 70% of Housing Price
上海内环地价房价比高达70%
Shanghai Land Price Reaches 70% of Housing Price Inside Inner Ring Road
OMP Reporter Liu Xiuhao
Brief article from today (August 11, 2009) about the proportion of the price of land to the price of housing (land is acquired from local state government in tender, auction, and listing that are open to all). Read previous posts about the report by the MoLaR on the constitution of current real estate housing prices and the proportion accounted for by the cost of acquiring land. Their survey was discussed in pervious posts.
http://epaper.dfdaily.com/dfzb/html/2009-08/11/content_151249.htm
Despite the announcement on July 23 by Ministry of Land and Resources that a special investigation shows land prices only make up a 23.2% proportion of housing prices, the Eastern China region and especially the Shanghai area has a rapid rise in the ratio of land price to housing price with the recent dramatic climb of land prices. Fangfang Land Consulting released the most recent quarterly “Long Silver Land Prices, East China Report” yesterday. It showed that of the 16 major urban land markets in the Eastern China region, the proportion of land prices to housing prices is in the range of 30%-50%. Of these, inside the inner ring road of Shanghai the range is 70%. In addition, Greenland Group made a triumphant advance in the land market for the first half of this year, passing Vanke in one sweep to become the new “land king”.
Small and Medium Developers are Even More Radical
Fangfang Property’s land price survey showed that, in July, the urban land price in cities such as Shanghai, Hangzhou, and Nanjing was 40% of housing prices, with certain areas surpassing a ratio of 60 percent. The level of land prices in Suzhou and Wuxi was slightly lower, accounting for approximately 30 percent of city housing prices.
Among these cities, recent land parcels leased by Hangzhou are mostly in the central city, and land price accounts for over 50% of housing price; Shanghai land prices are in the proportion range of 35%-50% of housing prices, but there is wide variation based on the land locations, with those near the inner ring line having a land price proportion of 70% of housing price. This shows the extreme shortage of land resources there. For the outer ring and outside areas of Shanghai, the land price proportion falls to only 40 percent or so.
With continued explosion in commodity housing market transactions, the sales returns for companies are higher across the board than their payments for acquiring land, so there is no financing pressure. Meanwhile, the issue of new land banks is far behind sales turnover rate, so the strong inclination to acquire land affects the predictions for the price of land. A comprehensive look at the companies competing for land in the market in Shanghai shows that large enterprises were relative cautious while small and medium developers were radical, daring to pay high prices.
Vanke is First in Land Acquisition Quantity
In the first half of the hear, Greenland acquired four land parcels on the open market, including office and commercial land in the city center and residential land in the suburbs. The characteristic of different districts and counties in the land bank is very vivid.
While Greenland was wantonly storing up, Dahua and Vanke increased their sales and reduced their land banking speed. Greenland became the new Shanghai “land king” with a total 3.41 million square meters of land bank area. Dahua is second with 2.65 million square meters. And Vanke has fallen to third with total banked areas of 2.32 million square meters.
Nationally, 15 brand-name real estate development companies (Vanke [Wanke], Poly [Baoli], Gemdale [Jindi], China Merchants, Greenland, Dahua, Forte [Fudi], China Overseas [Zhonghai], Jiangsu Xincheng, Greentown, Yanlord [Renheng], Sun Hung Kai [Xinhongji], CITIC Pacific, Hutchinson Whampoa, and Hopson) increased their land banks by 9.40 million square meters in area, with most of the land parcels bought for under 2,500 yuan/square meter. Of these, 5 companies increased their land banks by over 1 million square meters, with Vanke and Poly being first and second in total amounts, acquiring 3.48 million square meters and 1.96 million square meters respectively.
Shanghai Land Price Reaches 70% of Housing Price Inside Inner Ring Road
OMP Reporter Liu Xiuhao
Brief article from today (August 11, 2009) about the proportion of the price of land to the price of housing (land is acquired from local state government in tender, auction, and listing that are open to all). Read previous posts about the report by the MoLaR on the constitution of current real estate housing prices and the proportion accounted for by the cost of acquiring land. Their survey was discussed in pervious posts.
http://epaper.dfdaily.com/dfzb/html/2009-08/11/content_151249.htm
Despite the announcement on July 23 by Ministry of Land and Resources that a special investigation shows land prices only make up a 23.2% proportion of housing prices, the Eastern China region and especially the Shanghai area has a rapid rise in the ratio of land price to housing price with the recent dramatic climb of land prices. Fangfang Land Consulting released the most recent quarterly “Long Silver Land Prices, East China Report” yesterday. It showed that of the 16 major urban land markets in the Eastern China region, the proportion of land prices to housing prices is in the range of 30%-50%. Of these, inside the inner ring road of Shanghai the range is 70%. In addition, Greenland Group made a triumphant advance in the land market for the first half of this year, passing Vanke in one sweep to become the new “land king”.
Small and Medium Developers are Even More Radical
Fangfang Property’s land price survey showed that, in July, the urban land price in cities such as Shanghai, Hangzhou, and Nanjing was 40% of housing prices, with certain areas surpassing a ratio of 60 percent. The level of land prices in Suzhou and Wuxi was slightly lower, accounting for approximately 30 percent of city housing prices.
Among these cities, recent land parcels leased by Hangzhou are mostly in the central city, and land price accounts for over 50% of housing price; Shanghai land prices are in the proportion range of 35%-50% of housing prices, but there is wide variation based on the land locations, with those near the inner ring line having a land price proportion of 70% of housing price. This shows the extreme shortage of land resources there. For the outer ring and outside areas of Shanghai, the land price proportion falls to only 40 percent or so.
With continued explosion in commodity housing market transactions, the sales returns for companies are higher across the board than their payments for acquiring land, so there is no financing pressure. Meanwhile, the issue of new land banks is far behind sales turnover rate, so the strong inclination to acquire land affects the predictions for the price of land. A comprehensive look at the companies competing for land in the market in Shanghai shows that large enterprises were relative cautious while small and medium developers were radical, daring to pay high prices.
Vanke is First in Land Acquisition Quantity
In the first half of the hear, Greenland acquired four land parcels on the open market, including office and commercial land in the city center and residential land in the suburbs. The characteristic of different districts and counties in the land bank is very vivid.
While Greenland was wantonly storing up, Dahua and Vanke increased their sales and reduced their land banking speed. Greenland became the new Shanghai “land king” with a total 3.41 million square meters of land bank area. Dahua is second with 2.65 million square meters. And Vanke has fallen to third with total banked areas of 2.32 million square meters.
Nationally, 15 brand-name real estate development companies (Vanke [Wanke], Poly [Baoli], Gemdale [Jindi], China Merchants, Greenland, Dahua, Forte [Fudi], China Overseas [Zhonghai], Jiangsu Xincheng, Greentown, Yanlord [Renheng], Sun Hung Kai [Xinhongji], CITIC Pacific, Hutchinson Whampoa, and Hopson) increased their land banks by 9.40 million square meters in area, with most of the land parcels bought for under 2,500 yuan/square meter. Of these, 5 companies increased their land banks by over 1 million square meters, with Vanke and Poly being first and second in total amounts, acquiring 3.48 million square meters and 1.96 million square meters respectively.
Friday, July 31, 2009
In Vanke We Entrust!
万科托管“倒楼小区”未倒楼可按市价收购
Vanke Named Trustee for “Collapsed Building Apartment Complex”
Remaining Buildings Can be Sold Back at Market Price
http://epaper.dfdaily.com/dfzb/html/2009-08/01/content_149183.htm
OMP reporter Li Meng
August 1, 2009
This headline appeared on the front page of the Oriental Morning Post today. Vanke is one of the largest real estate companies in China, and its head, Wang Shi, is an entrepreneurial hero (see previous posts on him during Wenchuan earthquake) in China and has climbed Mount Everest. The article reports that Shanghai Vanke will take over as “third party trustee” for Lotus Riverside, the apartment complex where a building collapsed in the Minhang (not Minxing) District of Shanghai on June 27, 2009.
Note: I have noticed that people are referring to the Lotus Riverside apartments in “Minxing” district. Sorry, but the character can be read as both “xing” and “hang”. As anyone in Shanghai knows (or should), there is no such thing as Minxing district, only Minhang District. In fact Minhang District is one of the oldest areas of Shanghai. The majority of people moved to “central” Shanghai 150 years ago—Shanghai is a “new” city in China. However, several hundred years ago, the whole area belonged to Jiangsu Province, and the only two areas of human settlement were “Old Minhang” and Chongming Island. Just FYI – “Minxing” is major linguistic error. :-)
(See the original Chinese version for photograph of collapsed building).
The “Lotus Riverside” apartment complex, where an entire building collapsed in an accident, will be entrusted to a third party, the well-known Vanke Real Estate.
For the buildings that have not collapsed, Meidu Real Estate Company has outlined specific guidelines for three solutions to resolve the issue: owners can choose to have a 5% discount on price and continue with their contracts; they can cancel the contract and have all interest repaid; or they can have their apartment bought by Vanke for the market value on June 27, 2009.
Owners Must Decide Before August 15
Last night at 7:30, the Minhang District news office held its 13th news conference on the collapse of a building during construction of the “Lotus Riverside” apartment complex.
In addition to a complete listing of “Operating Guidelines for Outlined Solutions Concerning Buildings Sold in Advance that Did Not Collapse” issued by Meidu Real Estate Company, the news conference also clearly mentioned that Shanghai Vanke Real Estate Company, Limited would be the third party trustee for finishing construction of the apartment complex.
On July 20, Meidu Company announced “Outlined Solutions Concerning Buildings Sold in Advance that Did Not Collapse” to the public, giving three methods for carrying out contracts. But the solutions were clear at the time that the guidelines for the three solutions would be announced on July 31, and owners could make their decision between August 1 and August 15, 2009.
“Operating Guidelines” contains some additions and goes further in description for the three solutions already announced.
Vanke Will Hand Over Apartments Before May 31 of Next Year
As the third party trustee of “Lotus Riverside”, Shanghai Vanke Real Estate Company, Limited yesterday issued a “Notification”. It contained a guarantee that “apartments with quality up to standard will be handed over before May 31, 2009 as stated in the sold-in-advance contracts.”
Vanke mentioned that the company was invited by Meidi Company to be the third party trustee for the apartment complex construction of Lotus Riverside. Vanke will “assemble a competent team and use much effort and technique to ensure the continued construction of Lotus Riverside.” This company will also provide enthusiastic service to the public and customers, taking on all social responsibility.
Vanke thinks that the Lotus Riverside apartment complex is located in a superior site and has a nice environment. Because of this, Vanke is confident in its ability to ensure improvement of the apartment complex’s environment and construction quality. It will not fail to live up to the expectations of all its customers for a Vanke-quality apartment complex.
At the same time, Vanke expressed that it will work with Meidu Company in the appropriate handling of contracts for housing sold in advance as stated in “Operating Guidelines for Outlined Solutions Concerning Buildings Sold in Advance that Did Not Collapse”.
Solution 1: Return of 5%, Continued Fulfillment of the Sold in Advance Contract
Vanke guarantees that if an apartment cannot be handed over because its structure is not up to standards, the purchaser can cancel the sale-in-advance contract.
For those who choose solution one, Meidu Company will negotiate and sign a “Supplement to the Sale-in-Advance Contract”, and the supplemental agreement will include the following:
1. As a precondition to the purchaser continuing to fulfill their contract, Meidu Company will give up an appropriate amount of profit, that is, give a 5% discount on the total housing price specified in the “Sale-in-advance Contract”. Within 10 working days of signing, Meidu will pay the money into an account designated by the purchaser.
2. Meidu Company promises to continue to fulfill its tasks outlined in the “Sale-in-Advance Contract” according to specified time limits.
3. If the apartment cannot be handed over because its structure is not up to standards, the purchaser can cancel the sale-in-advance contract and their obligations based on entitlements specified in “Solutions for the Collapse of Lotus Riverside Building 7 Incident” and its “Operating Guidelines”.
4. If the above situation occurs, the purchaser has the right, according to “Solutions for the Collapse of Lotus Riverside Building 7 Incident” and its “Operating Guidelines”, to receive reimbursement for losses or compensation for contract violation. Meidu Company agrees to pay reimbursement or compensation, minus the 5% discount already paid, to the purchaser.
5. Because the purchaser choose and executed “Solutions for the Collapse of Lotus Riverside Building 7 Incident” and its “Operating Guidelines” which involve the market value of the apartment, government departments will decide on a organization for this evaluation.
When the “Supplement to the Sale-in-Advance Contract” is signed, Meidu Company will add Shanghai Vanke Real Estate Company, Limited who will also sign the “Supplement to the Sale-in-Advance Contract” and a “Letter of Commitment” with the purchaser. This guarantees that if the apartment cannot be handed over because its structure is not up to standards, the purchaser can choose to execute “Solutions for the Collapse of Lotus Riverside Building 7 Incident” and its “Operating Guidelines” allowing payback to purchaser within a specified time frame (from June 27, 2009 to the end of “Loan Contract” fulfillment date) of all bank interest and public accumulation fund interest on loans. If Meidu Company does not have the funds to pay, Vanke Company guarantees that it will pay.
Solution 2: Negotiate Cancellation of Sale-in-Advance Contract, Return Loan and Interest
Refunded amount = [the principal amount already paid by the purchaser (including paid by self and on loan) + bank deposit interest on amount of apartment price already paid] – loan principal and interest already paid on behalf of the purchaser by the Company to the loan bank and/or the public accumulation fund center.
1. For the purchaser who chooses solution two, Meidu Company will negotiate to cancel the “sale-in-advance contract” and “loan contract” with the loan bank, the public accumulation fund center, and (if necessary) the Shanghai Estate Guarantee Company, Limited [www.jiae.com.cn].
