The ascent of Zhang Xin, 50, who rose to become a real estate mogul, is a classical success story in modern China. As a young woman, she worked on assembly lines in the textile and electronics industries before going to England at the age of 19 to train to become an international secretary. She then completed degrees in economics and worked as an investment banker in London and on Wall Street. She returned to Beijing in 1995 and founded the commercial real estate development firm SOHO China together with her husband Shiyi Pan. Unusually for a Chinese business leader, Zhang also speaks out regularly on social and political issues.
She sat down with SPIEGEL in Beijing for an interview as she prepared to travel to the World Economic Forum in Davos, Switzerland.
SPIEGEL: Zhang Xin, if China’s economy was an enterprise and you were running it, how would you make your company fit for the future?
Zhang: No economy, no company, in fact no individual can develop its full potential today without embracing two fundamental trends — globalization and digitalization. They will dominate for quite some time to come.
SPIEGEL: What does this mean for China?
Zhang: It means that the country needs to continue opening up and keep connecting. It needs to realize that the world has become one. The old concept of isolation, the idea that you can solve your problems on your own does not work anymore — neither in cultural, economic, nor political terms. Isolation means a lack of growth. I grew up in China at a time when the country was completely isolated. That era is over.
SPIEGEL: The booms and busts on the market during the summer and at the beginning of the year have shattered confidence abroad in China’s economic power. How do you evaluate the extreme volatility on the capital markets?
Zhang: Investors don’t like uncertainty. The market is telling us that they need certainty, they need to see where the economy is heading. If the government is committed to continue the Open Door policy, they will need to come up with concrete policies and execution steps to increase confidence.
SPIEGEL: China’s leadership wants to transform its economy from an investment-driven to a service- and consumption-driven one. Will that work?
Zhang: At the moment our consumption is still too small in terms of GDP. But we are heading in the right direction.
SPIEGEL: Many China watchers wonder if this transformation will work.
Zhang: The question is not about whether it will work or not. It’s how quickly we can pull it off. Structural change will happen. When economies grow, there comes a time when you cannot rely on investment alone. We had that. The return on investment is becoming less and less. So we have to change. The old model doesn’t work anymore. It’s a question of speed.
SPIEGEL: Your company is one of China’s largest real estate firms. How has your business model changed over the years?
Zhang: Twenty years ago, we were only able to build boxes. Today, architects from all over the world are working with us — Zaha Hadid from London, Gerkan, Marg and Partner from Hamburg, Kengo Kuma from Japan. We brought design and digitalization from abroad to China.
SPIEGEL: In comparison, how did things start out for you?
Zhang: When we started out, we were among the first. Beijing had no and Shanghai had very few large buildings. At that time, it was all about building, building, building — and then selling, selling, selling. We were working like a manufacturer. Soon, however, we realized that land was running out in Beijing and Shanghai. So we started keeping our buildings, and managing and renting them out. We became landowners. That was the second act.
SPIEGEL: And then?
Zhang: Then we moved on to Act 3. China’s economy became more complex. By now there is a large number of small- and medium-sized companies that work quite differently from big, state-owned enterprises. They don’t follow any long-term business plan and don’t rent office space for years to come. They start out and need an office right away, for a week, a month or half a year, and they want to be among other entrepreneurs like themselves. Our tenants now are companies like Uber, the taxi service, Meituan.com, China’s version of Groupon — and a large number of startups. These companies operate in a modern way, just like their customers: They go on the Internet, look for an offer and take it.
SPIEGEL: After the stock market turbulences, does it surprise you that people have started to worry?
Zhang: China has consistently surprised us. When I returned from the United States 20 years ago, it was unimaginable that we would end up where we are now. What China has achieved defies all logic. I credit this to the hard work and enterprising spirit of the Chinese people.
SPIEGEL: Can you give an example?
Zhang: I am a runner. Last October, there was a marathon here in Beijing. I didn’t participate this time, but friends told me that the run wasn’t prepared too well. The organizers had only arranged about three hours’ worth of food and water supplies. Most people don’t finish within three hours, however. Too bad for them — or so it seemed. In fact, however, even those finishing last were perfectly taken care of, particularly during the fourth and fifth hour when demand is highest.
