China billionaire still doing things her way

Zhang Xin says real estate prices have been cooling but aren't headed for collapse

(SHANGHAI)From her leafy, 11th floor rooftop terrace at the headquarters of Soho China, billionaire Zhang Xin scans the relentlessly expanding Beijing skyline she helped create. Ms Zhang's avant-garde buildings - some sleek as chopsticks, others stepped like rice terraces - became part of the hottest real estate market on Earth in 2010.

Ms Zhang: Personifiesthe explosive rise of China, from the poverty of Mao Zedong's communistrule to the riches of state-controlled capitalism

Ms Zhang says that she's well aware of the chorus of investors and economists who predict that China's property boom is about to go bust,taking the global economy down with it. The doomsday scenarios don't intimidate Mr Zhang, a one-time penniless sweatshop worker who ascended to Wall Street by defying the odds.

She hopes to prove sceptics wrong again this year by betting hundreds of millions of dollars on newbuildings in Beijing and Shanghai, Bloomberg Markets magazine reports in its September issue.

'I don't see any bubbles,' says Ms Zhang, dressed in a white V-neck zippered top, black slacks and redheels. 'The next few months will be a fantastic time to buy.'

MsZhang, 44, personifies the explosive rise of China, from the poverty of Mao Zedong's communist rule to the riches of state-controlled capitalism in the world's third-biggest economy.

At age 30,armed with a master's degree from the University of Cambridge in England and connections from working at Goldman Sachs Group in New York and Hong Kong, Ms Zhang founded Soho China with her husband, Pan Shiyi.The company became central Beijing's biggest developer about a decade later in 2005 - and a favourite among investors.

Price gains

Soho China's shares jumped about 17 per cent on the Hong Kong stock exchange this year through Aug 3 compared with a 6.1 per cent fall in the Bloomberg Asia Pacific Real Estate Index, which includes 191property stocks.

Ms Zhang's ownership stake is worth about US$2.2 billion, ranking her alongside Oprah Winfrey as one of the world's wealthiest self-made women, says Rupert Hoogewerf, whose Shanghai-based Hurun Report tracks China's rich.

The English-speaking Ms Zhang, who regularly appears in Beijing's society magazines, brings a Western style to the way she does business. During the 2008 Summer Games in Beijing, Ms Zhang and Mr Pan entertained fellow billionaire Rupert Murdoch and his wife, China native Wendi Deng, at a celebrity party - attended by bankers, movie stars and the media - at a resort they built with the help of 12 architects next to the Great Wall of China. An inveterate blogger and user of aTwitter-like service, Ms Zhang, who calls herself a soccer mom, praised Spain's 'perfect' defence in a post following its World Cup victory in July.

Ms Zhang's company headquarters in the Chao wai Soho building looks like a Silicon Valley tech firm. Casually dressed engineers, architects and salespeople bounce around ideas in a communal coffee bar decorated with a sculptured herd of life-size fibre glass pigs.

'Many Chinese companies are run like military camps with military discipline,' Ms Zhang says. 'We do not run a company that way. It does not help the creative process.'

Mr Pan, 46, the slim,balding and bespectacled chairman of Soho China, says that his wife's relaxed management style only goes so far. Ms Zhang, the chief executive officer of Soho China, enforces its corporate culture with the determination of a Communist Party cadre, Mr Pan says through a spokesman.

Pushing boundaries

'Zhang Xin's personality, value system and educational background are just like our own personal Central Commission for Discipline Inspection,' Mr Pan jokes. He wasn't available to be interviewed in person.

In hiring noted architects from around the world, Ms Zhang has pushed the boundaries of design in Beijing. Kengo Kuma of Japan, who designed the Osaka headquarters of LVMH Moet Hennessy Louis Vuitton, created Sanlitun Soho, a development of nine office and apartment buildings shaped like ocean waves. It opened in June.

'She is a natural experimentalist, simultaneously setting and defying trends,' Mr Pan says.

Ms Zhang and Mr Pan develop buildings for Chinese much like themselves:entrepreneurs. Many of their rivals put up conventional offices, to be leased mainly to multinational tenants, or grandiose villas and luxury apartments with swimming pools for China's super-rich. The duo conveyed their more practical side with the name Soho, which stands for small office, home office.

CBD presence

The company says that it has developed 2.3 million square metres of real estate -including about a fifth of Beijing's central business district. Soho China's early projects were multi-use, designed for living, working or both.

Buyers of Ms Zhang's high-end units, which can cost more than 60,000 yuan (S$12,000) a square metre, include coal mine owners and exporters. In the second quarter, 92 per cent of Soho China's buildings were occupied, Ms Zhang says. Profit surged last year more than eight-fold to 3.3 billion yuan.

