In late November, 100 potential foreign investors sat down to dinner in Shanghai's Grand Theatre with the then Shanghai mayor Xu Kuangdi and officials from the city's Huangpu district. They spent the next two days at a seminar learning about investment opportunities in a new development project along Nanjing Road, one of the city's two main thoroughfares. The presentations were organised by world-famous consultants McKinsey & Co, while the PR was handled by Ruder Finn.
Looking for feedback
After the forum, requests for meetings with government officials were speedily accommodated, and the Chinese side seemed to be genuinely looking for feedback rather than simply informing potential investors about an already-decided plan. "The Nanjing Road Forum seemed to be very open to the views of a wide variety of the international business community," says Kevin McCann, director of the Audi division for Volkswagen (China) Investment Co. "I found it very refreshing."
It's all part of Shanghai's grand plan to develop more than 20km of riverfront and 22.6m sq metres of property along the Huangpu River into a business and entertainment paradise. The targeted area includes the famous Bund and part of the Pudong New District.
The Huangpu and neighbouring Hongkou districts occupy big chunks of that area on the Bund side, and both are looking to use foreign design and investment to remake their districts into commercial powerhouses. "We welcome the involvement from home and overseas. The project will be operated under market rules and foreign investors will be treated the same as domestic investors," says Feng Jingming, Huangpu's vice-mayor.
'Nanjing Road is the engine room of Chinese commerce', reads the slick promotional materials handed out at the forum. Although the Huangpu district has already converted part of Nanjing Road into a pedestrian mall, it wants to build on that success. So it is looking for US$2.4bn in investment over the next decade to make Nanjing Road, in the words of McKinsey's Jonathan Woetzel, "a place for Shanghainese to enjoy worldclass brands and food and entertainment."
The plan to develop that part of the strip from the Bund to Chengdu Road that falls in Huangpu has three distinct elements. Heritage Nanjing Road, the section closest to the Bund waterfront, will be 'elegant and nostalgic'; in the middle, the pedestrian mall of Cosmopolitan Shanghai will be 'contemporary and energetic'; the final portion, Taste of Tomorrow, will include green, open space and a public transportation hub.
Companies such as Kodak, Nike, Volkswagen and Hong Kong's Mandarin Oriental Group are already talking to the district government. The appeal? "We need [pedestrian] traffic and Nanjing Road has that," says McCann. Audi plans to build a showroom to introduce potential customers to the car's technology and the lifestyle it represents. Interested buyers will be directed to showrooms elsewhere in the city.
Kodak is considering building a multiscreen cinema and Nike is thinking of opening one of its huge Nike Towns. "There will be a number of international brands located along the road," sums up Woetzel, though he hastens to add: "It is certainly not the intent to turn Nanjing Road into a paradise for foreign brands."
Hongkou district has also segmented its redevelopment project into three sections: Modern Business Area, Shipping Business Area and a Historical Scenes and Modern Commercial Street Area. In line with the entire city's economic shift, Hongkou is looking to build up the tertiary sector, with law offices, accounting firms, banks and the like settling in the Modern Business Area.
The shipping area will aim for businesses such as insurance and freight forwarding. The third area will contain historical sites such as an old synagogue, along with retail and residential space. "We estimate the general investment will be up to Yn1bn," says Song Baoru, deputy director of the Hongkou district's North Bund Renovation Project. "The investment will come from both domestic and international [companies]."
Plans for Hongkou's rebirth are progressing. In February, the district held open design bids for the project and selected five firms – one German, one Australian and three American – from more than 30 bidders. "Shanghai has definite plans to develop itself and to become an international capital," says Song. "It's very natural for us to have the international design companies to plan for us."
By the end of May, the district aims to have finalised the development plan, most likely choosing elements from each proposal. Renovation will begin in 2003. "In the following three years, landmark buildings and mansions will be constructed in the central business area. In five years, basic infrastructure will be completed and the whole renovation project will be finished in 10 years," says Song.
This is long-term planning of the kind seldom seen in China just a few years ago. Then, the main characteristic of the 'planned economy' seemed to be the lack of long-term thinking. Even the development of Pudong over the past 12 years, which spawned several impressive buildings and plenty of green space, has lacked an overarching vision.
"They have the grand vision," says one Hong Kong-based developer who has had several meetings with the Huangpu government about investment opportunities on Nanjing Road. Says Woetzel: "It's a way of thinking about development that hopefully will result in a much healthier environment than we've had in the past."
Vision or no, however, old organisations and old ways of thinking still present the biggest obstacles to Shanghai's grand development plan. More than 80 percent of the businesses currently on Nanjing Road are state-owned enterprises.
Huangpu's Feng says that businesses that want to stay where they are must make the case for their survival, but ownership structures will complicate matters. At the Zhonglian Department Store, for instance, office employees awoken from their lunchtime nap commented that all they knew about the redevelopment plans was what they had read in the newspapers. "Besides, we belong to the municipal government, not the Huangpu district government," said one man.
Then there's the spectre of unemployment if any of the state-owned stores close down. "There will be new positions. Layoffs means resources are being optimised," Feng says, sounding like a true capitalist. "There will be more reasonable arrangements under the market economy."
Curious foreign investors may hit a pothole if they decide to call any of the numbers and names listed as contacts at businesses along Nanjing Road's pedestrian mall. None were available when a reporter made a few sample calls. And despite the Huangpu government's eagerness to please foreign investors, there is still a gap in thinking about business concepts. A few weeks after Audi selected a spot for its showroom, a multi-brand car sales showroom sprouted on the site. "[The district leaders] didn't really understand what we were trying to do," says McCann. He is now considering several alternative sites. "It's just a matter of finding the right formula," he says optimistically.