Joel Moser on Shenzhen: The Next Hong Kong

When Joel Moser, founder and CEO of Aquamarine Investment Partners, a global
institutional investor and manager of private equity, set out to meet possible
partners and learn the real estate and energy infrastructure plans around Asia,
he landed in the Longgang district of Shenzhen, China. He knew he was in the
city of the future, ripe with development and set to dethrone Hong Kong as the
portal to the West.

Q: You describe your visit to Shenzhen as
eye-opening. How so?

A: I’m a New Yorker and very much a student of New
York history. And I see (the development) in Shenzhen following—in broad brush
outlines and at a much faster pace—the pattern of growth around New York City.

At the turn of the century, we see New York City
planners anticipating tremendous growth, plotting out a city by creating a grid
plan for its streets, and then planning a big central park out in what was
still an outer region of the country.

It was that foresight, urban planning and
installation of infrastructure which helped fuel the rapid and orderly planned
growth of this town. I see that in Shenzhen. Downtown Shenzhen has already
grown up with big parks and avenues.

But we see the next phase happening in Longgang.
I see they have built a huge new urban park. They have planned a university
center around the park, for as many as 10 international universities. They’ve
built sports complexes large enough to accommodate that and they are already
building the campuses for two universities. As I walked through the park and
looked at these various potential construction sites, I feel like I’m looking
at the future campuses of Columbia, NYU, University of Michigan, or Yale
Shenzhen.

Q: How would you characterize the current real
estate environment in China?

A: I read every single article, and everyone
disagrees with everyone else. There are people saying China is about to
collapse and people saying it’s not going to happen. When one reads about the
ghost cities and the potential real estate bubble of China—that is not about
Shenzhen. And it’s not about what is happening in Longgang, which is being
driven by what is happening in downtown Shenzhen.

Q: Why do you think Shenzhen is such a
success?

A: For a long time Hong Kong was a global center,
and for the many years that China was closed, it was the only place that goods
came in and out, so it was a central point and Shenzhen was the other side of
the border. It benefited clearly from Hong Kong, it got the pent-up demand and
it is has outgrown Hong Kong, become bigger than Hong Kong, and a more dynamic
economy than Hong Kong. Then once a city reaches a certain critical mass
dynamic, then it is its own draw, people are drawn to the city because that is
where the jobs are, that’s where the people are. It is that urban dynamic and
this has clearly happened to Shenzhen.

Q: It seems the global forces of urbanization have
propelled this city past other cities that received similar government
development plans. Why?

A: I work in public-private partnerships and we
spent a lot of time studying the interrelationship of what government does
versus what private sector does. And the answer is, when it’s happening, it’s
always both. The government sets the table in the private sector and caters the
feast. We see that happening in Shenzhen, and we know that China is a much more
central government and obviously a government mechanism very different than in
the United States.

Q: What would USCBC members need to know about
Longgang and the opportunities there?

A: I think what they should know that there is an
extremely welcoming local government there eager to bring in foreign
businesses, and excited of the growth that is happening. So what I think
international businesses would be interested in hearing is that this is how
Longgang imagined its future as an international intellectual center. They see
Longgang as a center of intellectual academic excellence and therefore it will
certainly attract some of the best and brightest people there as students, who
will be there as an employee pool, as well as people who want to live in and
around universities, so this is probably a really smart place to look to
locate.

Q: Do you see the government opening its arms to foreign
companies?

A: I actually did have the opportunities to meet
with some of the government leadership in the area, and I think they are
extremely welcoming and hoping that the world discovers Longgang to be a place
where international business will come.

Q: Can you note any foreign
company that has flourished in Shenzhen?

A: Starbucks. I suspect that every major
international company has a foothold in Shenzhen already.

Q: When do you think Shenzhen will become this new hub?

A: I think it has got miles of potential scope. It
is no secret in China, it is no secret from China watchers, and it is no secret
from the high-level global business enterprises. I think it’s hard to get
attention against Beijing and Shanghai, but I think Shenzhen is on the map.

Q: If ghost towns are built in
places as you suggest they shouldn’t have been built, do you see any remedy?

A: Some of them are going to work, some of them
will just have to decay. But the reason people want to live in cities is
because there are jobs there, and there are other reasons to be there, for
example, there are academic centers, there are health care centers. You can’t
make a city just by building high rise housing. That does not make a city. There
needs to be a reason for people to want to live there in the first place. In
the end, geography or culture, there’s got to be a driving impetus as to why a
city happens where it does.

ABOUT THE AUTHOR  Ellen Huber is the Digital Editor at The US-China Business Council and its magazine The China Business Review.