2. An agreement will be reached through negotiation with all parties and Meidu Company will sign an “Agreement to Cancel the Sale-in-Advance Contract” with the purchaser. Meidu Company will also sign an “Agreement to Cancel the Loan Contract” with the purchaser, the loan bank, the public accumulation fund center and (if necessary) the Shanghai Estate Guarantee Company, Limited.
3. After signing the “Agreement to Cancel the Sale-in-Advance Contract” and the “Agreement to Cancel the Loan Contract”, Meidu Company will pay all interest incurred by the purchaser that has not been paid as specified in the “Agreement to Cancel the Loan Contract”. Meidu Company will also directly pay funds into the loan bank and/or the public accumulation fund center accounts.
4. From the registration of the notice to cancel the “Sale-in-Advance Contract” and completion of the registration to cancel the mortgage in the “Loan Contract”, within 10 working days, Meidu Company will pay the “due sum of money” to the purchaser via the bank account indicated in the “Agreement to Cancel the Sale-in-Advance Contract”:
The “due sum of money” = [the principal amount already paid by the purchaser (including paid by self and on loan) + bank deposit interest on amount of apartment price already paid] – loan principal and interest already paid by the Company to the loan bank and/or the public accumulation fund center on behalf of the purchaser.
Solution 3: According to the Market Price on June 27, Vanke Purchases the Apartment
The market price differential = the market price as appraised on June 27, 2009 – the total price in the “Sale-in-Advance Contract”.
1. Government departments will appoint an appraiser with valid qualifications who, on August 15, 2009, will appraise the market value of the purchased apartment on June 27, 2009 for those who choose solution three, as well as issue an appraisal report.
2. After the above appraisal report comes out, Meidu Company will negotiate arrangements for the sale with Vanke Company who will return the money to the purchaser who choose solution three. In addition, Meidu Company will also negotiate the cancellation of the “Sale-in-Advance Contract” and the “Loan Contract” with the loan bank, the public accumulation fund center, and (if necessary) the Shanghai Estate Guarantee Company, Limited.
3. Once an agreement has been reached with all parties, Meidu Company will sign a “Third Party Agreement” with the purchaser and Vanke Company to pay back the money. Meidu will also sign an “Agreement to Cancel the Sale-in-Advance Contract” with the purchaser, and an “Agreement to Cancel the Loan Contract” with the purchaser, the loan bank, the public accumulation fund center and (if necessary) the Shanghai Estate Guarantee Company, Limited.
4. After the “Third Party Agreement”, the “Agreement to Cancel the Sale-in-Advance Contract”, and the “Agreement to Cancel the Loan Contract” are signed, Vanke Company pledges to pay any outstanding loans and interest directly to the bank accounts at loan bank and/or the public accumulation fund center as specified in the Third Party Agreement”, and the “Agreement to Cancel the Loan Contract”.
5. After the “Third Party Agreement”, the “Agreement to Cancel the Sale-in-Advance Contract”, and the “Agreement to Cancel the Loan Contract” are signed, and within ten working days of the completion of the condition below, Vanke Company guarantees to pay the “due sum of money” to the purchaser into the bank account specified in the “Third Party Agreement”.
The purchaser, the loan bank, the public accumulation fund center, and (if necessary) the Shanghai Estate Guarantee Company, Limited must complete the registration of notice to cancel the “Sale-in-Advance Contract” and registration of the cancellation of the mortgage in the “Loan Contract”.
6. The “due sum of money” mentioned in the previous item = [the amount already paid by the purchaser (including paid by self and on loan) + market price differential] – principal and interest paid by the Company on behalf of the purchaser to the loan bank and/or the public accumulation fund center.
7. The “market price differential” mentioned in the previous item = the appraised total market value of the apartment on June 27, 2009 – the total price of the apartment in the “Sale-in-Advance Contract”.
At the same time, Meidu Company announced that, as of yesterday, it had sent by mail copies of the “Guidelines” to purchasers. After purchasers receive the “Operating Guidelines”, they can fill out the “Solution Selection Form” and mail it back to “Riverside Lotus” Sales Center, 599 Luoyang Road, Shanghai (Zip: 201100) before August 15, 2009.
Vanke Named Trustee for “Collapsed Building Apartment Complex”
Remaining Buildings Can be Sold Back at Market Price
http://epaper.dfdaily.com/dfzb/html/2009-08/01/content_149183.htm
OMP reporter Li Meng
August 1, 2009
This headline appeared on the front page of the Oriental Morning Post today. Vanke is one of the largest real estate companies in China, and its head, Wang Shi, is an entrepreneurial hero (see previous posts on him during Wenchuan earthquake) in China and has climbed Mount Everest. The article reports that Shanghai Vanke will take over as “third party trustee” for Lotus Riverside, the apartment complex where a building collapsed in the Minhang (not Minxing) District of Shanghai on June 27, 2009.
Note: I have noticed that people are referring to the Lotus Riverside apartments in “Minxing” district. Sorry, but the character can be read as both “xing” and “hang”. As anyone in Shanghai knows (or should), there is no such thing as Minxing district, only Minhang District. In fact Minhang District is one of the oldest areas of Shanghai. The majority of people moved to “central” Shanghai 150 years ago—Shanghai is a “new” city in China. However, several hundred years ago, the whole area belonged to Jiangsu Province, and the only two areas of human settlement were “Old Minhang” and Chongming Island. Just FYI – “Minxing” is major linguistic error. :-)
(See the original Chinese version for photograph of collapsed building).
The “Lotus Riverside” apartment complex, where an entire building collapsed in an accident, will be entrusted to a third party, the well-known Vanke Real Estate.
For the buildings that have not collapsed, Meidu Real Estate Company has outlined specific guidelines for three solutions to resolve the issue: owners can choose to have a 5% discount on price and continue with their contracts; they can cancel the contract and have all interest repaid; or they can have their apartment bought by Vanke for the market value on June 27, 2009.
Owners Must Decide Before August 15
Last night at 7:30, the Minhang District news office held its 13th news conference on the collapse of a building during construction of the “Lotus Riverside” apartment complex.
In addition to a complete listing of “Operating Guidelines for Outlined Solutions Concerning Buildings Sold in Advance that Did Not Collapse” issued by Meidu Real Estate Company, the news conference also clearly mentioned that Shanghai Vanke Real Estate Company, Limited would be the third party trustee for finishing construction of the apartment complex.
On July 20, Meidu Company announced “Outlined Solutions Concerning Buildings Sold in Advance that Did Not Collapse” to the public, giving three methods for carrying out contracts. But the solutions were clear at the time that the guidelines for the three solutions would be announced on July 31, and owners could make their decision between August 1 and August 15, 2009.
“Operating Guidelines” contains some additions and goes further in description for the three solutions already announced.
Vanke Will Hand Over Apartments Before May 31 of Next Year
As the third party trustee of “Lotus Riverside”, Shanghai Vanke Real Estate Company, Limited yesterday issued a “Notification”. It contained a guarantee that “apartments with quality up to standard will be handed over before May 31, 2009 as stated in the sold-in-advance contracts.”
Vanke mentioned that the company was invited by Meidi Company to be the third party trustee for the apartment complex construction of Lotus Riverside. Vanke will “assemble a competent team and use much effort and technique to ensure the continued construction of Lotus Riverside.” This company will also provide enthusiastic service to the public and customers, taking on all social responsibility.
Vanke thinks that the Lotus Riverside apartment complex is located in a superior site and has a nice environment. Because of this, Vanke is confident in its ability to ensure improvement of the apartment complex’s environment and construction quality. It will not fail to live up to the expectations of all its customers for a Vanke-quality apartment complex.
At the same time, Vanke expressed that it will work with Meidu Company in the appropriate handling of contracts for housing sold in advance as stated in “Operating Guidelines for Outlined Solutions Concerning Buildings Sold in Advance that Did Not Collapse”.
Solution 1: Return of 5%, Continued Fulfillment of the Sold in Advance Contract
Vanke guarantees that if an apartment cannot be handed over because its structure is not up to standards, the purchaser can cancel the sale-in-advance contract.
For those who choose solution one, Meidu Company will negotiate and sign a “Supplement to the Sale-in-Advance Contract”, and the supplemental agreement will include the following:
1. As a precondition to the purchaser continuing to fulfill their contract, Meidu Company will give up an appropriate amount of profit, that is, give a 5% discount on the total housing price specified in the “Sale-in-advance Contract”. Within 10 working days of signing, Meidu will pay the money into an account designated by the purchaser.
2. Meidu Company promises to continue to fulfill its tasks outlined in the “Sale-in-Advance Contract” according to specified time limits.
3. If the apartment cannot be handed over because its structure is not up to standards, the purchaser can cancel the sale-in-advance contract and their obligations based on entitlements specified in “Solutions for the Collapse of Lotus Riverside Building 7 Incident” and its “Operating Guidelines”.
4. If the above situation occurs, the purchaser has the right, according to “Solutions for the Collapse of Lotus Riverside Building 7 Incident” and its “Operating Guidelines”, to receive reimbursement for losses or compensation for contract violation. Meidu Company agrees to pay reimbursement or compensation, minus the 5% discount already paid, to the purchaser.
5. Because the purchaser choose and executed “Solutions for the Collapse of Lotus Riverside Building 7 Incident” and its “Operating Guidelines” which involve the market value of the apartment, government departments will decide on a organization for this evaluation.
When the “Supplement to the Sale-in-Advance Contract” is signed, Meidu Company will add Shanghai Vanke Real Estate Company, Limited who will also sign the “Supplement to the Sale-in-Advance Contract” and a “Letter of Commitment” with the purchaser. This guarantees that if the apartment cannot be handed over because its structure is not up to standards, the purchaser can choose to execute “Solutions for the Collapse of Lotus Riverside Building 7 Incident” and its “Operating Guidelines” allowing payback to purchaser within a specified time frame (from June 27, 2009 to the end of “Loan Contract” fulfillment date) of all bank interest and public accumulation fund interest on loans. If Meidu Company does not have the funds to pay, Vanke Company guarantees that it will pay.
Solution 2: Negotiate Cancellation of Sale-in-Advance Contract, Return Loan and Interest
Refunded amount = [the principal amount already paid by the purchaser (including paid by self and on loan) + bank deposit interest on amount of apartment price already paid] – loan principal and interest already paid on behalf of the purchaser by the Company to the loan bank and/or the public accumulation fund center.
1. For the purchaser who chooses solution two, Meidu Company will negotiate to cancel the “sale-in-advance contract” and “loan contract” with the loan bank, the public accumulation fund center, and (if necessary) the Shanghai Estate Guarantee Company, Limited [www.jiae.com.cn].
2. An agreement will be reached through negotiation with all parties and Meidu Company will sign an “Agreement to Cancel the Sale-in-Advance Contract” with the purchaser. Meidu Company will also sign an “Agreement to Cancel the Loan Contract” with the purchaser, the loan bank, the public accumulation fund center and (if necessary) the Shanghai Estate Guarantee Company, Limited.
3. After signing the “Agreement to Cancel the Sale-in-Advance Contract” and the “Agreement to Cancel the Loan Contract”, Meidu Company will pay all interest incurred by the purchaser that has not been paid as specified in the “Agreement to Cancel the Loan Contract”. Meidu Company will also directly pay funds into the loan bank and/or the public accumulation fund center accounts.
4. From the registration of the notice to cancel the “Sale-in-Advance Contract” and completion of the registration to cancel the mortgage in the “Loan Contract”, within 10 working days, Meidu Company will pay the “due sum of money” to the purchaser via the bank account indicated in the “Agreement to Cancel the Sale-in-Advance Contract”:
The “due sum of money” = [the principal amount already paid by the purchaser (including paid by self and on loan) + bank deposit interest on amount of apartment price already paid] – loan principal and interest already paid by the Company to the loan bank and/or the public accumulation fund center on behalf of the purchaser.
Solution 3: According to the Market Price on June 27, Vanke Purchases the Apartment
The market price differential = the market price as appraised on June 27, 2009 – the total price in the “Sale-in-Advance Contract”.
1. Government departments will appoint an appraiser with valid qualifications who, on August 15, 2009, will appraise the market value of the purchased apartment on June 27, 2009 for those who choose solution three, as well as issue an appraisal report.
2. After the above appraisal report comes out, Meidu Company will negotiate arrangements for the sale with Vanke Company who will return the money to the purchaser who choose solution three. In addition, Meidu Company will also negotiate the cancellation of the “Sale-in-Advance Contract” and the “Loan Contract” with the loan bank, the public accumulation fund center, and (if necessary) the Shanghai Estate Guarantee Company, Limited.
3. Once an agreement has been reached with all parties, Meidu Company will sign a “Third Party Agreement” with the purchaser and Vanke Company to pay back the money. Meidu will also sign an “Agreement to Cancel the Sale-in-Advance Contract” with the purchaser, and an “Agreement to Cancel the Loan Contract” with the purchaser, the loan bank, the public accumulation fund center and (if necessary) the Shanghai Estate Guarantee Company, Limited.
4. After the “Third Party Agreement”, the “Agreement to Cancel the Sale-in-Advance Contract”, and the “Agreement to Cancel the Loan Contract” are signed, Vanke Company pledges to pay any outstanding loans and interest directly to the bank accounts at loan bank and/or the public accumulation fund center as specified in the Third Party Agreement”, and the “Agreement to Cancel the Loan Contract”.
5. After the “Third Party Agreement”, the “Agreement to Cancel the Sale-in-Advance Contract”, and the “Agreement to Cancel the Loan Contract” are signed, and within ten working days of the completion of the condition below, Vanke Company guarantees to pay the “due sum of money” to the purchaser into the bank account specified in the “Third Party Agreement”.