SPIEGEL: Why?
Zhang: Because people along the route had realized that there was demand and quickly organized supply. That’s so Chinese. In a well-organized country like Germany, such a problem may not have arisen in the first place, but in China people immediately recognized an opportunity.
SPIEGEL: No one will doubt the diligence and flexibility of the Chinese, but will this be enough to avoid a hard landing of China’s economy?
Zhang: Growth will be slower, no one denies that. But the question is: Where are the chances and opportunities now? I see some positive and some negative trends. It’s a good thing that it is getting simpler to register a company in China, it is good that the exchange rate of our currency is getting more flexible and that it’s getting easier for Chinese businesspeople to travel. All of this opens up our economy. But it is a worry that there have been so many delays in the reform of China’s state-owned enterprises. We all know that private companies are run more efficiently than state ones. These reforms are very much anticipated for the potential dynamism they could create.
SPIEGEL: Are you worried about the many employees who might be laid off when the reform of the state-owned enterprises takes off?
Zhang: China reformed its state sector before, in the late 1990s. Tens of millions were laid off at the time. That was scary and we had warnings of social unrest. But it did not happen. Instead, there was a restructuring in our economic system. I am not sure if China will follow a Western playbook in this respect.
SPIEGEL: How do you mean that?
Zhang: On the one hand the world is getting more integrated and we should not dismiss social values as «Western» when they are actually modern values. On the other hand, individual countries have their own history and their own evolution. Trade unions, for example, don’t play the same role in China as they do in Europe or the US.
SPIEGEL: You and other entrepreneurs of your generation have shaped an economic era in China similar to what was known as the «Gründerzeit» in 19th-century Germany. Is this era now coming to an end?
Zhang: When we started out, we didn’t really think that the era of great opportunity would end one day. We were much too busy developing our companies. But in today’s China you can build a city, even a mega-city like Beijing or Shanghai, within 10 or 15 years. And then you are done. So in real estate development, the Gründerzeit is over. But that is not the case in other sectors.
SPIEGEL: Such as?
Zhang: I firmly believe that digitalization has only just begun in China. In addition to the taxi, transport, shopping and hotel businesses, many other industries will follow: education, health care, administration, even the legal branch — everything, really. There is still a lot of opportunity in China for the inventive and ambitious ones.
SPIEGEL: China’s generation of founders has become rich over the past 20 years. What will you and the other 600 or so Chinese dollar billionaires do with your money?
Zhang: Mark Zuckerberg recently announced that he will donate $45 billion of his wealth to philanthropy. Two years ago, my husband and I decided to endow $100 million to set up the SOHO China Scholars. This program will give financial aid to Chinese students so they can attend the best universities in the world. Many Chinese entrepreneurs are now donating for education; others support foundations in health care and research. None of us wants to be the richest guy in the cemetery.
SPIEGEL: Europeans often see philanthropy as a sign that a state isn’t doing enough in terms of social welfare and education.
Zhang: That may be true, but it is worthwhile to engage in something that is close to one’s heart. I had a scholarship. So if I donate money to give brilliant Chinese students an opportunity to study abroad, then this embodies everything I believe in: education, globalization, social mobility. I am an example of social mobility.
SPIEGEL: In spite of its communist past, China often resembles America rather than Europe. Rich people earn admiration in China, not envy.
Zhang: I have a profound dislike for showing off one’s material wealth. This is insensitive and it is not what human hearts are made for. But what I like about China and sometimes miss in Europe is the entrepreneurial spirit of our young people, their ambition and dynamism.
SPIEGEL: And the Chinese have this in common with the Americans?
Zhang: Yes, and I think this explains to some degree why private engagement and philanthropy will play a big role here. I used to ask myself why American universities are financed through endowments. Now I know: During the early days of America, the state was poor and when citizens wanted to set something up, they needed to collect money themselves. Historically, this was different in Europe. There used to be a strong state, a monarch or a king. He provided money.
SPIEGEL: In China there is a strong party. Can one get rich in China without the party?
