Quantum leap

Evergrande to invest Rmb100 billion in tech space


Xu Jiayin: taking to the skies

Starbucks irked some of its customers in 2011 when it expunged its name and the word “coffee” from its logo. The rebranding was aimed at giving the coffee retailer more flexibility to push into new business areas such as groceries.

Some of the biggest Chinese property firms have also been changing their names as they try to expand beyond bricks and mortar. Hong Kong-listed stocks Agile, Longfor and Times all dropped “property” from their company names last year, for instance. Such “depropertisation”, as the 21CN Business Herald puts it, underlines a trend that has seen the real estate giants operating not only as developers but also competing in new markets such as logistics, tourism, medical services and care for the elderly.

Vanke, a developer which has cemented its reputation as a provider of “good houses and good communities” since its inception in 1984, has undergone a makeover too.

In its 2017 financial results presentation last month – where it reported 45% growth in home sales to Rmb530 billion ($84 billion) – Vanke said it was repositioning into “urban and rural development” and as a “living services provider”.

“It is very clear the era of runaway home prices and large shortages has ended in China,” Vanke’s chairman Yu Liang told analysts.

Yu added that Vanke will move away from a focus on high sales volumes in this “new era” for the residential market, and concentrate more on “customer experience”.

Perhaps Yu’s remarks were designed to resonate with policy directives from the central government: these demand China’s economic growth focus more on the ‘quality’ of the GDP added rather than the percentage rate alone.

But when it comes to riding on the policy tailwinds, few have done it better than Evergrande’s chairman Xu Jiayin.

Xu changed his company’s name from Guangzhou Evergrande Properties to China Evergrande Group two years ago. Its hefty investment in football, including a team under the Evergrande brand and heavy spending on soccer youth academies, has been seen as a response to Xi Jinping’s dreams of turning China into a football powerhouse. Evergrande has also expanded into cinema chains and movie production. And in February it reinforced its ambition to be a flag bearer for the nation’s much-desired ‘soft power’ through a partnership with China Film Group for a domestic format to rival the imported widescreen technology, IMAX (see WiC401).

Evergrande is not done with diversification yet. Late last month Xu announced another new dawn for his firm: he aligned it with government ambitions to transform China into a global leader in tech.

Xu told reporters that Evergrande would invest large sums in industries such as aerospace, quantum technology and artificial intelligence.

And last week there was news of the first deal: the property heavyweight will cooperate with the Chinese Academy of Sciences in investing Rmb100 billion in three ‘advanced science’ hubs. “The three bases will provide world-class facilities and support for scientists and we will make them world-class innovation centres, and a hub for global top scientists,” Xu promised.

As the South China Morning Post has pointed out, Xu likes to trumpet his love of his country. Last year he gave a speech in which he recalled his humble childhood and said that without state aid, he wouldn’t have finished his studies.“Everything Evergrande has today, it owes to the Party and the state. I say this from deep within my heart,” he vowed.

Of course, the science hubs may turn out to be property developments in a different guise. 21CN has also noted that most of the new businesses launched by other property firms are lossmaking or, at best, make minimal contributions to their core businesses.

Others wonder whether the property tycoons have the expertise to run their diversifying empires. A potential precedent for Evergrande’s Xu is Wanda property boss Wang Jianlin, who promised two years ago that his new division Wanda Tech would soon earn Rmb10 billion a year in profit, only to shut the tech unit in January (see WiC394).

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