The purchaser, the loan bank, the public accumulation fund center, and (if necessary) the Shanghai Estate Guarantee Company, Limited must complete the registration of notice to cancel the “Sale-in-Advance Contract” and registration of the cancellation of the mortgage in the “Loan Contract”.
6. The “due sum of money” mentioned in the previous item = [the amount already paid by the purchaser (including paid by self and on loan) + market price differential] – principal and interest paid by the Company on behalf of the purchaser to the loan bank and/or the public accumulation fund center.
7. The “market price differential” mentioned in the previous item = the appraised total market value of the apartment on June 27, 2009 – the total price of the apartment in the “Sale-in-Advance Contract”.
At the same time, Meidu Company announced that, as of yesterday, it had sent by mail copies of the “Guidelines” to purchasers. After purchasers receive the “Operating Guidelines”, they can fill out the “Solution Selection Form” and mail it back to “Riverside Lotus” Sales Center, 599 Luoyang Road, Shanghai (Zip: 201100) before August 15, 2009.
Wednesday, July 29, 2009
Shanghai Apartment Collapse: Investigation Results and Punishment
闵行倒楼：6人被拘 7人取 保候审 副区长遭行政警告
Minhang Collapsed Building: 6 arrested, 7 out on bail, vice district chief given administrative warning
http://epaper.dfdaily.com/dfzb/html/2009-07/29/content_148342.htm
In yesterday’s Oriental Morning Post, the results of a government investigation into the collapse of an apartment building in the Minhang district of Shanghai were unveiled. While earlier articles, including the English-language Shanghai Daily, reported that both the development company and the construction company were partially owned by officials of Minhang and of Meilong Town (a town within Minhang, located near the real estate development), yesterday’s investigation announced that those links did not exist (at least now).
Investigation of Developer Meidu Company Shareholder Situation
* Founded in 1995, was originally Minhang District Meilong Town Collective Enterprise
* In 2001, changed system to an enterprise run by individuals [minying] with 24 shareholders registered with Bureau of Industry and Commerce; it is an employee of the Meilong Town Land Requisition Service Office and Xun Hao Properties Limited
* From founding to present 6 shareholders have withdrawn
Shanghai Meidu Real Estate Company
* There are 18 actual shareholders currently
* The 8 shareholders who are town public service personnel have unhooked themselves from their original work unit
* The head of the Meilong Town Land Requisition Service Office, Zhang Jinliang, who is an enterprise employee has already unhooked himself from the town Land Requisition Service Office work. Recently, the organizational system of the Meilong Town Land Requisition Service Office was dissolved and it is in the process of auditing and liquidating assets
6 shareholders are employees of Xun Hao Company will either give up their shares or unhook themselves from Xun Hao Company
* The remaining 3 shareholders are an employee of Zhongxin Construction Company, a sole proprietor, and a retiree.
* The company’s former chairman, Que Jingde, is currently the second-largest shareholder with 15% of the shares
* The company’s former board member and current chairman, Zhang Zhiqin, is the top shareholder, and once was a top executive in Xun Hao Company, holds 64.275% of the shares
July 29, 2009
OMP reporter, Li Meng
At the city government news conference yesterday, the head of the group assigned to investigate the “6 [June] 27” accident and director general of the municipal safety supervisory bureau Xie Liming explained the actions to be taken after investigating the “6-27” accidental collapse of Lotus Riverside building 7. Six people from developer Meidu Real Estate Company and project contractor Zhongxin Construction Company who are suspected of negligence leading to a serious accident have been arrested and are in custody; seven people have been released on bail. The company responsible for the accident, Meidu Real Estate Company, has been fined 1.5 million yuan.
Xie Liming said that, because of his leadership responsibility in ensuring district construction engineering safety, Lian Zhenghua, vice warden of Minhang District, was given an administrative warning. The town chief of Meilong Town, Minhang District, Shi Baoqi and the vice-town chief, Zhou Liang, separately received an administrative demerit and a large administrative demerit.
Xie Liming expressed that the collapse of the Shanghai “Lotus Riverside” building during apartment construction has had a bad effect on society and it is of a very serious nature—an accident with major responsibility by those involved. Currently, the certifications of the developer of the collapsed building, Meidu Real Estate Company, the project contractor, Zhongxin Construction Company, and the supervisory unit, Guangqi Inspection Company, have all been revoked.
According to sources, after the collapse of building 7 of “Lotus Riverside” on June 27, member of the Political Bureau of the CPC Central Committee and Shanghai Municipal Party Secretary Yu Zhengsheng and mayor Han Zheng immediately demanded a full investigation of the reasons for the accident and an accounting of the parties responsible—they pledged to use this as a experiential guide, make it a precedent, and clarify responsibility.
The accident investigation team looked at 21 crucial sections of the engineering process and engineering activities, using surveys of the scene, technical appraisals, investigation of approval process, and close research and analysis.
The investigative team was in Minhang District of over 20 days, interviewed 293 people, and produced close to 300 records. Analysis of the investigation made clear the direct and indirect reasons for the accident, identified the nature and responsibility for the accident, advanced opinions on how to dispose of those responsible for the accident, and improvement guidelines on how to avoid the accident.
The investigative group made clear that the second-largest shareholder of the Meidu Real Estate Company, Que Jingde, is not a civil servant of a state organ, and his role as assistant to the town chief of Meilong Town is the result of Meilong Town party secretary Cai Jianzhong overstepping his authority and instituted after an irregular nomination, nor was it reported to the District Organization Department. The Minhang District Committee has now certified that the institution of Que Jingde as assistant to the town chief was invalid and relevant departments are investigating whether to indict Que Jingde. Cai Jianzhong has been suspended from his duties pending the group’s investigation into overstepping authority and irregular nomination of Que Jingde as assistant to the town chief.
After the investigation and identification of responsibility by the investigative group, it was found that 7 people including Meidu Real Estate legal representative Zhang Zhiqin and Zhongxin Construction Company legal representative Zhang Yaojie have direct responsibility for the accident. They are suspected of committing the crime of negligence leading to a serious accident and the determination of criminal responsibility will be decided by the court. Six of the people are in custody. Eight others have been determined to be negligent, including supervisory unit Guangqi Inspection Company legal representative Wang Jinquan, and they will be fined and lose their labor contracts. Finally, the engineering supervisory unit Xieli Survey Company had a nonzero responsibility in causing the accident, and will be publicly criticized.
Xie Liming expressed at the news conference that other problems and leads related to the collapse of building are valued by the Shanghai municipal council and the municipal government, and will be investigated by the relevant city departments and the Minhang District council and government. After investigation, the results will be evaluated and made public through legal means.
Minhang Collapsed Building: 6 arrested, 7 out on bail, vice district chief given administrative warning
http://epaper.dfdaily.com/dfzb/html/2009-07/29/content_148342.htm
In yesterday’s Oriental Morning Post, the results of a government investigation into the collapse of an apartment building in the Minhang district of Shanghai were unveiled. While earlier articles, including the English-language Shanghai Daily, reported that both the development company and the construction company were partially owned by officials of Minhang and of Meilong Town (a town within Minhang, located near the real estate development), yesterday’s investigation announced that those links did not exist (at least now).
Investigation of Developer Meidu Company Shareholder Situation
* Founded in 1995, was originally Minhang District Meilong Town Collective Enterprise
* In 2001, changed system to an enterprise run by individuals [minying] with 24 shareholders registered with Bureau of Industry and Commerce; it is an employee of the Meilong Town Land Requisition Service Office and Xun Hao Properties Limited
* From founding to present 6 shareholders have withdrawn
Shanghai Meidu Real Estate Company
* There are 18 actual shareholders currently
* The 8 shareholders who are town public service personnel have unhooked themselves from their original work unit
* The head of the Meilong Town Land Requisition Service Office, Zhang Jinliang, who is an enterprise employee has already unhooked himself from the town Land Requisition Service Office work. Recently, the organizational system of the Meilong Town Land Requisition Service Office was dissolved and it is in the process of auditing and liquidating assets
6 shareholders are employees of Xun Hao Company will either give up their shares or unhook themselves from Xun Hao Company
* The remaining 3 shareholders are an employee of Zhongxin Construction Company, a sole proprietor, and a retiree.
* The company’s former chairman, Que Jingde, is currently the second-largest shareholder with 15% of the shares
* The company’s former board member and current chairman, Zhang Zhiqin, is the top shareholder, and once was a top executive in Xun Hao Company, holds 64.275% of the shares
July 29, 2009
OMP reporter, Li Meng
At the city government news conference yesterday, the head of the group assigned to investigate the “6 [June] 27” accident and director general of the municipal safety supervisory bureau Xie Liming explained the actions to be taken after investigating the “6-27” accidental collapse of Lotus Riverside building 7. Six people from developer Meidu Real Estate Company and project contractor Zhongxin Construction Company who are suspected of negligence leading to a serious accident have been arrested and are in custody; seven people have been released on bail. The company responsible for the accident, Meidu Real Estate Company, has been fined 1.5 million yuan.
Xie Liming said that, because of his leadership responsibility in ensuring district construction engineering safety, Lian Zhenghua, vice warden of Minhang District, was given an administrative warning. The town chief of Meilong Town, Minhang District, Shi Baoqi and the vice-town chief, Zhou Liang, separately received an administrative demerit and a large administrative demerit.
Xie Liming expressed that the collapse of the Shanghai “Lotus Riverside” building during apartment construction has had a bad effect on society and it is of a very serious nature—an accident with major responsibility by those involved. Currently, the certifications of the developer of the collapsed building, Meidu Real Estate Company, the project contractor, Zhongxin Construction Company, and the supervisory unit, Guangqi Inspection Company, have all been revoked.
According to sources, after the collapse of building 7 of “Lotus Riverside” on June 27, member of the Political Bureau of the CPC Central Committee and Shanghai Municipal Party Secretary Yu Zhengsheng and mayor Han Zheng immediately demanded a full investigation of the reasons for the accident and an accounting of the parties responsible—they pledged to use this as a experiential guide, make it a precedent, and clarify responsibility.
The accident investigation team looked at 21 crucial sections of the engineering process and engineering activities, using surveys of the scene, technical appraisals, investigation of approval process, and close research and analysis.
The investigative team was in Minhang District of over 20 days, interviewed 293 people, and produced close to 300 records. Analysis of the investigation made clear the direct and indirect reasons for the accident, identified the nature and responsibility for the accident, advanced opinions on how to dispose of those responsible for the accident, and improvement guidelines on how to avoid the accident.
The investigative group made clear that the second-largest shareholder of the Meidu Real Estate Company, Que Jingde, is not a civil servant of a state organ, and his role as assistant to the town chief of Meilong Town is the result of Meilong Town party secretary Cai Jianzhong overstepping his authority and instituted after an irregular nomination, nor was it reported to the District Organization Department. The Minhang District Committee has now certified that the institution of Que Jingde as assistant to the town chief was invalid and relevant departments are investigating whether to indict Que Jingde. Cai Jianzhong has been suspended from his duties pending the group’s investigation into overstepping authority and irregular nomination of Que Jingde as assistant to the town chief.
After the investigation and identification of responsibility by the investigative group, it was found that 7 people including Meidu Real Estate legal representative Zhang Zhiqin and Zhongxin Construction Company legal representative Zhang Yaojie have direct responsibility for the accident. They are suspected of committing the crime of negligence leading to a serious accident and the determination of criminal responsibility will be decided by the court. Six of the people are in custody. Eight others have been determined to be negligent, including supervisory unit Guangqi Inspection Company legal representative Wang Jinquan, and they will be fined and lose their labor contracts. Finally, the engineering supervisory unit Xieli Survey Company had a nonzero responsibility in causing the accident, and will be publicly criticized.
Xie Liming expressed at the news conference that other problems and leads related to the collapse of building are valued by the Shanghai municipal council and the municipal government, and will be investigated by the relevant city departments and the Minhang District council and government. After investigation, the results will be evaluated and made public through legal means.
Tuesday, July 28, 2009
China: Hot Money Blowing Bubbles
滚滚热钱豪赌楼市泡沫
Surging Hot Money Makes Big Bets on Property Bubble
100 Billion in Foreign Capital “Wheels Around and Strikes Back” in the Second Quarter
Wan Jing
2009-07-29
China Securities Journal, July 29, 2009
http://www.cs.com.cn/fc/03/200907/t20090729_2164954.htm
Apologies for the long article. It is quite interesting look at the surge in “hot money” into China this year, and its effect on the real estate market. Worth the time it takes to read (and a look at the illustration through the link – sorry, can’t upload pictures).
Illustration (by Han Jingfeng): House, “Domestic Housing Market”, Man in house, “Quick, come in out for some shelter”, Traveler, “Overseas Funds” (See http://paper.cs.com.cn/page/17/2009-07/29/B02/20090729B02_pdf.pdf)
“Ever since the lifting of the ban ‘limiting outside commands’ in the Shenzhen housing market in April, there has been a proliferation of property transactions at various ports and the number of Hong Kongers buying property has increased by 20 to 30 percent,” the manager of Shenzhen Futian Port Intermediary told a China Securities Journal reporter. After the steep decline in property prices last year, beaten Hong Kong investors have staged a comeback; meanwhile several high-end housing developments in Beijing have also made sharp allegations that in the most recent period the ratio of foreign funds purchasing housing has risen sharply, of which there is no lack of wealthy Euro-American and middle Eastern investors; and in June, 306 units of luxurious housing were transacted in Shanghai with a price of over 40,000 yuan/square meter, exceeding the total transactions from May, and over 20 percent of the buyers were from overseas…
With the sharp recovery in the housing and stock markets, the hot money from abroad that once momentarily left last year, has now in the second quarter come surging back in carrying 100’s of billions. According to statistics, at the end of June China’s total foreign exchange reserves totaled 2.13 trillion USD, of which a 177.9 billion USD increase came from the second quarter—the trade imbalance accounting for 43.7 billion USD and FDI (foreign direct investment) increasing 21.2 billion USD. According to the current way of calculating hot money, subtracting the increases in trade imbalance and FDI from the increase in foreign exchange reserves, yields an estimate of 122.0 billion USD increase in hot money.
