Rain in Spain

Owned by Dalian Wanda (for now)

Construction standards are just not what they used to be in Spain. When the Romans occupied the Iberian peninsula in the first century AD they built a 15-kilometre aqueduct in Segovia that was still in use 18 centuries later. Standing the test of time is not something that can be said of one of the country’s greatest 20th century monuments, the Edificio España in Madrid.

The 25-storey landmark was built in 1953 as a showpiece for Franco’s Nationalist regime. China’s Dalian Wanda now owns the building, which has stood unoccupied for several years and latterly become a symbol of Spain’s devastating real estate market crash.

Wanda had planned to refurbish it into a hotel and residential complex. However, when its engineer, Ignacio Fernandez, discovered the construction materials had a lifespan of just 70 years, he argued that the plan was not feasible as future renovation might cause it to collapse. Wanda then suggested tearing down the edifice and rebuilding it brick-by-brick according to the original design. The local heritage committee threw the proposal out too. And a few weeks ago, Spanish newspapers reported that Wanda was shutting down its Spanish office and hiring agents to sell the iconic high-rise.

Spain’s social media users were not impressed, according to NetEase, which says a “firestorm” of protest has engulfed Madrid’s new mayor Manuela Carmena. Wanda’s boss Wang Jianlin then appeared to add fuel to the flames by suggesting the Madrid city government had treated him like a dog (Wanda subsequently denied he had ever made the remarks to a Chinese reporter).

According to Spanish newspaper, El Pais, Mayor Carmena hastily convened a press conference to “reassure” those concerned about the project’s demise. She claimed Wanda wasn’t at the briefing because it was still negotiating with the government. However, one day later she was forced to admit she had not actually met anyone from the Chinese company and was ploughing ahead in the absence of any feedback from Wanda.

NetEase believes Wanda’s problems could be the result of political infighting after the new mayor committed herself to scrutinising projects approved by her predecessor. It speculates the local government will back down, but wonders whether Wanda still wants to proceed with the project.

Recent comments from Wang suggest he always knew it would be a long game. Back in October he had been asked about the cultural and legal problems Wanda faces as it tries to expand in Europe and the US. Using the Edificio España as an example, Wang said the project has been on hold because of a campaign emanating from Madrid. “It’s a perfect example of what Western freedom can lead to,” he remarked. “Anyone can express their viewpoint and gather web signatures in protest.” He concluded the best solution was to hire a PR firm, or a team of lawyers, and simply wait it out.

The group must be hoping it does not run into similar problems in India where it has just signed a deal to build a $10 billion industrial park in the state of Haryana, close to New Delhi as well as to the city of Gurgaon, famous as a business process outsourcing centre.

(The Indian government has also signed deals with China Fortune Land Development for an industrial town project and with ZTE Corp to build smart cities.)

Wanda’s investment represents China’s largest FDI in India to date. As India’s Financial Express points out, this is a remarkable turnaround. Chinese firms had only invested $1.2 billion in India between 2000 and September 2015, less than the Cayman Islands’ $1.23 billion. The newspaper says it is early days, but believes China may soon rival the US ($14 billion over the same period) and Japan ($19 billion) for FDI and may even prompt the two countries to settle their border issues. The Times of India agrees and says the drought is turning into a deluge, with Chinese companies keen to take advantage of India’s stronger growth prospects.

China’s CBN is more circumspect. While acknowledging the government’s increasing enthusiasm for India as part of the One Belt One Road project, it wonders whether individual Chinese investors will feel the same way given their previous preference for developed markets in the West.

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