Zhang: Our company has only been active in Beijing and Shanghai, two very market-dominated cities. This was an advantage. Land is purchased here in public auctions, in a transparent way. When you do real estate development outside Beijing and Shanghai it is good to have «guanxi» — good relations within the local government.
SPIEGEL: Jack Ma, the founder of Alibaba, famously advised entrepreneurs to «love the party but not to marry it.»
Zhang: We are not very good at this. Our success rests on our international experience and on our ability to read the market. And I contest the notion that you can only succeed in China when you are well-connected. Neither my husband nor I are «princelings» — children of influential people, that is. And yet China has enabled us to succeed.
SPIEGEL: The party, however, has become quite rigid, not just with Chinese but also with foreign businessmen.
Zhang: I think our legal system needs to be developed. Cases of citizens who are detained and then have to wait much too long for a trial — that is scary, for everyone. When someone commits a crime he needs to be charged quickly. Why does this take so long in many cases? I don’t know. Is it because our legal system is still rudimentary? China has promised to modernize its legal system. This has high priority.
SPIEGEL: When countries prosper economically there comes a time when its people start asking for greater political participation. Will this eventually happen in China, too?
Zhang: I said before that the Chinese no longer crave so much for food and accommodation, but they do crave democracy. I stand by that. I don’t know which model China will follow. But the higher our standard of living, the higher our levels of education, the further people will look around. And we can see which level of openness other societies enjoy. We are no different — we too want more freedom. The question is: How much freedom will be allowed?
SPIEGEL: Today the silhouettes of your buildings dominate the skylines of Beijing and Shanghai, almost serving as a signature of modern China. Have you ever wondered how long these buildings will continue to stand tall and just how sustainable these structures that you have created together with your architects will be?
Zhang: We have become so quick and effective in building things today. It would be easy to build another Pyramid of Giza or another Great Wall. But these buildings haven’t withstood the test of time because of their building quality. They stand tall because they have a symbolic value, they represent a culture. I’m afraid what we are building today will not have the same impact and sustainability of the architecture of a 100, 500 or 1,000 years ago. The buildings of those days were miracles. We don’t perform such miracles today. So we should be a little more modest. For my part, I’ll be glad to show one of my buildings one day to my grandchildren and say: I’m proud of that.
She sat down with SPIEGEL in Beijing for an interview as she prepared to travel to the World Economic Forum in Davos, Switzerland.
SPIEGEL: Zhang Xin, if China’s economy was an enterprise and you were running it, how would you make your company fit for the future?
Zhang: No economy, no company, in fact no individual can develop its full potential today without embracing two fundamental trends — globalization and digitalization. They will dominate for quite some time to come.
SPIEGEL: What does this mean for China?
Zhang: It means that the country needs to continue opening up and keep connecting. It needs to realize that the world has become one. The old concept of isolation, the idea that you can solve your problems on your own does not work anymore — neither in cultural, economic, nor political terms. Isolation means a lack of growth. I grew up in China at a time when the country was completely isolated. That era is over.
SPIEGEL: The booms and busts on the market during the summer and at the beginning of the year have shattered confidence abroad in China’s economic power. How do you evaluate the extreme volatility on the capital markets?
Zhang: Investors don’t like uncertainty. The market is telling us that they need certainty, they need to see where the economy is heading. If the government is committed to continue the Open Door policy, they will need to come up with concrete policies and execution steps to increase confidence.
SPIEGEL: China’s leadership wants to transform its economy from an investment-driven to a service- and consumption-driven one. Will that work?
Zhang: At the moment our consumption is still too small in terms of GDP. But we are heading in the right direction.
SPIEGEL: Many China watchers wonder if this transformation will work.
Zhang: The question is not about whether it will work or not. It’s how quickly we can pull it off. Structural change will happen. When economies grow, there comes a time when you cannot rely on investment alone. We had that. The return on investment is becoming less and less. So we have to change. The old model doesn’t work anymore. It’s a question of speed.
SPIEGEL: Your company is one of China’s largest real estate firms. How has your business model changed over the years?
