The Wall Street Journal - Power Pair Builds Beijing -- and a Life(35442)

Boss Talk: Power Pair Builds Beijing -- and a Life --- Zhang and Husband Find Middle Ground to Develop Chinese Real-Estate Empire

By Jason Leow

1,319 words

17 September 2007

The Wall Street Journal

English

With the Olympics a year away, Beijing s construction boom is in overdrive. Some analysts and government officials even fear a real-estate bubble. Yet Zhang Xin, chief executive of developer Soho China, says the company will post its highest growth this year and next.

Ms. Zhang and her husband, Pan Shiyi, 43, are one of China s best-known business couples, renowned for their funky aesthetic. Their first project, Soho New Town -- for "Small Office-Home Office" -- attracted wide attention with its multicolored buildings in contrast to Beijing s grayness.

Today, Soho China has switched its focus to retail and office spaces, where Ms. Zhang says margins are the highest. With more than 16.7 million square feet, it s the leading developer in the capital s central business district. The couple plans an initial public offering in Hong Kong next month, in which they hope to raise $1.65 billion.

A former investment banker with Goldman Sachs in New York, Ms. Zhang, 42, grew up in Bejing and Hong Kong. Mr. Pan s rags-to-riches tale is legendary in China. Before the offering was announced last week, Ms. Zhang spoke with The Wall Street Journal about how they share running the business and balance it with life at home with their two children. Excerpts:

WSJ: How have you been able to get parcel after parcel of land in Beijing s central business district? There s a perception you must have very good political connections.

Ms. Zhang: We don t. I can honestly tell you we don t spend any time cultivating anyone. As a private company in this country, we are neither government-owned nor Communist by nature. The only way we can work is under the law. Our contracts have to be governed and supported by the law. Our behavior has to be.

In 1995, when we wanted to buy this piece of smelly land [Soho New Town, which replaced a rice-wine factory] and we talked to the government, no developer wanted it. As for Jianwai Soho [in the central business district], I spent two years trying to get serious developers outside China to come in with us, but we couldn t get anyone.

So we did it alone.

WSJ: In the past year, the government has taken some tough actions with real-estate developers, such as restricting bank loans and land supply for them, fearing a property bubble. Why haven t you been affected?

Ms. Zhang: We don t focus on the size of the land bank. We re a commercial developer so we focus on the quality of the land. A massive land in Heilongjiang means nothing to us. But land in the central business district means a lot to us.

WSJ: How do you and Mr. Pan work together?

Ms. Zhang: If you look at our two backgrounds, I come from a more consultative background, having been Western-educated and Wall Street-trained. Pan comes from a more traditional Chinese way. I think his mentality was more like the head of the family makes the decision on behalf of everyone for the goodness of everyone.

WSJ: Who changed whom?

Ms. Zhang: We ve come to a middle ground. I have certainly brought him to see the world outside China and how people think, how people work. He has brought me to see how the core of the Chinese system works.

WSJ: At least in the Chinese media, your company is associated more often with Pan Shiyi -- the farmer who grew up so poor he had to beg for food -- than with you. Are you jealous of that association?

Ms. Zhang: No, after all he is my husband. But the founders of Soho are Mr. Pan and Ms. Zhang. It s very hard for two people to do the media. You almost always have one image. He does it so well, so why not? People love the story of this nong min [farmer] from Gansu province who has come a long way and still keeps a humble attitude and still has a lot of drive.

WSJ: Yet you are the Cambridge graduate with the economics degree and the Wall Street veteran. Why have you focused on the softer aspects of business like aesthetics and design?

Ms. Zhang: Pan is by nature a better businessman. I am not as intuitive as he is in terms of smelling where the market is today.

WSJ: In terms of picking a site and pricing it, who has gotten it right more of the times?

Ms. Zhang: So far we have done only one development that we stopped half way through. It just didn t sell that well. It was my instinct to do it; it was his instinct to cut it.

WSJ: Mr. Pan has been quite open about his criticisms on recent government actions to slow real-estate development. Are you concerned that he is so public with his remarks?

Ms. Zhang: No, I think this is a good way of communicating with the government. It needs to hear our opinions. Where would we talk to the government if it wasn t through the media, the most powerful channel? . . . You ll be surprised how much attention they pay to the media. China is a different place today.

WSJ: Mr. Pan keeps a very popular blog which he uses to comment on China s real estate industry. Whose idea was that?

Ms. Zhang: His idea. I should give credit to him because when he started it I said this was such a waste of time and he should be running a company, not writing a blog. But he kept writing and it came to a point where the blog has become an important speaking place for us.

WSJ: You were against Mr. Pan appearing as the Chinese Donald Trump in a local version of "The Apprentice," and he didn t do the show. Why was that so important to you?

Ms. Zhang: I didn t think the association was right for him. I have a bit more exposure to the Western world to know what should be the right association for him. Pan was a poor peasant who came to where he is today. He is such a socially conscious person and very compassionate.

WSJ: Are both of you very concerned not only with how foreigners see Soho China but also how they see China?

Ms. Zhang: Absolutely, yes. I m a CEO. I m a wife. I m a mother. When I go to conferences, when I talk to the media, I m also seen as a window to China. The reporting doesn t have to be all good, but it has to be with justification.

WSJ: How do you balance your work with home?

Ms. Zhang: I am very strict in dividing my work hours and home hours. My colleagues all know that I don t work on weekends. I feel like the weekend is for my role as a mom and a wife. Evenings too, I hardly ever go out.

WSJ: Then how do you network?

Ms. Zhang: I don t. Work hours are work hours. Let s meet in the office, and we can have lunch together. I don t need to go out for dinner. Pan doesn t either.

WSJ: In May, Mr. Pan addressed a conference in Hong Kong on Taoism. Have both of you become more spiritual?

Ms. Zhang: When I met him, he was already reading a lot of Taoism. He got me interested, and together we became more advanced in our research.

WSJ: Have you picked a religion?

Ms. Zhang: I have been a Baha i for two years. I think he s still investigating.