CHENGDU - This city in
south-central China has never seen anything like
The Waterfront. Situated on the Jin River and set
to be completed by the end of the year, no other
apartment complex in this capital city of Sichuan province has
features that can compare to what Keppel Land - a
Singaporean developer - is constructing.
The complex will house 1,143 apartments in
six buildings and will feature a four-hole putting
green, a fitness center, both an indoor and an
outdoor pool (featuring a beach with sand brought
in from Singapore), and views of the river.
On a tour through model apartments, the
management of The
Waterfront was keen to show
the high quality of its construction. Just five
minutes by car from the city's central business
district, the project is aimed at a new sort of
moneyed class that is developing in this city of
about 10 million people.
Kevin Scofield, a property
consultant associated with the Waterfront
development, said, "Keppel Land wanted to be the
first
company to invest in such a residential
complex in Chengdu to show the people of this city
how to enjoy their lives."
The people of
Chengdu have a reputation in China as bons
vivants, and have always found a way to enjoy
their lives in this city of spicy food and
teahouses. What Scofield was referring to is the
new wealth that has been generated here resulting
from economic growth rates that have averaged
12.6% over the past five years. The lifestyle
traits traditionally associated with Chengdu are
starting to include the trappings of modern luxury
that have come to be known in China's successful
east-coast cities.
Investment has flooded
into Chengdu in recent years on the heels of the
central government's "Go West" policy, a major
initiative of the government based on its strong
desire to diversify the development of the country
from the prosperous east coast to some of China's
second- and third-tier cities, especially in the
underdeveloped inland provinces. The government
has been worried by rising inequality and has put
great emphasis on trying to encourage investors
and multinationals to consider the interior.
As seen in the past, the centralized
nature of China's political system is often an
advantage when it comes to steering the country
toward certain economic goals. It seems that once
again that sort of "state capitalism" is paying
dividends, and Chengdu is perhaps the best
example.
According to Chengdu's Municipal
Bureau of Foreign Trade and Economic Cooperation,
100 of the world's top 500 companies have
established operations in the city. Among those
companies are Microsoft, Citibank, Lafarge,
Coca-Cola, Alcatel Dell, GE, Toyota, HSBC,
Standard Chartered Bank and Hutchison Whampoa, to
name just a few. One of the biggest players in
Chengdu's growing group of multinationals has been
Intel, which has invested to the tune of about
US$450 million in two manufacturing facilities,
including one that will produce one of the world's
most advanced microprocessors.
In addition
to incentives from the government that have
facilitated investment, businesses are flocking to
Chengdu for other reasons. The city has a highly
skilled labor pool because of the 24 universities
and 17 colleges (universities providing four years
of education and colleges three) in the area that
offer a less expensive education than their
counterparts on the coast. Chengdu is already the
transport and logistics hub of western China, and
its glittering new airport is the country's
fifth-busiest, offering connections to Asian
centers such as Bangkok, Singapore and Hong Kong;
KLM has announced a direct flight to Europe
starting this summer and Lufthansa is rumored to
be considering one as well.
The rapid
expansion of businesses in and around Chengdu has
been driving the real-estate market.
Multinationals need appropriate housing for
management-level expatriates and the market is
tight, in particular for serviced apartments. But
developers have their eye as much or more on local
Chinese, who have seen income levels steadily
rising over the last several years. Disposable
income in Chengdu rose to 11,359 yuan ($1,417) in
2005, an increase of 9.3% from the previous year.
All of this has led the Waterfront
apartments to sell quickly. The Waterfront reports
that 85% of the apartments have been sold well
ahead of completion of the project. Among the
buyers, 40% were from overseas, with several
multinationals purchasing apartments for their
executives.
Reed Hatcher, associate
director of CBRE Richard Ellis, a global
real-estate consultancy firm, said, "Individual
investors are starting to consider Chengdu because
it is beginning to look like a good value
investment due to the lower lump sum needed to
enter the market."
Hatcher, who is based
in Shanghai, pointed out
that "if you take a similar-size apartment in a
high-end residential complex that would sell for a
25,000 [yuan] per square meter in Shanghai and
compare it to Chengdu, it is going for 6,000,"
which is the rate quoted by The Waterfront.
