*The following is an excerpt from the One Hour China Book, for which a new 2017 version is available here.
“China Vanke is a real estate company that has no equivalent in the West. The company’s revenues are greater than the top four American real estate developers combined. It has built more apartments than any other company in history. And Wang Shi, the founder, is now the world’s largest real estate developer. He is also the person who has provided a defining event for millions of rising Chinese: the purchase of their first home.
China Vanke is strictly a residential real estate developer. They make simple, clean apartments for China’s middle class. That’s it. This is a simple “value for money” proposition, which is a very common strateg y among China’s first moguls. He did not really innovate. He did not offer luxury. He offered basic quality homes at a affordable price. And he did it in great volume very quickly. For example, in 2015 alone, China Vanke sold over 20 million square million in apartments across more than 25 Chinese cities.
A Pretty Inspiring Rags-to-Riches Story
Wang Shi was born in 1951 in a military family in Liuzhou, Guangxi. Even today, this is a world away from Shanghai and Beijing. But back in the 1950s, it was deep in the wilderness of China. It was an isolated and poor city that was just recovering from its occupation by Japan in World War II.
Shi graduated from junior high school in 1968 at the height of the Cultural Revolution, a time when urban youth and other groups were being relocated to the countryside. Coming of age during this difficult period of China’s history is a common theme for many of the successful business people we will discuss in this book.
Following his parents’ advice, Shi joined the army and headed off to Xuzhou, Jiangsu (near Shanghai). However after just 6 months, he was transferred to the Turpan Basin in Xinjiang. This is just about as far northwest as you can go in China. It was literally the end of the world at that time. And for 5 years, Shi worked there within a military logistics group. Finally in 1973, he left the army and found a job as a furnace worker in the Zhengzhou Railway Bureau in Henan in central China.
The now 23-year-old Shi eventually enrolled in the Department of Water Supply and Drainage Engineering at the Lanzhou College of Transportation, capturing one of the only two entrance opportunities available. After graduation, he returned to southern China and began work in the engineering section of the Guangzhou Railway Bureau.
In terms of rags to super riches stories, it is difficult to find a more humble beginning for a billionaire than Wang Shi’s story. To come of age in rural China during the Cultural Revolution meant a focus on survival. And Shi’s early movements between colleges, military positions and government jobs were not uncommon. These were largely the only career options available in China at that time.
By 27, Shi had settled down. He worked on several civil engineering projects as a technician, got married to Wang Jianghui, the daughter of a retired deputy party secretary of Guangdong Province, and started a family. There was virtually no indication of the capitalist heights to which he would soon rise.
However, in 1980, Shi took and passed the recruitment examination for the Department of Foreign Trade and Economic Cooperation of Guangdong Province. This would turn out to be the move that would change everything for him. For Guangdong, just across the border from Hong Kong, was about to become the first part of China to open to the world. Another common theme of the success stories in this book is being in Guangdong and Shenzhen in the early 1980s.
Shi became a liaison for Guangdong’s Foreign Trade and Economic Relationship Committee. Whether by strategy or luck, he had found himself in the epicenter of newly capitalist China. As China opened to the world, foreign trade through Shenzhen and Guangdong was the first big economic activity. And as liaison for the foreign trade committee, he likely had a bird’s eye view into the business opportunities being created at that time.
In 1983, Shi quit his job and struck out on his own. He went right to Shenzhen, which had by that time been designated China’s first Special Economic Zone. He was not alone in this move. Government officials from all over China were jumping into business and heading to Shenzhen. But as mentioned, while Shenzhen is a first tier city today, it was not much more than a series of villages in the early 1980s.
Shi struck gold fairly quickly. At that time, China needed basically everything and those bringing goods across the Shenzhen border were extracting large profits. Shi made his first 3 million renminbi (about US$1 million at that time) by bringing in corn and reselling it to an animal feed company. He used this first windfall to jump into consumer electronics, importing electronic equipment from Japan and then selling them to the local market. He also started up several manufacturing plants for garments, watches, beverages and printing. Shenzhen had become a boomtown for just about every type of product. Shi would later say, “Except for pornography, gambling, drugs, and weapons, Vanke (his company) did almost everything.” His company Vanke, in Chinese, basically means diversification.
What Shi was doing was deal-making. He was trading, buying and selling – basically cutting deals amid the frenzy of China’s opening to the world. According to China Daily, he was at one point the biggest importer in Shenzhen.
However, this chapter is about the urbanization mega-trend. And while Shi was successful, so were many others. He had not yet caught the mega-trend that would rocket him upwards above the rest.
That changed in November 1988 when Shi participated in a land auction for the first time. He made an astonishingly high bid for the “Vuitton Villa” land plot in Shenzhen. His bid was so high it surprised everyone, including the auction officer. But it got him into the real estate game. And with his first real estate project acquired, his company began to transform from a trading house (called the “Modern Educational Equipment Exhibit Center”) into a real estate developer.”
The story is continued in Part 2. Located here.
The above is from our book – the One Hour China Book. It is available here.
I write and speak about Chinese consumers and digital China.
Photo by Jeff