Skyscraper is symbol of China's new heights
Monday, 17 September 2007
Geoff Dyer
When Minoru Mori first came to Shanghai in 1994, the Japanese real estate tycoon was reminded of the dynamism of postwar Tokyo. He promptly bought a large plot of land in Pudong, the area designated by the government to become Shanghai's international financial centre.
Thirteen years later, his trophy project is finally taking shape. Workers laid the last beam last week of the 1,614-ft tower, which is now the tallest in a country becoming addicted to tall buildings.
Called the Shanghai World Financial Centre, Mr Mori believes the skyscraper will become an icon for the new-found confidence of China's financial markets. When construction started on the first floor in mid-2005, the Shanghai market was touching 1,000 points: as workers complete the 101th storey, it is above 5,000 points.
"The timing is just about the best it could be," said Mr Mori. The $1bn building will eventually host a string of international banks, he said, and become "the pride of Shanghai".
To get this far, Mr Mori has had to plough through some formidable obstacles. After initially breaking ground in 1997, the project's financial backers began to pull out when the Asian financial crisis devastated demand for office space. The company says there are now plenty of potential investors and Morgan Stanley has agreed to take a 10 per cent stake in the project.
The tower also found itself caught up in the complex politics of Japan's relationship with China. The initial design included a large hole at the top of the building, where Mr Mori hoped to install a Ferris wheel. The developer said the hole was based on the Chinese symbol of a moon gate: angry Shanghaiese, who remember Japan's wartime occupation of the city, claimed it resembled the sun at the centre of the Japanese flag.
In the aftermath of angry anti-Japanese demonstrations in Shanghai and Chinese criticism of visits by politicians to the Yasukuni shrine in Tokyo, Mr Mori quietly changed the design to a square in 2005. "We were never bullied for being Japanese," he insisted.
The Shanghai building is only surpassed in height by Taiwan's Taipei 101 tower and the Burj Dubai skyscraper. Yet tall buildings have not always been the best allies of financial market confidence. Construction of the Empire State building began in 1930, just as the Great Depression was taking hold, while the Twin Towers in Kuala Lumpur was topped out in 1997 as the Asian crisis was breaking.
One of Mori Building's most ambitious projects was the Ark Hills in Tokyo, which was completed after two decades of work in 1986 - just a few years ahead of the prolonged slump in Japanese stocks. Mr Mori admits it took at least another decade before the building fulfilled its goal of becoming a centre for the international financial industry.
Indeed, some analysts have drawn parallels between the Shanghai market today and "bubble" Japan of the late 1980s. Not only are valuations worryingly high, but a large part of Chinese corporate earnings this year have come from equity investments - just as speculation once boosted Japanese corporate profits.
And while Japan rode out the 1987 crash after an initial fall, the Shanghai market has been oblivious to the global credit crunch since its February correction.
Low clouds over Shanghai on Friday made it difficult to see the top of the new tower. Mr Mori will be hoping his prized skyscraper becomes the symbol of a market that has come of age instead of one that has already reached its peak.
In another report, Jamil Anderlini reports from Beijing: The number of credit cards in circulation in China has more than doubled over the past year to more than 40m as a credit culture begins to take shape in the country, according to a report released on Friday.
Penetration rates remain well below those in comparable societies such as Taiwan and Hong Kong, leaving huge potential for an industry that should provide Rmb13bn ($1.73bn) in profits by 2013, according to the report from McKinsey, the consultancy.
But international banks remain barred from issuing credit cards in China and the card business is still unprofitable for domestic banks.
The sector's growing potential increases pressure on Beijing to implement long-awaited rules allowing foreign banks to issue cards, in keeping with its World Trade Organisation accession commitment to provide "national treatment" by the end of 2006.
Analysts say the government is protecting domestic banks in the fledgling sector but is soon expected to open it to foreign banking groups such as HSBC and Citigroup, which are now only allowed to offer co-branded cards with domestic partners.
For the past few years Beijing has encouraged the creation of a consumer credit industry to promote private consumption and rebalance China's rapid economic growth, which relies heavily on fixed asset investment.
The report estimates the number of true credit cards in China doubled for each of the past four years to reach about 43m by the middle of this year.
As the necessary payment infrastructure expands rapidly across the country, Chinese consumers are using credit cards to pay for an increasing array of goods and services.
But traditionally conservative attitudes towards borrowing mean 94 per cent of credit cardholders still pay off the balance of their cards before they have to make any interest payments, according to McKinsey.
"We have still not made money on credit cards and this is because of Chinese people's spending culture," a senior Chinese banking official told the Financial Times.
He said Chinese banks were working to increase the use of credit cards and the length of time customers take to repay but were mindful of the risks involved in indiscriminate card issuance and eager to avoid the repayment crises seen in Taiwan and Korea in the past decade.
Just 14 per cent of eligible customers have a credit card in China, compared with 81 per cent in Hong Kong and 70 per cent in Taiwan.