Of course Chengdu is not Shanghai, but
analysts have no problem making that comparison.
In fact, many expect Chengdu's real estate to
develop in a far more healthy fashion than in
Shanghai, where a dangerous bubble has grown over
the years due to rampant speculation that has seen
properties being bought and sold several times
before they were even completed. Last June the
government slapped a 5.5% tax on the total
transaction of properties sold within one year,
which cooled the market off, but Shanghai real
estate currently offers no great bargains.
Hatcher said, "Chengdu has not factored
heavily or been looked at by investors in recent
years, so it has insulated the city from the
speculative price hikes that we've seen in cities
in the east coast. So it has seen relatively
stable growth in recent years. Secondly, it didn't
see a drop in the past year in the aftermath of
the government's [macroeconomic control] measures,
which were aimed at [reducing] the speculative
activity in the market."
While Chengdu has
never rivaled Beijing or Shanghai, it
has for many years been a main attraction for
tourists visiting China. Famed for its laid-back
approach to life and fiery cuisine, Chengdu also
features important historic and religious
landmarks in the surrounding area as well as the
country's main giant-panda breeding ground (where
you can have your picture taken hugging a panda
for 400 yuan). Sichuan province has some of
China's most spectacular natural sites, and
Chengdu is a hub for travelers bound for the Tibet and Xinjiang autonomous
regions as well.
Chengdu is now seeing a
rapid increase in business travelers to the city
as the number of foreign companies invested there
expands. There are currently only a few
international-class hotels in the city - with the
Sheraton as the leading name - but that market is
also set to expand.
Just down the road
from The Waterfront, where the Fu and Nan rivers
come together, is a pagoda called He Jiang
Ting>, which is a popular location for married
couples to take photographs. Above this romantic
location another set of buildings is on the rise.
The Shangri-La hotel chain is constructing a
36-story hotel with a ballroom annex of more than
2,000 square meters attached, as well as a
31-story office complex next door. The hotel will
feature more than 600 rooms and serviced
apartments and should be open in the first quarter
of 2007, it is hoped by Chinese New Year.
Johnson Wong, general manager of the
Shangri-La in Chengdu, says the hotel has been a
direct result of the country's "Go West" policy.
The Shangri-La chain currently has 21 hotels
operating in China and nine more set to open by
2008, including three in Inner Mongolia alone.
"The focus of our expansion is on western
and northern China," said Wong, adding that the
healthy revenue and occupancy rates of other
hotels in Chengdu bode well for the Shangri-la's
future. With the city hoping to develop this area
along the river into something like Shanghai's
famed Bund area, the Shangri-La and its office
complex have received a great deal of cooperation
from officials and the area is likely to be a
focal point of business and leisure activity in
the coming years.
The managing director of
CBRE Richard Ellis's Chengdu office, Loh Siang
Huei, said Chengdu is "still at the beginning of
the growth phase". He concurred that the city
needs more hotels and luxury residential
complexes, though the market is perhaps tightest
for office space, with "people paying grade A
prices for grade B places."
All of these
factors have made Loh a very busy man, fielding
inquiries from companies looking for commercial
and residential space and real-estate companies
looking to get into the market. Loh said
Singaporean companies are at the forefront of
developments in Chengdu, with such companies as
Fraser Neave, Surbana and Yanlord joining Keppel
Land in the market. A "road show" with Chengdu
officials visiting Singapore to attract investment
is part of Loh's plans in the coming weeks.
It's hard to imagine that Chengdu needs
much more advertising to attract business. Given
the long list of companies that have already set
up shop in Chengdu, or just judging by a look
around the city at all the cranes at work on new
building sites, it iss apparent that the word is
already out that Chengdu is China's new hot spot
for investment.
Jeremy Hurewitz
is a Shanghai-based freelance journalist. He edits
a monthly series on Asia for Project
Syndicate.
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company to invest in such a residential
complex in Chengdu to show the people of this city
how to enjoy their lives." 