Hot Money Surges in New Attack
According to China Academy of Social Sciences (CASS) Institute of World Economics and Politics researcher Zhang Meng’s analysis, if one deducts the estimated effect of Euro and dollar appreciation, it will explain 33.9 billion USD of the increase in foreign reserves leaving 90.0 billion USD of increase in foreign reserves that lacks a logical explanation—hence the only explanation is that it is the short-term inflow of international capital. According to statistics, from the start of the global financial crisis in October of last year to March of this year, there was a negative value to the inflow of international capital. But in February and March, there was a gradual reduction in the negative value, while in April it suddenly turned position, increasing 32.5 billion USD. May and June continue to increase at high rates.
Of especial importance is that in June the trade imbalance was only 8.26 billion USD, and actually used foreign direct investment was 8.96 billion USD, meaning that in that month the increase of 42.1 billion USD in foreign reserves there is potentially 24.9 billion USD that is entering as hot money. Bank of Communications department of development researcher E Yongjian thinks that there is evidence that hot money from abroad is entering with increasing speed and the liabilities ledger for the central bank is also showing the same trends—short-term international capital has started to increase in the speed of its return.
According to estimates from United Securities, over 120 billion USD in hot money streamed into China in the second quarter, exceeding the previous high point of 73.2 billion USD in the first quarter of 2007. Analysts point out that since March of this year, foreign reserves have been increasing nonstop but the trade imbalance and FDI increases have not clearly improved. The increase in foreign reserves is much faster than the growth in the trade imbalance or FDI meaning that outside funds are flowing in at high levels. United Securities analyst Liu Xiangning thinks the surge in hot money into China is mainly flowing into the property and stock markets—in the first quarter short-term international capital was flowing in at a negative number, and in the second quarter is has become a massive amount, meaning that the sensitivity of these funds is very high.
The poles towards which hot money from abroad flows are concealed. According to this reporter’s understanding, hot money often flows through multiple channels including individual layers and company layers. Individual layers mainly go through private conversion of foreign exchange—in Hong Kong, every individual can change 20,000 yuan (HKD change to RMB) and can remit 80,000 yuan RMB to the mainland. It often happens between Hong Kong and Shenzhen that, because many people are friends and family, there are special groups that convert foreign exchange like ants moving house such that a massive amount of hot money can move in very quickly.
In terms of company layers, the traditional channels for hot money such as “overstating export, understating import, and engaging in fake direct domestic investment” are gradually becoming marginalized. The new, emerging channels for entering the domestic area are technological service trade, importing of luxury items, trading in currencies, individual purchase of foreign currency, FDI capital projects, and underground money lenders [qianzhuang]. Experts point out that the operations of technological service trade and import of luxury items are secret and very difficult to regulate so they are a frequent choice when a large amount of hot money moves in. Currency trading is even more hidden from regulation and can allow hot money to move in both directions, and usually involves a large-scale multinational group that moves funds between its subsidiaries so it can move even faster.
In addition, the FDI approval rights issued by MOFCOM [Ministry of Commerce] might become a bigger and wider channel for the entrance of hot money. In March of this year, MOFCOM decentralized the approval and modification of companies started by foreign investors with registered capital of less than 100 million USD to the provincial level commerce regulators at the location of the company registration. The convenience provided to foreign capital will also provide a more convenient and lucrative operating channel for overseas hot money.
Lurking in the Housing Market
The specter of hot money started appearing in the first quarter in the housing market, and its momentum has intensified in the second quarter. Starting from March, property prices in first-level cities have increased across the board, increasing four consecutive months compared with a quarter earlier and surpassing the peaks of 2007. Part of the push raising property prices in first-level cities is investors from abroad. In addition to that of individuals investing in real estate, hot money also goes through different types of property investment companies and private organizations to enter the housing market.
A long-term study conducted by Centaline (China) Property Research Center shows that: from April of this year, of the three large groups of housing purchasers in Shanghai, namely Shanghaiese, people from outside provinces and cities, and people from HMT [Hong Kong, Macau, and Taiwan] and overseas, the proportion of Shanghaiese has decreased, falling a total of about 5% in April and May with Shanghaiese housing purchasers falling to 85% in May. At the same time, HMT people have taken over to become the nuclear force of the high-end property housing market in Shanghai. Starting from March, HMT housing purchasers increased 25%, 40%, and 43% over three months compared to the previous quarter, matching historical high points from former years.
Centraline property analyst Zhuang Wei expressed that while the market share occupied by people from overseas and HMT is not large, it is much more focused on high-end housing complexes, and places where they invest are sometimes “big money” transactions largely increasing the activity level in the housing market.
After the cancellation of “limiting outside commands”, the Shenzhen housing market has also started to be inundated with Hong Kong investors. According to an introduction by a representative of the Luohu port branch of Shi-Hua Real Estate, compared to April there has been an increase of 20 percent in purchases by Hong Kongers of Luohu port area properties, especially small- and medium-sized layouts of less than 70 square meters near Luohu port. At the Futian port, Futian central area, and Honey Lake [Xiangmihu] luxury residence area, Hong Kongers coming to invest in property have also increased. A China Securities Journal reporter recently visited multiple high-end housing complexes in Nanshan district and discovered that more than a few groups of people touring properties had Hong Kong accents, mostly focusing investment on areas and complexes with future potential to increase in value.
The general manager at the Shenzhen business department of Midland Realty, Jiang Shaojie, expressed that there are low interest rates at Hong Kong banks so funds are looking for roads to invest in the housing market, while at the same time there is a deluge of international hot money, making economically-sensitive Hong Kongers anxious over inflation. After the experience of the financial crisis, many Hong Kongers had severe losses from investment in financial securities hence real estate and gold investment are more in their good graces. But compared to 2007 when it buyers were unstrained with respect to properties, currently Hong Kongers in Shenzhen are reasonable and cautious in their purchases.
The development of the high-end residence market in Guangzhou has also felt the force of funds from abroad. Hopefluent market research department determined that, after 3 successive months in 2009 when the Guangzhou high-end market had approximately 10% growth, in May it sprand 18%. Conducting research on 46 mainstream housing complexes in the central area of Guangzhou, they found that 75% had already returned to 2007 levels. And among investors in these housing complexes, HMT and overseas buyers made up 30 percent and are growing.
Even in the realm of real estate development, restrictions on the entry of overseas capital are starting to being slackened. In May, the Beijing Municipal Land Reserve allowed guaranteed funds in foreign exchange to be used to land transactions, relaxing restrictions on the participation of overseas capital in land bidding.
The Future Might be More Rapid
The argument over whether, behind the dramatic climb in the domestic housing and stock markets, there lies the helping push of a large amount of hot money is currently ongoing. Professor Li Youhuan of the Guangdong Academy of Social Sciences thinks that hot money now is mainly concentrated in Hong Kong and Taiwan, and whether or not a large amount has entered the domestic market requires continued investigation. From April and May of this year, the dramatic climbs in Hong Kong and Taiwan stock markets and housing assets is related to a large influx of hot money, and Professor Li estimates that the scale of the inflow will grow in July.
Haitong Securities financial industry analyst She Minhua also expressed that the recent jump in global stock markets and commodities is mainly because of the strong predictions of economic recovery, along with predictions of inflation. “This is a relatively reasonable reaction. The gains in the domestic stock and property markets are not strongly related to speculative hot money.”
As the first stop in the build-up of international hot money, Hong Kong has relatively clear evidence of overseas funds flooding in. The newest research report from Citibank pointed out that, in the past two months, on average every week the funds flowing into Asian and especially flowing into Hong Kong have already reached the level of funds entering during the peak of the 2007 bull market. Sinolink Securities predicts that approximately 342.0 billion HKD of “hot money” has entered Hong Kong since September of last year, making up 50% of Hong Kong’s base currency, and vastly surpassing historical levels—and Hong Kong’s stock market has during this time recovered markedly.
Hot money has become a wave in Hong Kong and Taiwan, quickly raising the anxiety of whether a large amount of hot money will enter domestic areas. “Today, the eruption in the housing and stock markets has already being going on for some time, but from our inspections of flows in underground channels for overseas hot money, it has only been in June when a real turning point was reached, ending a span from October of last year to June of this year when net flows were outward—they have now turned net inward.” Guangdong Academy of Social Sciences Professor Li Youhuan expressed that in the last three months hot money mainly has been coming from the savings funds and some investment funds of HMT areas. Some overseas Chinese savings funds and a small amount of investment funds have started to enter the domestic market but currently there is no large-scale investment from international investment funds.
Li Youhuan thinks that, as far as the inspection of underground money channels, from April to June, every 10 days the amount of hot money flowing in shows a growing trend—and this has increased even further recently. Using the domestic and international economic development trends to predict, hot money flowing in will speed up in the second half of the year.
Different from the caution of domestic scholars, amidst the large-scale increase in the domestic stock and housing markets, large overseas banks emphasize that further development will become even more ferocious. A chief economic officer at a large overseas bank expressed that China’s housing market has already entered a period of growth, and the second half of the year will be auspicious for the real estate market. With excess liquidity and without a full recovery of the real economy, it is impossible for the government to mop up liquidity in the short term, so domestic housing prices will continue to rise. Unlike the first half of the year when rigid demand provided the impetus, the second half of the year operations from hot money will provide the key driving force in the increase of housing prices.
Zhang Meng, researcher at the CASS Institute of World Economics and Politics, thinks that in the second half of the year China will face an even greater surge in inflow of short-term international capital. With 7.37 trillion in new credit and loans supplied in the first half of 2009, if even more short-term international capital flows in, China’s asset market will be sandwiched between domestic and overseas excess liquidity making it very difficult to avoid a new bubble in asset prices. Of this we should be especially on guard.
Surging Hot Money Makes Big Bets on Property Bubble
100 Billion in Foreign Capital “Wheels Around and Strikes Back” in the Second Quarter
Wan Jing
2009-07-29
China Securities Journal, July 29, 2009
http://www.cs.com.cn/fc/03/200907/t20090729_2164954.htm
Apologies for the long article. It is quite interesting look at the surge in “hot money” into China this year, and its effect on the real estate market. Worth the time it takes to read (and a look at the illustration through the link – sorry, can’t upload pictures).
Illustration (by Han Jingfeng): House, “Domestic Housing Market”, Man in house, “Quick, come in out for some shelter”, Traveler, “Overseas Funds” (See http://paper.cs.com.cn/page/17/2009-07/29/B02/20090729B02_pdf.pdf)
“Ever since the lifting of the ban ‘limiting outside commands’ in the Shenzhen housing market in April, there has been a proliferation of property transactions at various ports and the number of Hong Kongers buying property has increased by 20 to 30 percent,” the manager of Shenzhen Futian Port Intermediary told a China Securities Journal reporter. After the steep decline in property prices last year, beaten Hong Kong investors have staged a comeback; meanwhile several high-end housing developments in Beijing have also made sharp allegations that in the most recent period the ratio of foreign funds purchasing housing has risen sharply, of which there is no lack of wealthy Euro-American and middle Eastern investors; and in June, 306 units of luxurious housing were transacted in Shanghai with a price of over 40,000 yuan/square meter, exceeding the total transactions from May, and over 20 percent of the buyers were from overseas…
With the sharp recovery in the housing and stock markets, the hot money from abroad that once momentarily left last year, has now in the second quarter come surging back in carrying 100’s of billions. According to statistics, at the end of June China’s total foreign exchange reserves totaled 2.13 trillion USD, of which a 177.9 billion USD increase came from the second quarter—the trade imbalance accounting for 43.7 billion USD and FDI (foreign direct investment) increasing 21.2 billion USD. According to the current way of calculating hot money, subtracting the increases in trade imbalance and FDI from the increase in foreign exchange reserves, yields an estimate of 122.0 billion USD increase in hot money.
Hot Money Surges in New Attack
According to China Academy of Social Sciences (CASS) Institute of World Economics and Politics researcher Zhang Meng’s analysis, if one deducts the estimated effect of Euro and dollar appreciation, it will explain 33.9 billion USD of the increase in foreign reserves leaving 90.0 billion USD of increase in foreign reserves that lacks a logical explanation—hence the only explanation is that it is the short-term inflow of international capital. According to statistics, from the start of the global financial crisis in October of last year to March of this year, there was a negative value to the inflow of international capital. But in February and March, there was a gradual reduction in the negative value, while in April it suddenly turned position, increasing 32.5 billion USD. May and June continue to increase at high rates.
Of especial importance is that in June the trade imbalance was only 8.26 billion USD, and actually used foreign direct investment was 8.96 billion USD, meaning that in that month the increase of 42.1 billion USD in foreign reserves there is potentially 24.9 billion USD that is entering as hot money. Bank of Communications department of development researcher E Yongjian thinks that there is evidence that hot money from abroad is entering with increasing speed and the liabilities ledger for the central bank is also showing the same trends—short-term international capital has started to increase in the speed of its return.
According to estimates from United Securities, over 120 billion USD in hot money streamed into China in the second quarter, exceeding the previous high point of 73.2 billion USD in the first quarter of 2007. Analysts point out that since March of this year, foreign reserves have been increasing nonstop but the trade imbalance and FDI increases have not clearly improved. The increase in foreign reserves is much faster than the growth in the trade imbalance or FDI meaning that outside funds are flowing in at high levels. United Securities analyst Liu Xiangning thinks the surge in hot money into China is mainly flowing into the property and stock markets—in the first quarter short-term international capital was flowing in at a negative number, and in the second quarter is has become a massive amount, meaning that the sensitivity of these funds is very high.
