THE CHALLENGE OF THE CHALLENGE OF SUSTAINABILITYSUSTAINABILITY

IN CHINA AND THE ROLE OF IN CHINA AND THE ROLE OF THE PROFESSIONAL ADVISORTHE PROFESSIONAL ADVISOR

Margaret BrookeMargaret Brooke

Professional Property ServicesProfessional Property Services LimitedLimited

16 October 200616 October 2006

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BackgroundBackground

Sustainability in ChinaSustainability in China– EconomicEconomic– SocialSocial– EnvironmentalEnvironmental

All about managing changeAll about managing change

Case Study – ChongqingCase Study – Chongqing– 1010thth most livable city in China most livable city in China– Fastest growing municipality in ChinaFastest growing municipality in China

Chongqing MapChongqing Map

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Chongqing DemographicsChongqing Demographics

Located some 2,500 km from ShanghaiLocated some 2,500 km from ShanghaiStrategic location on the Yangtze RiverStrategic location on the Yangtze RiverPopulation – 31 million (2005)Population – 31 million (2005)Area – 82,400 square kilometresArea – 82,400 square kilometres44thth Municipal City in China (1997) Municipal City in China (1997)GDP per capita – RMB 11,000 in 2005GDP per capita – RMB 11,000 in 2005(RMB 4,450 in 1997)(RMB 4,450 in 1997)GDP grown 11.5% pa. since 1997GDP grown 11.5% pa. since 1997

ChongqingChongqing

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Old industrial centreOld industrial centre

The economic centre of SW China – The economic centre of SW China – bridge between the west and eastbridge between the west and east

Established transport – water, land and airEstablished transport – water, land and air

Since 1930’s a heavy industrial baseSince 1930’s a heavy industrial base– steel and aluminum steel and aluminum – cars and motor bikescars and motor bikes– chemicals and pharmaceuticalschemicals and pharmaceuticals– electronics and building materialselectronics and building materials

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New Infrastructure DevelopmentsNew Infrastructure Developments

The Three Gorges Dam – largest hydroelectric The Three Gorges Dam – largest hydroelectric dam in the world spanning the Yangtze – to be dam in the world spanning the Yangtze – to be completed in 2009completed in 2009Port – Chongqing is the last cargo port on the Port – Chongqing is the last cargo port on the upper reaches of the Yangtze and in the midst of upper reaches of the Yangtze and in the midst of a RMB14 million redevelopmenta RMB14 million redevelopmentHighways – 8 major new highway projects in and Highways – 8 major new highway projects in and around the cityaround the cityBridges – 8 new links across the Yangtze to Bridges – 8 new links across the Yangtze to improve connectivity improve connectivity Airport capacity being quintupled by 2010Airport capacity being quintupled by 2010

Three Gorges DamThree Gorges Dam

Bridges old and newBridges old and new

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ModernisationModernisation

New economic hub of western ChinaNew economic hub of western ChinaIntroduction of new job creation Introduction of new job creation opportunities – logistics, trade servicesopportunities – logistics, trade servicesShui On Group renovated Hualong Bridge Shui On Group renovated Hualong Bridge area and developing new Industrial Zonearea and developing new Industrial Zone137,000 sm of new floor space laid a day 137,000 sm of new floor space laid a day – residential, retail and factory– residential, retail and factory1,400 people a day arrive from the 1,400 people a day arrive from the countrysidecountryside

New riverside developmentsNew riverside developments

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Economic ChallengesEconomic Challenges

Widening gap between rich and poor, Widening gap between rich and poor, winners and loserswinners and losers

Wages and salaries rising but so also are Wages and salaries rising but so also are costscosts

Need to extend urban economic gains to Need to extend urban economic gains to the countrysidethe countryside

Problems of affordable housing, medical Problems of affordable housing, medical and education provisionand education provision

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Social ChallengesSocial Challenges

Growing competitiveness creating stress Growing competitiveness creating stress and inequalitiesand inequalities

Speed of urbanisation impacting lifestyles Speed of urbanisation impacting lifestyles and family tiesand family ties

10-25% of Chongqing residents suffer 10-25% of Chongqing residents suffer mental problemsmental problems

Divergence between aspirations v Divergence between aspirations v achievementachievement

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Environmental ChallengesEnvironmental Challenges

Cheap coal and doubling of car ownership Cheap coal and doubling of car ownership have lead to China having 16 of the dirtiest have lead to China having 16 of the dirtiest 20 cities on earth and Chongqing is 20 cities on earth and Chongqing is amongst themamongst themAir quality failed to reach a level of 2, the Air quality failed to reach a level of 2, the government health standard, on 25% of government health standard, on 25% of days in 2005days in 2005The city is trying to clean up but economic The city is trying to clean up but economic development takes prioritydevelopment takes priority

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Housing ProvisionHousing Provision

Some 16.5 million sm of residential floor Some 16.5 million sm of residential floor space provided in 2005space provided in 2005

Prices rose 8.5% during the year to Prices rose 8.5% during the year to RMB2,600 psmRMB2,600 psm

Demand largely local with over 90% of Demand largely local with over 90% of sales being to local residentssales being to local residents

Lack of affordable housing for less well off Lack of affordable housing for less well off

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Are such levels of development Are such levels of development sustainable?sustainable?