Zhang: Twenty years ago, we were only able to build boxes. Today, architects from all over the world are working with us — Zaha Hadid from London, Gerkan, Marg and Partner from Hamburg, Kengo Kuma from Japan. We brought design and digitalization from abroad to China.
SPIEGEL: In comparison, how did things start out for you?
Zhang: When we started out, we were among the first. Beijing had no and Shanghai had very few large buildings. At that time, it was all about building, building, building — and then selling, selling, selling. We were working like a manufacturer. Soon, however, we realized that land was running out in Beijing and Shanghai. So we started keeping our buildings, and managing and renting them out. We became landowners. That was the second act.
SPIEGEL: And then?
Zhang: Then we moved on to Act 3. China’s economy became more complex. By now there is a large number of small- and medium-sized companies that work quite differently from big, state-owned enterprises. They don’t follow any long-term business plan and don’t rent office space for years to come. They start out and need an office right away, for a week, a month or half a year, and they want to be among other entrepreneurs like themselves. Our tenants now are companies like Uber, the taxi service, Meituan.com, China’s version of Groupon — and a large number of startups. These companies operate in a modern way, just like their customers: They go on the Internet, look for an offer and take it.
SPIEGEL: After the stock market turbulences, does it surprise you that people have started to worry?
Zhang: China has consistently surprised us. When I returned from the United States 20 years ago, it was unimaginable that we would end up where we are now. What China has achieved defies all logic. I credit this to the hard work and enterprising spirit of the Chinese people.
SPIEGEL: Can you give an example?
Zhang: I am a runner. Last October, there was a marathon here in Beijing. I didn’t participate this time, but friends told me that the run wasn’t prepared too well. The organizers had only arranged about three hours’ worth of food and water supplies. Most people don’t finish within three hours, however. Too bad for them — or so it seemed. In fact, however, even those finishing last were perfectly taken care of, particularly during the fourth and fifth hour when demand is highest.
SPIEGEL: Why?
Zhang: Because people along the route had realized that there was demand and quickly organized supply. That’s so Chinese. In a well-organized country like Germany, such a problem may not have arisen in the first place, but in China people immediately recognized an opportunity.
SPIEGEL: No one will doubt the diligence and flexibility of the Chinese, but will this be enough to avoid a hard landing of China’s economy?
Zhang: Growth will be slower, no one denies that. But the question is: Where are the chances and opportunities now? I see some positive and some negative trends. It’s a good thing that it is getting simpler to register a company in China, it is good that the exchange rate of our currency is getting more flexible and that it’s getting easier for Chinese businesspeople to travel. All of this opens up our economy. But it is a worry that there have been so many delays in the reform of China’s state-owned enterprises. We all know that private companies are run more efficiently than state ones. These reforms are very much anticipated for the potential dynamism they could create.
SPIEGEL: Are you worried about the many employees who might be laid off when the reform of the state-owned enterprises takes off?
Zhang: China reformed its state sector before, in the late 1990s. Tens of millions were laid off at the time. That was scary and we had warnings of social unrest. But it did not happen. Instead, there was a restructuring in our economic system. I am not sure if China will follow a Western playbook in this respect.
SPIEGEL: How do you mean that?
Zhang: On the one hand the world is getting more integrated and we should not dismiss social values as «Western» when they are actually modern values. On the other hand, individual countries have their own history and their own evolution. Trade unions, for example, don’t play the same role in China as they do in Europe or the US.
SPIEGEL: You and other entrepreneurs of your generation have shaped an economic era in China similar to what was known as the «Gründerzeit» in 19th-century Germany. Is this era now coming to an end?
Zhang: When we started out, we didn’t really think that the era of great opportunity would end one day. We were much too busy developing our companies. But in today’s China you can build a city, even a mega-city like Beijing or Shanghai, within 10 or 15 years. And then you are done. So in real estate development, the Gründerzeit is over. But that is not the case in other sectors.
SPIEGEL: Such as?
Zhang: I firmly believe that digitalization has only just begun in China. In addition to the taxi, transport, shopping and hotel businesses, many other industries will follow: education, health care, administration, even the legal branch — everything, really. There is still a lot of opportunity in China for the inventive and ambitious ones.