The poles towards which hot money from abroad flows are concealed. According to this reporter’s understanding, hot money often flows through multiple channels including individual layers and company layers. Individual layers mainly go through private conversion of foreign exchange—in Hong Kong, every individual can change 20,000 yuan (HKD change to RMB) and can remit 80,000 yuan RMB to the mainland. It often happens between Hong Kong and Shenzhen that, because many people are friends and family, there are special groups that convert foreign exchange like ants moving house such that a massive amount of hot money can move in very quickly.
In terms of company layers, the traditional channels for hot money such as “overstating export, understating import, and engaging in fake direct domestic investment” are gradually becoming marginalized. The new, emerging channels for entering the domestic area are technological service trade, importing of luxury items, trading in currencies, individual purchase of foreign currency, FDI capital projects, and underground money lenders [qianzhuang]. Experts point out that the operations of technological service trade and import of luxury items are secret and very difficult to regulate so they are a frequent choice when a large amount of hot money moves in. Currency trading is even more hidden from regulation and can allow hot money to move in both directions, and usually involves a large-scale multinational group that moves funds between its subsidiaries so it can move even faster.
In addition, the FDI approval rights issued by MOFCOM [Ministry of Commerce] might become a bigger and wider channel for the entrance of hot money. In March of this year, MOFCOM decentralized the approval and modification of companies started by foreign investors with registered capital of less than 100 million USD to the provincial level commerce regulators at the location of the company registration. The convenience provided to foreign capital will also provide a more convenient and lucrative operating channel for overseas hot money.
Lurking in the Housing Market
The specter of hot money started appearing in the first quarter in the housing market, and its momentum has intensified in the second quarter. Starting from March, property prices in first-level cities have increased across the board, increasing four consecutive months compared with a quarter earlier and surpassing the peaks of 2007. Part of the push raising property prices in first-level cities is investors from abroad. In addition to that of individuals investing in real estate, hot money also goes through different types of property investment companies and private organizations to enter the housing market.
A long-term study conducted by Centaline (China) Property Research Center shows that: from April of this year, of the three large groups of housing purchasers in Shanghai, namely Shanghaiese, people from outside provinces and cities, and people from HMT [Hong Kong, Macau, and Taiwan] and overseas, the proportion of Shanghaiese has decreased, falling a total of about 5% in April and May with Shanghaiese housing purchasers falling to 85% in May. At the same time, HMT people have taken over to become the nuclear force of the high-end property housing market in Shanghai. Starting from March, HMT housing purchasers increased 25%, 40%, and 43% over three months compared to the previous quarter, matching historical high points from former years.
Centraline property analyst Zhuang Wei expressed that while the market share occupied by people from overseas and HMT is not large, it is much more focused on high-end housing complexes, and places where they invest are sometimes “big money” transactions largely increasing the activity level in the housing market.
After the cancellation of “limiting outside commands”, the Shenzhen housing market has also started to be inundated with Hong Kong investors. According to an introduction by a representative of the Luohu port branch of Shi-Hua Real Estate, compared to April there has been an increase of 20 percent in purchases by Hong Kongers of Luohu port area properties, especially small- and medium-sized layouts of less than 70 square meters near Luohu port. At the Futian port, Futian central area, and Honey Lake [Xiangmihu] luxury residence area, Hong Kongers coming to invest in property have also increased. A China Securities Journal reporter recently visited multiple high-end housing complexes in Nanshan district and discovered that more than a few groups of people touring properties had Hong Kong accents, mostly focusing investment on areas and complexes with future potential to increase in value.
The general manager at the Shenzhen business department of Midland Realty, Jiang Shaojie, expressed that there are low interest rates at Hong Kong banks so funds are looking for roads to invest in the housing market, while at the same time there is a deluge of international hot money, making economically-sensitive Hong Kongers anxious over inflation. After the experience of the financial crisis, many Hong Kongers had severe losses from investment in financial securities hence real estate and gold investment are more in their good graces. But compared to 2007 when it buyers were unstrained with respect to properties, currently Hong Kongers in Shenzhen are reasonable and cautious in their purchases.
The development of the high-end residence market in Guangzhou has also felt the force of funds from abroad. Hopefluent market research department determined that, after 3 successive months in 2009 when the Guangzhou high-end market had approximately 10% growth, in May it sprand 18%. Conducting research on 46 mainstream housing complexes in the central area of Guangzhou, they found that 75% had already returned to 2007 levels. And among investors in these housing complexes, HMT and overseas buyers made up 30 percent and are growing.
Even in the realm of real estate development, restrictions on the entry of overseas capital are starting to being slackened. In May, the Beijing Municipal Land Reserve allowed guaranteed funds in foreign exchange to be used to land transactions, relaxing restrictions on the participation of overseas capital in land bidding.
The Future Might be More Rapid
The argument over whether, behind the dramatic climb in the domestic housing and stock markets, there lies the helping push of a large amount of hot money is currently ongoing. Professor Li Youhuan of the Guangdong Academy of Social Sciences thinks that hot money now is mainly concentrated in Hong Kong and Taiwan, and whether or not a large amount has entered the domestic market requires continued investigation. From April and May of this year, the dramatic climbs in Hong Kong and Taiwan stock markets and housing assets is related to a large influx of hot money, and Professor Li estimates that the scale of the inflow will grow in July.
Haitong Securities financial industry analyst She Minhua also expressed that the recent jump in global stock markets and commodities is mainly because of the strong predictions of economic recovery, along with predictions of inflation. “This is a relatively reasonable reaction. The gains in the domestic stock and property markets are not strongly related to speculative hot money.”
As the first stop in the build-up of international hot money, Hong Kong has relatively clear evidence of overseas funds flooding in. The newest research report from Citibank pointed out that, in the past two months, on average every week the funds flowing into Asian and especially flowing into Hong Kong have already reached the level of funds entering during the peak of the 2007 bull market. Sinolink Securities predicts that approximately 342.0 billion HKD of “hot money” has entered Hong Kong since September of last year, making up 50% of Hong Kong’s base currency, and vastly surpassing historical levels—and Hong Kong’s stock market has during this time recovered markedly.
Hot money has become a wave in Hong Kong and Taiwan, quickly raising the anxiety of whether a large amount of hot money will enter domestic areas. “Today, the eruption in the housing and stock markets has already being going on for some time, but from our inspections of flows in underground channels for overseas hot money, it has only been in June when a real turning point was reached, ending a span from October of last year to June of this year when net flows were outward—they have now turned net inward.” Guangdong Academy of Social Sciences Professor Li Youhuan expressed that in the last three months hot money mainly has been coming from the savings funds and some investment funds of HMT areas. Some overseas Chinese savings funds and a small amount of investment funds have started to enter the domestic market but currently there is no large-scale investment from international investment funds.
Li Youhuan thinks that, as far as the inspection of underground money channels, from April to June, every 10 days the amount of hot money flowing in shows a growing trend—and this has increased even further recently. Using the domestic and international economic development trends to predict, hot money flowing in will speed up in the second half of the year.
Different from the caution of domestic scholars, amidst the large-scale increase in the domestic stock and housing markets, large overseas banks emphasize that further development will become even more ferocious. A chief economic officer at a large overseas bank expressed that China’s housing market has already entered a period of growth, and the second half of the year will be auspicious for the real estate market. With excess liquidity and without a full recovery of the real economy, it is impossible for the government to mop up liquidity in the short term, so domestic housing prices will continue to rise. Unlike the first half of the year when rigid demand provided the impetus, the second half of the year operations from hot money will provide the key driving force in the increase of housing prices.
Zhang Meng, researcher at the CASS Institute of World Economics and Politics, thinks that in the second half of the year China will face an even greater surge in inflow of short-term international capital. With 7.37 trillion in new credit and loans supplied in the first half of 2009, if even more short-term international capital flows in, China’s asset market will be sandwiched between domestic and overseas excess liquidity making it very difficult to avoid a new bubble in asset prices. Of this we should be especially on guard.
Monday, July 27, 2009
Housing Stir-Frying Groups
谁推高了房价：购房主力是炒房团？
Who is Pushing Up Housing Prices?
Is the Impetus Housing Stir-Frying Groups [chaofang tuan]?
China Securities Journal article from about the origins of rise in urban housing prices. Housing “stir-frying” groups (chaofang tuan, or 炒房团 ) refer to groups of investors, usually believed to be from outside the city where housing is purchased, who come in and scoop up all the apartments for sale, usually before the public is given a chance to buy, and in collusion with the property developer. The lack of supply drives up prices, after which the group sells out making a quick profit. The most infamous “stir-frying” group comes from Wenzhou and is believed to be responsible for Shanghai’s high real estate prices.
Note: “stir-frying” (chao, 炒) is a word in Chinese that applies not only to housing but to stocks, stamps, and other goods (like chaohuo or flipping goods between stores in Zhongguancun). It is sometimes related, in English, to “cornering the market” where a good or commodity of limited amount is bought up and made scarce, raising the price, and then sold back to turn a quick investment. Hence one could argue “stir-frying” is a way to turn a quick profit by quickly “heating” a scarce thing. The link with quick frying in cooking is definitely a component of the meaning. The awkwardness of translation is compensated by richness from the centrality of food to China and the meaning of the word in Chinese.
Original article from CSJ: http://www.cs.com.cn/fc/03/200907/t20090727_2162953.htm
Illustration: Person is “Housing Purchaser”, house reads “Housing Price”, wok reads “real estate market”.
Recently, there have been reports stating “the impetus of housing purchases is still housing stir-frying groups” instilling more than a little surprise in people. The reports refer to an investigation organized by a certain university college: researchers directly surveyed 2,000 consumers in 40 cities by phone and found that 32.1% felt that the next 3 months was a good opportunity for buying housing while 32.7% felt it was a bad opportunity. Using this they come to a conclusion: statistically, since positive and negative views balance, “basically it can be certified that the impetus for buying housing is not from direct consumers but from investors”.
Beginning in September of last year, central and local governments issued multiple control and regulation policies aimed at the housing market, lowing transaction taxes and supporting the purchase of housing by residents. In February the market began to warm and by May and June it became white-hot. According to data released from the Bureau of Statistics two days ago, in the first half of 2009, 14.43 million square meters of commercial residences were sold in Shanghai, an increase of 34.8% over the same period from a year earlier, with a total sales revenue of 168.773 billion yuan, an increase of 88.5%. Sales of housing in stock registered 10.6241 million square meters, an increase of 35.3%. Because real and improved living demand has been unleashed with housing needed for weddings and by students, sales volume has clearly increased and pushed up housing prices. The phenomenon of standing in line to buy housing has appeared at some hot properties. Here, whether it is from the figures of agents or middlemen, it is the end-user buying to live in the property who is the vast majority. Government department spokespeople have also said that it is not investors who are in the majority.
Of course, demand is made up both of consumption by end-user livers and of investment. Mature housing markets are inseparable from these two types of demand. The situation in Shanghai these days results from investment demand that was clearly unleashed in May, while April was the month when real and improved living demands held up the market triggering movement from investors. In the second-hand [used; most housing in China is new] market, investors have either sold out or entered the market. According to statistics from intermediary organizations, in the central areas of certain cities, nine-tenths of owners who sell out originally were investors and they plan to move cash into other investment channels. Meanwhile, long-term property investment at the two levels of 5-6 million yuan and 8-10 million yuan are undertaken by investors entering the market, and their number made up 30% of total transactions of high-end housing in May.
Besides long-term investment, there is also short-term investment. Short-term investors are usually thought of as speculating through stir-frying housing, for example stir-frying apartment patterns [chao louhua; apartment pattern refers to “off-the-plan” property, property that is under construction] or short-term changing hands. Stir-frying apartment patterns means transactions in housing that is not finished, and was once in fashion but is now forbidden by government policy; short-term changing hands means buying and selling quickly when the price of housing is rising rapidly, or buying in a future house and selling once it is finished to reap the price differential.
It is undeniable that over-investment is more likely to create a housing price bubble. Relevant departments have pointed out that an investment proportion restricted to less than 20% is crucial to avoiding risk. Also, it is key to control investors using bank loans to stir-fry housing. This type of behavior has been amply documented, for instance in Shenzhen in 2007 there was a craze in the housing market and statistics show that investors made up 38% of the market.
Ending the sale of unfinished housing, collecting taxes on the sale of second-hand housing, and tightening loans for second apartments are the measures adopted by the government to control investment and attack speculation. But Shanghai annual statistics show that investment in housing accounts for less than 20% of all transactions, and even for some high-level properties it accounts for less than 40%. Some apartment complexes have more than half that are investors but these are individual cases.
The key drivers and majority for housing purchases are the decisive operators of the changes in housing prices. In the housing market of today that has been heating up for less than half a year, saying “currently the impetus of the market is housing stir-frying groups” is an exaggeration.
On July 17, at the Work Meeting to Encourage the Healthy Development of Shanghai Real Estate, the city government emphasized that the supply of land should be increased, with a special emphasis on the supply of land to be used for ordinary commercial residences. Focus should be on encouragement of starting work and making sales while being firm in investigating illegal and out of line behaviors such as holding back on development for increased price and fake transactions. It is clear that the goal is to increase the amount of supply and the speed it is made available. If the current impetus for housing purchases is housing stir-frying groups, that should control demand and restrict the purchase of housing for investment.
There are many problems to research in the housing market but analysis must use practical reality. Reaching foregone conclusions will only mislead consumers and interfere in the implementation of government control and regulation policies.
Who is Pushing Up Housing Prices?
Is the Impetus Housing Stir-Frying Groups [chaofang tuan]?