'They focus on sectors which hold long-term promise,' says Mark Mobius, Singapore-based executive chairman of Templeton Asset Management, which is Soho China's largest institutional investor, with a 4 per cent stake, according to data compiled by Bloomberg. 'They have high sensitivity and a great sense of style.'

Ms Zhang is now expanding her empire again,dismissing the China bears. In June, she paid 2.25 billion yuan for a 22,500 sq m plot of vacant land on the Bund, Shanghai's stately colonial-era waterfront strip, where buildings resemble those of 19thcentury Europe.

Futuristic complex

Two weeks later in Beijing, she started marketing a futuristic 485,000 sq m commercial,retail and entertainment complex that's shaped like interlinked cocoons. It will be designed by London-based Pritzker Prize-winning architect Zaha Hadid.

Ms Zhang, who was born in 1965 as China was about to plunge into the chaos of the Cultural Revolution, is an unlikely billionaire. Her parents, who were both translators at Beijing's Bureau of Foreign Languages, separated during Mao's crackdown. As part of the Communist Party's forced exodus of intellectuals to work in the countryside, Ms Zhang and her mother ended up in a rural part of Henan province.

In 1979, they found their way to Hong Kong and lived in a single room just big enough for two bunk beds. They shared a bathroom with other families.

For five years, from age 14, Ms Zhang toiled in small factories making sleeves, collars, zippers and electrical parts. She says that conditions there were similar to those in mainland China today. At Taiwanese-owned Foxconn Technology Group, which makes Apple iPhones in Guangdong province, at least 10 of its workers committed suicide in recent months, according to China's official media. Foxconn employees work a massive amount of overtime to make a living wage and grow extremely exhausted, Li Qiang, executive director of New York-based China Labor Watch, said in May.

Early days

'My life then was exactly the same as those factory workers,' Ms Zhang says. 'It was mindless work. You basically moved from one factory to another for whoever paid you slightly more.'

By age 19, she had saved the equivalent of a few thousand British pounds - enough to buy an airplane ticket to London and support herself while she studied English at secretarial school.

'Quickly, after I landed in England, I found out ways to get scholarships,' she says. 'England turned out to be a very encouraging place for me.'

She won a spot at the University of Sussex, where she earned her under graduate degree in economics in 1991. Then she enrolled at Cambridge and graduated in 1992 with a master's in development economics.

Barings Plc, a London-based investment bank, hired Ms Zhang right out of Cambridge to work in Hong Kong analysing privatisation in China. Soon after starting the job, she switched to Goldman Sachs, serving as an analyst at the investment bank. It was a short stay. In 1994, she joined Travelers Group. Homesick, she returned to China a year later.

Ms Zhang told the New Yorker magazine in 2005 that she had detested investment banking. 'On Wall Street, all values seemed upside down.People spoke crassly, treated each other badly, looked down on the poor and adored the rich.'

Unpleasant memory

She said that investment banking reminded her of her days working in the Hong Kong garment factories. 'The difference is, in Hong Kong the competition turned people into shortsighted mice, whereas on Wall Street it turns them into wolves and tigers.'

Ms Zhang stepped back into China in 1995 as the economy was moving away from orthodox Marxism. As early as 1978, China's leader, Deng Xiaoping, had begun to open markets, declaring: 'To get rich is glorious.'

Beijing, famous for its exquisite 600-year-old Forbidden City flanked by stolid Soviet-style architecture, was beginning to sprout modern buildings.Workers were flocking to the capital as China's economy surged at the rate of 10 per cent a year. A friend of Ms Zhang's recommended that she contact Beijing Vantone Real Estate, where Mr Pan served as a partner.

Within four days of meeting Ms Zhang, Mr Pan proposed. Soon after their marriage, he left Vantone and the newly weds teamed up to form a company called Hongshi (red stone), later renamed Soho China. Ms Zhang would use her experience in investment banking to attract foreign investors and architects; Mr Pan had local knowledge and connections to negotiate with the government to acquire the land.

'It was the initial attraction in us being partners in business as well as partners in life,' Ms Zhang says.

Ms Zhang, who early this year feared a bubble, now says her own research reveals that the property market is regaining its sanity. She says that real estate prices have been cooling since April, following the government's lending restrictions, but aren't headed for acollapse.

If the former sweatshop worker is right, her latest property investments are likely to prosper - as will China, perhaps sparing the global economy the threat of a double-dip recession. --Bloomberg