SPIEGEL: China’s generation of founders has become rich over the past 20 years. What will you and the other 600 or so Chinese dollar billionaires do with your money?
Zhang: Mark Zuckerberg recently announced that he will donate $45 billion of his wealth to philanthropy. Two years ago, my husband and I decided to endow $100 million to set up the SOHO China Scholars. This program will give financial aid to Chinese students so they can attend the best universities in the world. Many Chinese entrepreneurs are now donating for education; others support foundations in health care and research. None of us wants to be the richest guy in the cemetery.
SPIEGEL: Europeans often see philanthropy as a sign that a state isn’t doing enough in terms of social welfare and education.
Zhang: That may be true, but it is worthwhile to engage in something that is close to one’s heart. I had a scholarship. So if I donate money to give brilliant Chinese students an opportunity to study abroad, then this embodies everything I believe in: education, globalization, social mobility. I am an example of social mobility.
SPIEGEL: In spite of its communist past, China often resembles America rather than Europe. Rich people earn admiration in China, not envy.
Zhang: I have a profound dislike for showing off one’s material wealth. This is insensitive and it is not what human hearts are made for. But what I like about China and sometimes miss in Europe is the entrepreneurial spirit of our young people, their ambition and dynamism.
SPIEGEL: And the Chinese have this in common with the Americans?
Zhang: Yes, and I think this explains to some degree why private engagement and philanthropy will play a big role here. I used to ask myself why American universities are financed through endowments. Now I know: During the early days of America, the state was poor and when citizens wanted to set something up, they needed to collect money themselves. Historically, this was different in Europe. There used to be a strong state, a monarch or a king. He provided money.
SPIEGEL: In China there is a strong party. Can one get rich in China without the party?
Zhang: Our company has only been active in Beijing and Shanghai, two very market-dominated cities. This was an advantage. Land is purchased here in public auctions, in a transparent way. When you do real estate development outside Beijing and Shanghai it is good to have «guanxi» — good relations within the local government.
SPIEGEL: Jack Ma, the founder of Alibaba, famously advised entrepreneurs to «love the party but not to marry it.»
Zhang: We are not very good at this. Our success rests on our international experience and on our ability to read the market. And I contest the notion that you can only succeed in China when you are well-connected. Neither my husband nor I are «princelings» — children of influential people, that is. And yet China has enabled us to succeed.
SPIEGEL: The party, however, has become quite rigid, not just with Chinese but also with foreign businessmen.
Zhang: I think our legal system needs to be developed. Cases of citizens who are detained and then have to wait much too long for a trial — that is scary, for everyone. When someone commits a crime he needs to be charged quickly. Why does this take so long in many cases? I don’t know. Is it because our legal system is still rudimentary? China has promised to modernize its legal system. This has high priority.
SPIEGEL: When countries prosper economically there comes a time when its people start asking for greater political participation. Will this eventually happen in China, too?
Zhang: I said before that the Chinese no longer crave so much for food and accommodation, but they do crave democracy. I stand by that. I don’t know which model China will follow. But the higher our standard of living, the higher our levels of education, the further people will look around. And we can see which level of openness other societies enjoy. We are no different — we too want more freedom. The question is: How much freedom will be allowed?
SPIEGEL: Today the silhouettes of your buildings dominate the skylines of Beijing and Shanghai, almost serving as a signature of modern China. Have you ever wondered how long these buildings will continue to stand tall and just how sustainable these structures that you have created together with your architects will be?
Zhang: We have become so quick and effective in building things today. It would be easy to build another Pyramid of Giza or another Great Wall. But these buildings haven’t withstood the test of time because of their building quality. They stand tall because they have a symbolic value, they represent a culture. I’m afraid what we are building today will not have the same impact and sustainability of the architecture of a 100, 500 or 1,000 years ago. The buildings of those days were miracles. We don’t perform such miracles today. So we should be a little more modest. For my part, I’ll be glad to show one of my buildings one day to my grandchildren and say: I’m proud of that.