China Securities Journal article from about the origins of rise in urban housing prices. Housing “stir-frying” groups (chaofang tuan, or 炒房团 ) refer to groups of investors, usually believed to be from outside the city where housing is purchased, who come in and scoop up all the apartments for sale, usually before the public is given a chance to buy, and in collusion with the property developer. The lack of supply drives up prices, after which the group sells out making a quick profit. The most infamous “stir-frying” group comes from Wenzhou and is believed to be responsible for Shanghai’s high real estate prices.
Note: “stir-frying” (chao, 炒) is a word in Chinese that applies not only to housing but to stocks, stamps, and other goods (like chaohuo or flipping goods between stores in Zhongguancun). It is sometimes related, in English, to “cornering the market” where a good or commodity of limited amount is bought up and made scarce, raising the price, and then sold back to turn a quick investment. Hence one could argue “stir-frying” is a way to turn a quick profit by quickly “heating” a scarce thing. The link with quick frying in cooking is definitely a component of the meaning. The awkwardness of translation is compensated by richness from the centrality of food to China and the meaning of the word in Chinese.
Original article from CSJ: http://www.cs.com.cn/fc/03/200907/t20090727_2162953.htm
Illustration: Person is “Housing Purchaser”, house reads “Housing Price”, wok reads “real estate market”.
Recently, there have been reports stating “the impetus of housing purchases is still housing stir-frying groups” instilling more than a little surprise in people. The reports refer to an investigation organized by a certain university college: researchers directly surveyed 2,000 consumers in 40 cities by phone and found that 32.1% felt that the next 3 months was a good opportunity for buying housing while 32.7% felt it was a bad opportunity. Using this they come to a conclusion: statistically, since positive and negative views balance, “basically it can be certified that the impetus for buying housing is not from direct consumers but from investors”.
Beginning in September of last year, central and local governments issued multiple control and regulation policies aimed at the housing market, lowing transaction taxes and supporting the purchase of housing by residents. In February the market began to warm and by May and June it became white-hot. According to data released from the Bureau of Statistics two days ago, in the first half of 2009, 14.43 million square meters of commercial residences were sold in Shanghai, an increase of 34.8% over the same period from a year earlier, with a total sales revenue of 168.773 billion yuan, an increase of 88.5%. Sales of housing in stock registered 10.6241 million square meters, an increase of 35.3%. Because real and improved living demand has been unleashed with housing needed for weddings and by students, sales volume has clearly increased and pushed up housing prices. The phenomenon of standing in line to buy housing has appeared at some hot properties. Here, whether it is from the figures of agents or middlemen, it is the end-user buying to live in the property who is the vast majority. Government department spokespeople have also said that it is not investors who are in the majority.
Of course, demand is made up both of consumption by end-user livers and of investment. Mature housing markets are inseparable from these two types of demand. The situation in Shanghai these days results from investment demand that was clearly unleashed in May, while April was the month when real and improved living demands held up the market triggering movement from investors. In the second-hand [used; most housing in China is new] market, investors have either sold out or entered the market. According to statistics from intermediary organizations, in the central areas of certain cities, nine-tenths of owners who sell out originally were investors and they plan to move cash into other investment channels. Meanwhile, long-term property investment at the two levels of 5-6 million yuan and 8-10 million yuan are undertaken by investors entering the market, and their number made up 30% of total transactions of high-end housing in May.
Besides long-term investment, there is also short-term investment. Short-term investors are usually thought of as speculating through stir-frying housing, for example stir-frying apartment patterns [chao louhua; apartment pattern refers to “off-the-plan” property, property that is under construction] or short-term changing hands. Stir-frying apartment patterns means transactions in housing that is not finished, and was once in fashion but is now forbidden by government policy; short-term changing hands means buying and selling quickly when the price of housing is rising rapidly, or buying in a future house and selling once it is finished to reap the price differential.
It is undeniable that over-investment is more likely to create a housing price bubble. Relevant departments have pointed out that an investment proportion restricted to less than 20% is crucial to avoiding risk. Also, it is key to control investors using bank loans to stir-fry housing. This type of behavior has been amply documented, for instance in Shenzhen in 2007 there was a craze in the housing market and statistics show that investors made up 38% of the market.
Ending the sale of unfinished housing, collecting taxes on the sale of second-hand housing, and tightening loans for second apartments are the measures adopted by the government to control investment and attack speculation. But Shanghai annual statistics show that investment in housing accounts for less than 20% of all transactions, and even for some high-level properties it accounts for less than 40%. Some apartment complexes have more than half that are investors but these are individual cases.
The key drivers and majority for housing purchases are the decisive operators of the changes in housing prices. In the housing market of today that has been heating up for less than half a year, saying “currently the impetus of the market is housing stir-frying groups” is an exaggeration.
On July 17, at the Work Meeting to Encourage the Healthy Development of Shanghai Real Estate, the city government emphasized that the supply of land should be increased, with a special emphasis on the supply of land to be used for ordinary commercial residences. Focus should be on encouragement of starting work and making sales while being firm in investigating illegal and out of line behaviors such as holding back on development for increased price and fake transactions. It is clear that the goal is to increase the amount of supply and the speed it is made available. If the current impetus for housing purchases is housing stir-frying groups, that should control demand and restrict the purchase of housing for investment.
There are many problems to research in the housing market but analysis must use practical reality. Reaching foregone conclusions will only mislead consumers and interfere in the implementation of government control and regulation policies.
Sunday, July 26, 2009
Ratio of Land Price to Price of Final Housing
国土资源部：地价占房价比平均23%
Ministry of Land and Resources: Land is only 23% of the Price of Housing
The China Securities Journal (CSJ) and Shanghai’s Oriental Morning Post (OMP) are reporting today (July 27, 2009) on a report by the Ministry of Land and Resources – though the only report I could find on the Ministry website was dated July 3 on “Re-evaluating the link between housing and land prices.” The translation of the OMP article is below.
CSJ article: http://www.cs.com.cn/xwzx/05/200907/t20090727_2162686.htm
OMP e-article: http://epaper.dfdaily.com/dfzb/html/2009-07/26/content_147644.htm
MoLaR July 3 report: http://www.mlr.gov.cn/xwdt/jrxw/200907/t20090703_122457.htm
Basically the report from MoLaR is trying to dispel the myth that rising land prices, as in the price developers pay to local governments for land-use rights, is causing the rise (this year, for the past few months) in real estate and housing prices.
OMP reporter Liu Xiuhao
Since MoLaR announced the fact that “on average 23.2% of real estate prices come from the price of land”, people from multiple circles have raised objections. Two days ago, MoLaR publicly released the data from a national survey of 620 projects to answer the doubts.
The OMP discovered that, of the 620 projects that were investigated, one of Shanghai’s “land kings”, who emerged at the end of 2006, loomed large among them. These parcels of apartments that were once thought to be minimally profitable have, two years later, achieved land price to apartment price average ratio of 28.86%.
Last weekend, the newest residential land king was born in the far suburbs of Qingpu where the floor price reached an unbelievable 14,500 yuan/square meter. People looking back on the old days will discover that, after Shanghai housing prices rose, “land kings” successfully make hefty profits for real estate developers.
Shanghai Index is Slightly Lower than Other Core Cities
MoLaR commented: “the question of what proportion land prices make up of housing prices has been a universally hot topic for a long time. We have always been of the opinion that revealing the actual data and situation is a transparent way to provide understanding of relevant information to society. It is the best method of answering doubts and clearing up debate.”
Over the weekend, MoLaR publicly released a detailed catalog of its national investigation into housing and land price ratios. Among the 620 cases studied, the highest priced housing was 45,000 yuan/square meter and the lowest priced was 1,130 yuan/square meter; land-housing price ratios ranged from a low of 5.3% to a high of 58.6%.
The subject of this investigation was mainly commercial real estate development projects that obtained land and sold housing (including those that have already sold out) since 2006. The housing price investigated was the average sales price at the time the apartment complexes went on sale, and the land price was the price of the land for the apartment complex at the time of the land transaction.
Dividing the results by region in which the real estate project is located, the eastern region [of China] had 316 cases, with a land to housing price average ratio of 27%; the middle region had 158 cases, with a land to housing price average ratio of 21%; and the western region had 146 cases, with a land to housing price average ratio of 18%.
This time, Shanghai had 6 apartment complexes located in Baoshan, Fengxian, Yangpu, and Qingpu. Of them, the lowest land to housing price ratio was 15.19% and the highest was 31.95%, while the average was 26.7%. Compared to the national average, Shanghai has a slightly higher percentage for land price but compared to other core cities like Shenzhen, Hangzhou, and Nanjing, Shanghai still has a slightly lower ratio—making it one of most money-making cities for apartment complex development.
Housing Prices Sour, “Land Kings” of That Year Make Large Profits
Actually, one of the six apartment complexes under investigation was a “land king” born that year. On November 26, 2006, after 176 rounds of fierce contest, central state enterprise China Resources [Huarun] Group’s subsidiary China Resources [Huarun] Land broke free from the stubborn circle of five magnates and raised the final bidding paddle with a price of 1.541 billion yuan for area C2 of New Jiangwan City—becoming a land king.
At the time, a large number of industry representatives were anxious over the future of profits for developers. An estimate at the time was that only with a price of 15,000 yuan/square meter would a modest profit be had, while the price of housing in this area at the time was under 10,000 yuan/square meter.
One year later, housing prices soared. The housing price in the area of New Jiangwan is already twice what it was that year. The apartment complex that was once thought to have only minimal profit now sells for 23,139 yuan/square meter, and the ratio of land to housing price is only 28.86%. A land price thought once to be “astronomical” has already been surpassed by multiple others in the suburbs.
From this public issue of the project information it can be seen that the highest proportion of land price to housing price is found in the Noble Diamond Mansions [Shengshi Baodi] on South Changjiang Road, while the lowest proportion of land price to housing price is found in the Industrial Comprehensive Development Area project of Fengxian district.
Market Supply and Demand are the Ultimate Factors in Determining Land Prices
In issuing the investigation catalogue alongside “Several Issues Concerning the Interpretation of Land Prices” MoLaR made clear that market supply and demand are the factors in determining land prices.
The practice of the land market in China shows that the determining factor on high or low land prices is the ultimate influence the relations of market supply and demand. Land needs are directly influenced by the future predictions of housing price by development companies. In the tendering, auctioning, and listing for state-owned land sales, the different quoted prices from development companies are based on their predictions of future housing prices and expected profits, such that the development company quotes a price based on predicted housing price minus construction prices and profit. Universally good predictions yields fierce bidding and “the highest price wins”, whereas low prices frequently lead to no bidders or no tenders. In addition to factors from predictions, the “astronomical land price” phenomenon, where certain apartment complexes have much higher prices than other apartments in the surrounding area, has appeared over the past few years in certain cities. This is related to multiple factors including the inherent position of the land, the entry of funds from other industries and enterprise financing from listing, and the movement of capital. Of these, the rule that “the better the area, the easier to sell the apartment” is the most important reason that leads to fierce competition between development companies.
Ministry of Land and Resources: Land is only 23% of the Price of Housing
The China Securities Journal (CSJ) and Shanghai’s Oriental Morning Post (OMP) are reporting today (July 27, 2009) on a report by the Ministry of Land and Resources – though the only report I could find on the Ministry website was dated July 3 on “Re-evaluating the link between housing and land prices.” The translation of the OMP article is below.
CSJ article: http://www.cs.com.cn/xwzx/05/200907/t20090727_2162686.htm
OMP e-article: http://epaper.dfdaily.com/dfzb/html/2009-07/26/content_147644.htm
MoLaR July 3 report: http://www.mlr.gov.cn/xwdt/jrxw/200907/t20090703_122457.htm
Basically the report from MoLaR is trying to dispel the myth that rising land prices, as in the price developers pay to local governments for land-use rights, is causing the rise (this year, for the past few months) in real estate and housing prices.
OMP reporter Liu Xiuhao
Since MoLaR announced the fact that “on average 23.2% of real estate prices come from the price of land”, people from multiple circles have raised objections. Two days ago, MoLaR publicly released the data from a national survey of 620 projects to answer the doubts.
The OMP discovered that, of the 620 projects that were investigated, one of Shanghai’s “land kings”, who emerged at the end of 2006, loomed large among them. These parcels of apartments that were once thought to be minimally profitable have, two years later, achieved land price to apartment price average ratio of 28.86%.
Last weekend, the newest residential land king was born in the far suburbs of Qingpu where the floor price reached an unbelievable 14,500 yuan/square meter. People looking back on the old days will discover that, after Shanghai housing prices rose, “land kings” successfully make hefty profits for real estate developers.
Shanghai Index is Slightly Lower than Other Core Cities
MoLaR commented: “the question of what proportion land prices make up of housing prices has been a universally hot topic for a long time. We have always been of the opinion that revealing the actual data and situation is a transparent way to provide understanding of relevant information to society. It is the best method of answering doubts and clearing up debate.”
Over the weekend, MoLaR publicly released a detailed catalog of its national investigation into housing and land price ratios. Among the 620 cases studied, the highest priced housing was 45,000 yuan/square meter and the lowest priced was 1,130 yuan/square meter; land-housing price ratios ranged from a low of 5.3% to a high of 58.6%.
The subject of this investigation was mainly commercial real estate development projects that obtained land and sold housing (including those that have already sold out) since 2006. The housing price investigated was the average sales price at the time the apartment complexes went on sale, and the land price was the price of the land for the apartment complex at the time of the land transaction.
Dividing the results by region in which the real estate project is located, the eastern region [of China] had 316 cases, with a land to housing price average ratio of 27%; the middle region had 158 cases, with a land to housing price average ratio of 21%; and the western region had 146 cases, with a land to housing price average ratio of 18%.