Under syndication arrangement with FE
When Minoru Mori first came to Shanghai in 1994, the Japanese real estate tycoon was reminded of the dynamism of postwar Tokyo. He promptly bought a large plot of land in Pudong, the area designated by the government to become Shanghai's international financial centre.
Thirteen years later, his trophy project is finally taking shape. Workers laid the last beam last week of the 1,614-ft tower, which is now the tallest in a country becoming addicted to tall buildings.
Called the Shanghai World Financial Centre, Mr Mori believes the skyscraper will become an icon for the new-found confidence of China's financial markets. When construction started on the first floor in mid-2005, the Shanghai market was touching 1,000 points: as workers complete the 101th storey, it is above 5,000 points.
"The timing is just about the best it could be," said Mr Mori. The $1bn building will eventually host a string of international banks, he said, and become "the pride of Shanghai".
To get this far, Mr Mori has had to plough through some formidable obstacles. After initially breaking ground in 1997, the project's financial backers began to pull out when the Asian financial crisis devastated demand for office space. The company says there are now plenty of potential investors and Morgan Stanley has agreed to take a 10 per cent stake in the project.
The tower also found itself caught up in the complex politics of Japan's relationship with China. The initial design included a large hole at the top of the building, where Mr Mori hoped to install a Ferris wheel. The developer said the hole was based on the Chinese symbol of a moon gate: angry Shanghaiese, who remember Japan's wartime occupation of the city, claimed it resembled the sun at the centre of the Japanese flag.
In the aftermath of angry anti-Japanese demonstrations in Shanghai and Chinese criticism of visits by politicians to the Yasukuni shrine in Tokyo, Mr Mori quietly changed the design to a square in 2005. "We were never bullied for being Japanese," he insisted.
The Shanghai building is only surpassed in height by Taiwan's Taipei 101 tower and the Burj Dubai skyscraper. Yet tall buildings have not always been the best allies of financial market confidence. Construction of the Empire State building began in 1930, just as the Great Depression was taking hold, while the Twin Towers in Kuala Lumpur was topped out in 1997 as the Asian crisis was breaking.
One of Mori Building's most ambitious projects was the Ark Hills in Tokyo, which was completed after two decades of work in 1986 - just a few years ahead of the prolonged slump in Japanese stocks. Mr Mori admits it took at least another decade before the building fulfilled its goal of becoming a centre for the international financial industry.
Indeed, some analysts have drawn parallels between the Shanghai market today and "bubble" Japan of the late 1980s. Not only are valuations worryingly high, but a large part of Chinese corporate earnings this year have come from equity investments - just as speculation once boosted Japanese corporate profits.
And while Japan rode out the 1987 crash after an initial fall, the Shanghai market has been oblivious to the global credit crunch since its February correction.
Low clouds over Shanghai on Friday made it difficult to see the top of the new tower. Mr Mori will be hoping his prized skyscraper becomes the symbol of a market that has come of age instead of one that has already reached its peak.
In another report, Jamil Anderlini reports from Beijing: The number of credit cards in circulation in China has more than doubled over the past year to more than 40m as a credit culture begins to take shape in the country, according to a report released on Friday.
Penetration rates remain well below those in comparable societies such as Taiwan and Hong Kong, leaving huge potential for an industry that should provide Rmb13bn ($1.73bn) in profits by 2013, according to the report from McKinsey, the consultancy.
But international banks remain barred from issuing credit cards in China and the card business is still unprofitable for domestic banks.
The sector's growing potential increases pressure on Beijing to implement long-awaited rules allowing foreign banks to issue cards, in keeping with its World Trade Organisation accession commitment to provide "national treatment" by the end of 2006.
Analysts say the government is protecting domestic banks in the fledgling sector but is soon expected to open it to foreign banking groups such as HSBC and Citigroup, which are now only allowed to offer co-branded cards with domestic partners.
For the past few years Beijing has encouraged the creation of a consumer credit industry to promote private consumption and rebalance China's rapid economic growth, which relies heavily on fixed asset investment.
The report estimates the number of true credit cards in China doubled for each of the past four years to reach about 43m by the middle of this year.
As the necessary payment infrastructure expands rapidly across the country, Chinese consumers are using credit cards to pay for an increasing array of goods and services.
But traditionally conservative attitudes towards borrowing mean 94 per cent of credit cardholders still pay off the balance of their cards before they have to make any interest payments, according to McKinsey.
"We have still not made money on credit cards and this is because of Chinese people's spending culture," a senior Chinese banking official told the Financial Times.
He said Chinese banks were working to increase the use of credit cards and the length of time customers take to repay but were mindful of the risks involved in indiscriminate card issuance and eager to avoid the repayment crises seen in Taiwan and Korea in the past decade.
Just 14 per cent of eligible customers have a credit card in China, compared with 81 per cent in Hong Kong and 70 per cent in Taiwan.
Under syndication arrangement with FE