Coming from low baseComing from low base

Key driversKey drivers– Political stability and need for controlPolitical stability and need for control– Willingness to experimentWillingness to experiment– Aspirations of the peopleAspirations of the people– Export led economy to dateExport led economy to date– Regional not national economiesRegional not national economies

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What are the challenges?What are the challenges?

Political freedom v economic freedomPolitical freedom v economic freedomEnergy and resource sufficiency/efficiencyEnergy and resource sufficiency/efficiencyAging populationAging populationEnvironmental degradation (including Environmental degradation (including heritage)heritage)Rich v poorRich v poorFinancial systems reformFinancial systems reformCivil society and its value systemsCivil society and its value systems

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Can China accomplish its goals?Can China accomplish its goals?

Five balances:Five balances:– Domestic v internationalDomestic v international– Inland v coastInland v coast– Rural v urbanRural v urban– Society v economySociety v economy– Nature v manNature v man

Foreign policyForeign policy– ““peaceful rise to a great power”peaceful rise to a great power”

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What are impacts internationally of What are impacts internationally of such levels of development?such levels of development?

Increased nationalism Increased nationalism

Greater global economic competition Greater global economic competition and and opportunitiesopportunities

Intensive competition for global resourcesIntensive competition for global resources

Increased cross cultural influencesIncreased cross cultural influences

Outgoing investment will be a forceOutgoing investment will be a force

Increasing participation in international Increasing participation in international capital marketscapital markets

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What opportunities are presented – What opportunities are presented – both domestically and internationallyboth domestically and internationally??

Land use planningLand use planningOptimisation of Development – Optimisation of Development – marketability, design, efficiencymarketability, design, efficiencyAffordable housingAffordable housingProject managementProject managementProperty ManagementProperty ManagementInternational valuation standardsInternational valuation standardsEffective funding of projectsEffective funding of projects

Pudong TodayPudong Today

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Areas of OpportunityAreas of Opportunity

Land Use PlanningLand Use Planning– Developing master/action plans which are Developing master/action plans which are

both market driven and capable of deliveryboth market driven and capable of delivery– Holistic approach to implementation and Holistic approach to implementation and

managementmanagement– Obtaining community buy-inObtaining community buy-in– Flexible and responsive to changing market Flexible and responsive to changing market

circumstancescircumstances

Shenzhen Master PlanShenzhen Master Plan

Hong Kong

Built up area

Daya Bay

Dapeng Bay

Dapeng Peninsular

Shenzhen　　　　　　　　　　圳

Dong Guan

　　　　　　　　　　圳

Hui Zhou

　　　　　　　　　　圳

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Areas of OpportunityAreas of Opportunity

Optimisation of DevelopmentOptimisation of Development– Importance of project marketability and Importance of project marketability and

viabilityviability– Design, buildability and appropriate choice of Design, buildability and appropriate choice of

materialsmaterials– Reflecting aspirations of purchaser/occupier Reflecting aspirations of purchaser/occupier

but also economic and financial realitiesbut also economic and financial realities– Effectively combining uses to maximise site Effectively combining uses to maximise site

potentialpotential

Beijing ProjectsBeijing Projects

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Areas of OpportunityAreas of Opportunity

Affordable HousingAffordable Housing– Nationwide issue – ownership underpins Nationwide issue – ownership underpins

social stabilitysocial stability– Balancing market intervention and wealth Balancing market intervention and wealth

creationcreation– Need to distinguish between social and Need to distinguish between social and

financial needfinancial need– Tailor solutions to reflect local circumstancesTailor solutions to reflect local circumstances

Affordable HousingAffordable Housing

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Areas of OpportunityAreas of Opportunity

Project and Property ManagementProject and Property Management

– Address time, cost and quality issuesAddress time, cost and quality issues

– Introduce new skills and standardsIntroduce new skills and standards

– Extend life and profitability of Extend life and profitability of developmentsdevelopments

– Improve the quality of life by introducing Improve the quality of life by introducing management and maintenance management and maintenance programmesprogrammes

International ValuationInternational ValuationStandards CommitteeStandards Committee

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Areas of OpportunityAreas of Opportunity

International Valuation StandardsInternational Valuation Standards– Long term FDI programme contingent upon Long term FDI programme contingent upon

use of international standardsuse of international standards– Need for common approach which has global Need for common approach which has global

relevancerelevance– Combine nest of local knowledge with Combine nest of local knowledge with

understanding of international practiceunderstanding of international practice– Crucial in Mainland Chain’s efforts to continue Crucial in Mainland Chain’s efforts to continue

to attract FDI in futureto attract FDI in future

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ConclusionConclusion

Barring any unexpected stress within the Barring any unexpected stress within the system, current levels of development system, current levels of development should be sustainableshould be sustainable

Sustainability challenges need to be Sustainability challenges need to be recognised and addressedrecognised and addressed

Huge scope for international professionals Huge scope for international professionals to participate and assistto participate and assist

However, need to maintain focusHowever, need to maintain focus

Thank you!Thank you!

Professional Property Professional Property Services LimitedServices Limited

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