This time, Shanghai had 6 apartment complexes located in Baoshan, Fengxian, Yangpu, and Qingpu. Of them, the lowest land to housing price ratio was 15.19% and the highest was 31.95%, while the average was 26.7%. Compared to the national average, Shanghai has a slightly higher percentage for land price but compared to other core cities like Shenzhen, Hangzhou, and Nanjing, Shanghai still has a slightly lower ratio—making it one of most money-making cities for apartment complex development.
Housing Prices Sour, “Land Kings” of That Year Make Large Profits
Actually, one of the six apartment complexes under investigation was a “land king” born that year. On November 26, 2006, after 176 rounds of fierce contest, central state enterprise China Resources [Huarun] Group’s subsidiary China Resources [Huarun] Land broke free from the stubborn circle of five magnates and raised the final bidding paddle with a price of 1.541 billion yuan for area C2 of New Jiangwan City—becoming a land king.
At the time, a large number of industry representatives were anxious over the future of profits for developers. An estimate at the time was that only with a price of 15,000 yuan/square meter would a modest profit be had, while the price of housing in this area at the time was under 10,000 yuan/square meter.
One year later, housing prices soared. The housing price in the area of New Jiangwan is already twice what it was that year. The apartment complex that was once thought to have only minimal profit now sells for 23,139 yuan/square meter, and the ratio of land to housing price is only 28.86%. A land price thought once to be “astronomical” has already been surpassed by multiple others in the suburbs.
From this public issue of the project information it can be seen that the highest proportion of land price to housing price is found in the Noble Diamond Mansions [Shengshi Baodi] on South Changjiang Road, while the lowest proportion of land price to housing price is found in the Industrial Comprehensive Development Area project of Fengxian district.
Market Supply and Demand are the Ultimate Factors in Determining Land Prices
In issuing the investigation catalogue alongside “Several Issues Concerning the Interpretation of Land Prices” MoLaR made clear that market supply and demand are the factors in determining land prices.
The practice of the land market in China shows that the determining factor on high or low land prices is the ultimate influence the relations of market supply and demand. Land needs are directly influenced by the future predictions of housing price by development companies. In the tendering, auctioning, and listing for state-owned land sales, the different quoted prices from development companies are based on their predictions of future housing prices and expected profits, such that the development company quotes a price based on predicted housing price minus construction prices and profit. Universally good predictions yields fierce bidding and “the highest price wins”, whereas low prices frequently lead to no bidders or no tenders. In addition to factors from predictions, the “astronomical land price” phenomenon, where certain apartment complexes have much higher prices than other apartments in the surrounding area, has appeared over the past few years in certain cities. This is related to multiple factors including the inherent position of the land, the entry of funds from other industries and enterprise financing from listing, and the movement of capital. Of these, the rule that “the better the area, the easier to sell the apartment” is the most important reason that leads to fierce competition between development companies.
Tuesday, July 14, 2009
Liu Ren Arrested
Vice President Liu Ren of Oak Pacific (Qian Xiang) Interactive Arrested
Lawyer Estimates He will Squat for 10 Years
Vice President Liu Ren of Oak Pacific (Qian Xiang) Interactive Arrested
Lawyer Estimates He will Squat for 10 Years
Liu Ren in his younger years
http://news.xinhuanet.com/legal/2008-11/21/content_10391510.htm
http://www.morningpost.com.cn/article.asp?articleid=153504#top
November 21, 2008 Beijing Morning Post
Oak Pacific Interactive Technology Development Company, Limited vice president Liu Ren is a well-known figure in the IT industry. One would never have thought that he would become involved in criminal activity—being accused of seeking a “shut-up fee” to delete negative articles about a company. Quickly, the police arrested Liu Ren and two others. Yesterday, this correspondent learned that Liu Ren and the others have been arraigned for the crime of suspected racketeering by the Xicheng (District of Beijing) People’s District Attorney.
The 38-year-old Liu Ren became a reported after graduation from university, arriving at Oak Pacific Interactive in 2005 and becoming a vice-president there. The well-known DoNews (www.donews.com, also written in Chinese as “bullfighter” or 斗牛士) and Mop (www.mop.com, “cat attack” or 猫扑网) are both websites under the Oak Pacific umbrella. The two people arraigned along with Liu Ren are his employee, editor Xu Xinshi, and part-time editor of 17tech (www.17tech.com) website You Yang.
In July, 2008, Liu Ren sent emails to Xu Xinshi and You Yang to post and repost a large number of articles critical of the “Qihoo 360 Security Defender” software product developed by Beijing Sanji Wuxian Network Technology Co., Ltd., as well as articles critical of the president of this company, Zhou Mou. No specific reason was given for this action and Xu Xinshi and You Yang complied. In order to avoid harmful influence, Qi Mou of Sanji contacted Xu Xinshi in early August and asked that the negative articles be deleted from the website. Liu Ren and his two partners asked Qi Mou for a shut-up fee of a certain amount. The two parties negotiated over this issue several times.
On August 23, Liu Ren, Xu Xinshi and Qi Mou meet at a teahouse near the financial district in Xicheng district. They agreed on a fee of 230,000 yuan for deletion of the negative articles. Qi Mou transferred 50,000 yuan into an account supplied by Xu Xinshi on September 19. Liu Ren and others split the 50,000 and deleted the negative articles from the website.
But before long, the negative article reappeared since Qi Mou had not transferred the balance of payments. With no alternative, Qi Mou called the police on September 24. When Qi Mou made an appointment at a Haidian district teahouse to pay another 80,000 yuan to Liu Ren and his two partners, the police arrested the three.
Jaded? A more mature Liu Ren.
Lawyers Explanation
Ma Guohua, lawyer at the Beijing law firm Youtian, told this correspondent that, according to penal code regulations, racketeering for public or private property with for relatively large amount carries a penalty of less than three years in prison, detention, or house arrest; for a massive amount or involving extenuating circumstances carries a prison term of three to ten years. “A ‘relatively large amount’ is one to three thousand yuan; racketeering involving a ‘massive amount’ is at least ten to thirty thousand yuan.” Ma Guohua said that Liu Ren and his partners, if proven to demand 230,000 yuan, will be judged according to the ‘massive amount’ standard, and will be imprisoned for 10 years. Of course, part of the amount not successfully received can be viewed lightly in sentencing.
Liu Ren in his younger years
http://news.xinhuanet.com/legal/2008-11/21/content_10391510.htm
http://www.morningpost.com.cn/article.asp?articleid=153504#top
November 21, 2008 Beijing Morning Post
Oak Pacific Interactive Technology Development Company, Limited vice president Liu Ren is a well-known figure in the IT industry. One would never have thought that he would become involved in criminal activity—being accused of seeking a “shut-up fee” to delete negative articles about a company. Quickly, the police arrested Liu Ren and two others. Yesterday, this correspondent learned that Liu Ren and the others have been arraigned for the crime of suspected racketeering by the Xicheng (District of Beijing) People’s District Attorney.
The 38-year-old Liu Ren became a reported after graduation from university, arriving at Oak Pacific Interactive in 2005 and becoming a vice-president there. The well-known DoNews (www.donews.com, also written in Chinese as “bullfighter” or 斗牛士) and Mop (www.mop.com, “cat attack” or 猫扑网) are both websites under the Oak Pacific umbrella. The two people arraigned along with Liu Ren are his employee, editor Xu Xinshi, and part-time editor of 17tech (www.17tech.com) website You Yang.
In July, 2008, Liu Ren sent emails to Xu Xinshi and You Yang to post and repost a large number of articles critical of the “Qihoo 360 Security Defender” software product developed by Beijing Sanji Wuxian Network Technology Co., Ltd., as well as articles critical of the president of this company, Zhou Mou. No specific reason was given for this action and Xu Xinshi and You Yang complied. In order to avoid harmful influence, Qi Mou of Sanji contacted Xu Xinshi in early August and asked that the negative articles be deleted from the website. Liu Ren and his two partners asked Qi Mou for a shut-up fee of a certain amount. The two parties negotiated over this issue several times.
On August 23, Liu Ren, Xu Xinshi and Qi Mou meet at a teahouse near the financial district in Xicheng district. They agreed on a fee of 230,000 yuan for deletion of the negative articles. Qi Mou transferred 50,000 yuan into an account supplied by Xu Xinshi on September 19. Liu Ren and others split the 50,000 and deleted the negative articles from the website.
But before long, the negative article reappeared since Qi Mou had not transferred the balance of payments. With no alternative, Qi Mou called the police on September 24. When Qi Mou made an appointment at a Haidian district teahouse to pay another 80,000 yuan to Liu Ren and his two partners, the police arrested the three.
Jaded? A more mature Liu Ren.
Lawyers Explanation
Ma Guohua, lawyer at the Beijing law firm Youtian, told this correspondent that, according to penal code regulations, racketeering for public or private property with for relatively large amount carries a penalty of less than three years in prison, detention, or house arrest; for a massive amount or involving extenuating circumstances carries a prison term of three to ten years. “A ‘relatively large amount’ is one to three thousand yuan; racketeering involving a ‘massive amount’ is at least ten to thirty thousand yuan.” Ma Guohua said that Liu Ren and his partners, if proven to demand 230,000 yuan, will be judged according to the ‘massive amount’ standard, and will be imprisoned for 10 years. Of course, part of the amount not successfully received can be viewed lightly in sentencing.
Lawyer Estimates He will Squat for 10 Years
Vice President Liu Ren of Oak Pacific (Qian Xiang) Interactive Arrested
Lawyer Estimates He will Squat for 10 Years
Liu Ren in his younger years
http://news.xinhuanet.com/legal/2008-11/21/content_10391510.htm
http://www.morningpost.com.cn/article.asp?articleid=153504#top
November 21, 2008 Beijing Morning Post
Oak Pacific Interactive Technology Development Company, Limited vice president Liu Ren is a well-known figure in the IT industry. One would never have thought that he would become involved in criminal activity—being accused of seeking a “shut-up fee” to delete negative articles about a company. Quickly, the police arrested Liu Ren and two others. Yesterday, this correspondent learned that Liu Ren and the others have been arraigned for the crime of suspected racketeering by the Xicheng (District of Beijing) People’s District Attorney.
The 38-year-old Liu Ren became a reported after graduation from university, arriving at Oak Pacific Interactive in 2005 and becoming a vice-president there. The well-known DoNews (www.donews.com, also written in Chinese as “bullfighter” or 斗牛士) and Mop (www.mop.com, “cat attack” or 猫扑网) are both websites under the Oak Pacific umbrella. The two people arraigned along with Liu Ren are his employee, editor Xu Xinshi, and part-time editor of 17tech (www.17tech.com) website You Yang.
In July, 2008, Liu Ren sent emails to Xu Xinshi and You Yang to post and repost a large number of articles critical of the “Qihoo 360 Security Defender” software product developed by Beijing Sanji Wuxian Network Technology Co., Ltd., as well as articles critical of the president of this company, Zhou Mou. No specific reason was given for this action and Xu Xinshi and You Yang complied. In order to avoid harmful influence, Qi Mou of Sanji contacted Xu Xinshi in early August and asked that the negative articles be deleted from the website. Liu Ren and his two partners asked Qi Mou for a shut-up fee of a certain amount. The two parties negotiated over this issue several times.
On August 23, Liu Ren, Xu Xinshi and Qi Mou meet at a teahouse near the financial district in Xicheng district. They agreed on a fee of 230,000 yuan for deletion of the negative articles. Qi Mou transferred 50,000 yuan into an account supplied by Xu Xinshi on September 19. Liu Ren and others split the 50,000 and deleted the negative articles from the website.
But before long, the negative article reappeared since Qi Mou had not transferred the balance of payments. With no alternative, Qi Mou called the police on September 24. When Qi Mou made an appointment at a Haidian district teahouse to pay another 80,000 yuan to Liu Ren and his two partners, the police arrested the three.
Jaded? A more mature Liu Ren.
Lawyers Explanation
Ma Guohua, lawyer at the Beijing law firm Youtian, told this correspondent that, according to penal code regulations, racketeering for public or private property with for relatively large amount carries a penalty of less than three years in prison, detention, or house arrest; for a massive amount or involving extenuating circumstances carries a prison term of three to ten years. “A ‘relatively large amount’ is one to three thousand yuan; racketeering involving a ‘massive amount’ is at least ten to thirty thousand yuan.” Ma Guohua said that Liu Ren and his partners, if proven to demand 230,000 yuan, will be judged according to the ‘massive amount’ standard, and will be imprisoned for 10 years. Of course, part of the amount not successfully received can be viewed lightly in sentencing.
Liu Ren in his younger years
http://news.xinhuanet.com/legal/2008-11/21/content_10391510.htm
http://www.morningpost.com.cn/article.asp?articleid=153504#top
November 21, 2008 Beijing Morning Post
Oak Pacific Interactive Technology Development Company, Limited vice president Liu Ren is a well-known figure in the IT industry. One would never have thought that he would become involved in criminal activity—being accused of seeking a “shut-up fee” to delete negative articles about a company. Quickly, the police arrested Liu Ren and two others. Yesterday, this correspondent learned that Liu Ren and the others have been arraigned for the crime of suspected racketeering by the Xicheng (District of Beijing) People’s District Attorney.
The 38-year-old Liu Ren became a reported after graduation from university, arriving at Oak Pacific Interactive in 2005 and becoming a vice-president there. The well-known DoNews (www.donews.com, also written in Chinese as “bullfighter” or 斗牛士) and Mop (www.mop.com, “cat attack” or 猫扑网) are both websites under the Oak Pacific umbrella. The two people arraigned along with Liu Ren are his employee, editor Xu Xinshi, and part-time editor of 17tech (www.17tech.com) website You Yang.
In July, 2008, Liu Ren sent emails to Xu Xinshi and You Yang to post and repost a large number of articles critical of the “Qihoo 360 Security Defender” software product developed by Beijing Sanji Wuxian Network Technology Co., Ltd., as well as articles critical of the president of this company, Zhou Mou. No specific reason was given for this action and Xu Xinshi and You Yang complied. In order to avoid harmful influence, Qi Mou of Sanji contacted Xu Xinshi in early August and asked that the negative articles be deleted from the website. Liu Ren and his two partners asked Qi Mou for a shut-up fee of a certain amount. The two parties negotiated over this issue several times.
On August 23, Liu Ren, Xu Xinshi and Qi Mou meet at a teahouse near the financial district in Xicheng district. They agreed on a fee of 230,000 yuan for deletion of the negative articles. Qi Mou transferred 50,000 yuan into an account supplied by Xu Xinshi on September 19. Liu Ren and others split the 50,000 and deleted the negative articles from the website.
But before long, the negative article reappeared since Qi Mou had not transferred the balance of payments. With no alternative, Qi Mou called the police on September 24. When Qi Mou made an appointment at a Haidian district teahouse to pay another 80,000 yuan to Liu Ren and his two partners, the police arrested the three.
Jaded? A more mature Liu Ren.
Lawyers Explanation
Ma Guohua, lawyer at the Beijing law firm Youtian, told this correspondent that, according to penal code regulations, racketeering for public or private property with for relatively large amount carries a penalty of less than three years in prison, detention, or house arrest; for a massive amount or involving extenuating circumstances carries a prison term of three to ten years. “A ‘relatively large amount’ is one to three thousand yuan; racketeering involving a ‘massive amount’ is at least ten to thirty thousand yuan.” Ma Guohua said that Liu Ren and his partners, if proven to demand 230,000 yuan, will be judged according to the ‘massive amount’ standard, and will be imprisoned for 10 years. Of course, part of the amount not successfully received can be viewed lightly in sentencing.
Tuesday, April 28, 2009
What is Shanzhai?
山寨, shanzhai, is translated literally as "mountain stronghold" and
colloquially (by Jinshan and Google) as "copycatting".
The NYTimes, on April 27, 2009, published an article by the infamous
China "journalist" David Barboza on "Knockoff Cellphones" (two words
that were, or should be, hyphenated).
Translating ideas from China can be called journalism. In fact, explaining
shanzhai to a rapt audience should make good paper (ironically). But the
DIY list (entitled "The Cost of a Fake") for a non-branded mobile phone
(let's coin "NBMP" for this) caught my attention. Very much like a DIY
PC list, it details the components and their parts by price. Of course,
the assembler (the DIY-er) is making an intermediary fee. $40 for a NBMP
rather than $200 + contract for an innovative, corporate original.
“Legal cellphone makers should pay 17 percent of their revenue as
value-added tax, but shanzhai makers, of course, won’t pay it.”
Really? Add 17% to $40 and you don't get a 2-year contract. The U.S.
cellular phone market is a monopsony -- with hundreds of millions of
buyers but only 4 sellers (AT&T, Sprint, Verizon, and T-Mobile).
Just FYI, the China cell market is dominated by two carriers -- China
Mobile and China Unicom, both state-owned and run, and they are
monopolies. However, the structure of data plans, the delivery of service,
the network coverage, and the cost are far and away better and more
competitive than the U.S. How can this be? Does socialism work for
mobile phones?
In fact, while there are only two carriers for China, there are literally
"a million" phone providers. You or I could produce a mobile phone with
a little capital and an idea. That is a threat to companies who rely on
contracts to ensconce users in expensive plans, bad coverage, and poor
service. And really it is inexcusable. The "free market" and "capitalism"
belies the reality of carriers dictating to the market.
Imagine if mobile minutes were like gasoline. When you are running low,
you stop at the 7-11, the gas station, the post office, the newspaper
stand -- or even the Internet -- to add minutes. Adding one item to your
list, you gain a freedom from contracts, a market in phones, and leverage
with your carrier.
Kudos to shanzhai. Kudos to DIY computer installers. You are the salt of
the earth, and yet in you we find the ultimate check and balance on
corporate domination of markets.
Tuesday, March 10, 2009
Spring Stocks (蛋黄吃得多)
Shanghai and Shenzhen were leading the world in stock performance this year.
But hope springs eternal, perhaps for the naysayers of market socialism, aka local state capitalism.
With guanxi relationships blossoming like bamboo shoots after a spring rain, and young men's fancy, perhaps they cannot be blamed.
A national, potentially regional or global, system of market economy based on particularity and schmooze is definitely a challenge to the armchair stock traders who sit in lower manhatten, scoff at labor (and marx), and eat packets of mustard as subsistence.
My contribution: a cartoon from China Securities Journal (CSJ), January 10, 2009, page one (A1):
The cannon, looking lonesome, has a tag around its neck reading:
But hope springs eternal, perhaps for the naysayers of market socialism, aka local state capitalism.
With guanxi relationships blossoming like bamboo shoots after a spring rain, and young men's fancy, perhaps they cannot be blamed.
A national, potentially regional or global, system of market economy based on particularity and schmooze is definitely a challenge to the armchair stock traders who sit in lower manhatten, scoff at labor (and marx), and eat packets of mustard as subsistence.
My contribution: a cartoon from China Securities Journal (CSJ), January 10, 2009, page one (A1):
The cannon, looking lonesome, has a tag around its neck reading:
"Value Investment"
"价值投资"
"价值投资"
The man with a cigarette in his mouth, and a tag on his sleeve reading "fund" or "基金", brandishes his sword while viewing a stock market index fluctuating up and down, wildly, stating:
And underwater my stocks continue to be.
"This year calls for short-term soldiers, with some daily fluctuation buy-sell activity!"
"今年就得短兵，相接做波段！"
"今年就得短兵，相接做波段！"
And underwater my stocks continue to be.
Friday, January 23, 2009
Obama Error & Circuit vs. Hilon
The bankruptcy of Circuit City, the second largest eletronics retailer in the U.S., is definitely shocking news in the context of a global financial crisis. That Circuit City, and Best Buy, are my anologies for Zhongguancun's electronics cities, the places where PC's, photocopiers, faxes, and printers are bought and sold in bulk in Beijing, makes cultural translation that much more difficult. In the past, I described Zhongguancun's electronics cities, and those in Shanghai, Shenzhen, and every city in China, as "Best Buy (Circuit City) broken into a thousand pieces". Now, there are only pieces.
I, like everyone, celebrated the inauguration of Barack Obama as the 44th president of the United States. In the past two days, I read about how Tim Geithner, representing the president's views, has stated that China is a "currency manipulator". My ideas of change, like the Circuit City analogy, is broken into 1,000 pieces.
The idea that China is a currency manipulator is NOT (apologies for emphasis) a new idea. The afterglow of the inauguration has lead to a anti-China bedfellow. Actually, despite China's surface hardness and designation as "center" of the world, it has many problems. The problems are far deeper, and more serious, than anything the U.S. faces. If there were a "hard choice" to make, it would not be to hold China to task for currency manipulation; it would be to take the union workers, especially in the auto industry, to task. The auto industry manipulates the economy far more than China does its currency -- and the people who would suffer or benefit (in absolute terms) are in China, not Detroit.
Anyhow, the world is changing. There is a crisis. There is change. But will change lead to efficiency, or to surface change and more of the same. Mr. Geithner seems to be the same old story -- and actually, a silly, pandering capitulation.
One hopes that change does come -- that Circuit City becomes more like Hilon (Zhongguancun's most famous electronics market), and that Obama rejects "common sense" of leftist economics. The former would lead to more efficient and effective markets in electronics; the latter would lead to more just and equitable markets in the world economy.
With only two days in the hole, this is definitely food for thought.
I, like everyone, celebrated the inauguration of Barack Obama as the 44th president of the United States. In the past two days, I read about how Tim Geithner, representing the president's views, has stated that China is a "currency manipulator". My ideas of change, like the Circuit City analogy, is broken into 1,000 pieces.
The idea that China is a currency manipulator is NOT (apologies for emphasis) a new idea. The afterglow of the inauguration has lead to a anti-China bedfellow. Actually, despite China's surface hardness and designation as "center" of the world, it has many problems. The problems are far deeper, and more serious, than anything the U.S. faces. If there were a "hard choice" to make, it would not be to hold China to task for currency manipulation; it would be to take the union workers, especially in the auto industry, to task. The auto industry manipulates the economy far more than China does its currency -- and the people who would suffer or benefit (in absolute terms) are in China, not Detroit.
Anyhow, the world is changing. There is a crisis. There is change. But will change lead to efficiency, or to surface change and more of the same. Mr. Geithner seems to be the same old story -- and actually, a silly, pandering capitulation.
One hopes that change does come -- that Circuit City becomes more like Hilon (Zhongguancun's most famous electronics market), and that Obama rejects "common sense" of leftist economics. The former would lead to more efficient and effective markets in electronics; the latter would lead to more just and equitable markets in the world economy.
With only two days in the hole, this is definitely food for thought.
Tuesday, January 20, 2009
Did Somebody Say Minhang?
Minhang District Map, in English.
闵行区地图，英文版
Copyright held by Minhang District government, for reference purposes only
闵行区区人民版权所有，仅供参考。
闵行区地图，英文版
Copyright held by Minhang District government, for reference purposes only
闵行区区人民版权所有，仅供参考。
Wednesday, January 07, 2009
Yiwu Markets
Yiwu
As a sub-city of the Jinhua municipality, Yiwu is famous for the massive markets in small products for sale. Recently, I visited the International Trade City (guoji maoyi cheng) and walked through stages 1, 2, 3. The market consists of masses of stores and products, all operated by individual-family households (getihu)—a China-specific designation that refers to a private enterprise of less than 8 people. While the majority of customers are from mainland China, there is also a large number of Asian bargain hunters, including those from Malaysia, India, Pakistan, and Russia. The proliferation of overseas purchasers and quality inspectors reveals, as well as dozens of hotels (and not much else) scatted around the Trade City give testament to the product-market role of this area of the city.
To understand something about the market, and try to make comparisons with the massive “electronics cities” located in Zhongguancun but also in cities throughout China, I decided to search out a pen with a laser pointer. In Shanghai, I had found a simple laser pointer in Bainaohui Electronics City at a friend’s store for the unfriendly price of 100 RMB ($14.60, using 8.63 as an exchange rate). In the first pen store I found in the market, I inquired about the price of a laser-pointer pen. “3.80 yuan, lowest price” said the shopkeeper, taken aback at my Chinese but responding quickly and firmly. Eager for the great deal, I began to pull out a 5-yuan note. “Wholesale,” interrupted the shopkeeper, “that is the whole sale price.” “Oh, how much for just one,” I asked. “Don’t sell [that way],” ended our interaction. At another pen store, I found the same laser-pointed pen and a similar price, 4.30 yuan. I asked if they sell retail or individually. “No, that is just a sample (yangpin).”
My failure to buy the product revealed one of the prevalent, though not rigid, characteristics of product markets at the Trade City: it is a wholesale operation, where the stores are a front for a network of factories and shipping that stretches from the Yangtze River Delta (Changsanjiao) to the Pearl River Delta (Zhusanjiao). The stores that quoted me a 4 yuan price for a pen with a laser pointed wanted a minimum order of 1,000 units to give me the wholesale price, otherwise they wouldn’t sell (I did convince another shopkeeper to sell me the pen for 5 yuan). Another product I investigated was a pen that can record 2 GB of video (of reasonable quality, given the camera is embedded in a pen) and audio somewhat surreptitiously. This product was quoted at 180 yuan, and the woman was willing to accept a minimum order of “several dozen”—a proposition I considered briefly, though the prospect of selling several dozen less on pen video camera seemed a little daunting.
Unfortunately, I did not stay long enough to investigate the relationships between different stores: whether there are wholesalers’ wholesalers, or bigger companies that stand behind the store fronts and supply them with goods, as is the case with computer, printer, MP3, etc. sellers in China’s urban electronics markets; do stores collaborate with each other and refer business to one another; the proportion of customers who are long-term versus short-term—or the proportion of customers that comes through a network of relationships (family, friends, native-place fellows, classmates) versus those that just walk into the market.
There is a sense of social in the Yiwu product market, however. Given my limited time, I could easily see the families that came to the market, not just to view and purchase goods (mothers, fathers, and children browsing the thousands of toys being bounced, flown, crashed, and driven in the halls), but to live lives (most if not all stores have computers connected to the internet, and many communicate back and forth using QQ, a chat program from Tecent similar to MSN and Aim—and visiting between stores, and similar age young people chatting and playing while they tend to business, hence growing up both business-wise and social-wise). This phenomenon is identical to Zhongguancun’s electronic markets, where life is lived and relationships are used, built, broken, and developed through the market, with the focus on customers and buying and selling forming only one part of daily life.
Yiwu is not a very accessible city for someone who does not speak Mandarin Chinese. However, it is only a 2-hour train ride from Shanghai (then a 30 yuan cab trip to the Trade City). There are three 5-star hotels listed on Ctrip (a China online travel agency which books hotels at competitive rates and is free) in Yiwu. Yet, in the City of Jinhua, another place I visited on this trip, which technically oversees Yiwu, there are no 5-star hotels and sparse 4-stars (I stayed at the Jinhua International Hotel, a 3-star; in Yiwu, I stayed at Snow Peak Hotel, also a 3-star, which sits literally on the 3rd phase of the Trade City). There are, however, many, many foreigners, so it should be possible to get by with English.
Who knows? If you can pony up 10,000 yuan or so you can take a box of goods back to Shanghai (or elsewhere) and start selling or “doing business” (zuo shengyi), rather than just working. As the Chinese expression goes, “it is better to be the head of a chicken than the tail of a phoenix” (ning zuo jitou, bu zuo fengwei). 宁做鸡头，不做凤尾
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