A buyer has emerged for part of an elaborate office complex built by the Chengdu city government. But controversy continues
Li Weiao, Caijing 27 December 2008
After five months of waiting, Chengdu government officials have received their first offer for a new luxury headquarters that, under mounting pressure, went on the block even before most agencies moved in.
China Minsheng Bank offered in November to pay about 360 million yuan for one of seven buildings on the architecturally dramatic campus of the Chengdu Municipal Administrative Center. The building would become a new bank branch.
Caijing has learned that Minsheng is one of several major financial institutions approached by city officials scrambling to sell buildings on the campus, which was completed last winter after three years of construction and an estimated 2.5 billion yuan.
The project was controversial from the start, not only for what critics said was extravagant spending but also because the city government failed to seek budgetary support from the local branch of China’s legislature, the National People’s Congress.
Officials in Chengdu, the capital of Sichuan Province, managed to sidestep the controversy for years – until critics grew too loud to ignore after a May earthquake hit the province, reducing whole cities to rubble and killing tens of thousands.
Government officials announced plans to sell the complex in July, even while some city agencies were in the process of moving into new offices, and use the proceeds for quake rebuilding.
What the government may not have expected, however, was that debates over the complex would continue.
Elaborate Plans
The campus, also known as Xinxi City Square, is in the city’s south, about 8 kilometers from the old municipal center. It was envisioned as a centerpiece of the government’s urban strategy for developing eastern and southern Chengdu.
Built on 17 hectares, it includes buildings that resemble the Bird’s Nest built in Beijing for the 2008 Olympics. It also has an oval structure similar to Beijing’s newly built National Center for the Performing Arts; both were designed by French architect Paul Andrew. The project began in 2006 with construction of two residential compounds for senior and mid-level government officials.
The buildings are worth more than 2.5 billion yuan combined, according to a notice issued by Chengdu Xingnan Investment Co. Ltd., a company formed to promote development of the city’s southern district.
The Chengdu government applied for approval from the city’s Development and Planning Commission, but never informed the legislature. “We know nothing about it,” said Ran Yunfei, a People’s Congress member.
Ran said the project proceeded without a legislative vote or review. Moreover, the project began without an endorsement from China’s cabinet, the State Council.
Government workers started moving in last March. By the time the quake hit May 12, more than 60 agencies had settled into eloquent surroundings.
‘For Sale’ Sign
At a government press conference July 16, officials announced that the office center would be sold to raise money for reconstruction in quake areas. Most city staffers were told to stay in their old offices.
“The pressing need to raise funds to provide housing for people left homeless by the quake, and the reconstruction of quake-hit areas, left a big dent in the local government’s finances,” He Huanzhang, head of the city’s publicity department, told reporters. All sale proceeds, he added, would go toward quake rebuilding.
Local speculation was that several banks including the China Development Bank, China Citic Bank, China Merchants Bank and Chengdu Bank would buy some of the buildings.
Executives at these banks told Caijing they have no such plans. But Caijing learned city leaders have contacted several financial institutions, and that negotiations were held behind the scenes.
“Over the past few months, Deputy Mayor Sun Ping met the leaders of several financial institutions, including the People’s Bank of China and the China Banking Regulatory Commission, and tried to convince them that the (government office) center could be converted into the city’s financial center,” a source told Caijing.
Xiong Jincheng, president of Minsheng Bank’s Chengdu branch, has refused to comment on the motivation for the deal. A contract for the 36,000 square meters of Building No. 6 has yet to be signed.
Minsheng’s decision was unexpected, since the bank earlier this year finished moving into 13,000 square meters on six floors of the Hui Ri Yang Guo International Plaza, a premier office site in a busy downtown area.
The bank’s offer to the city of 10,000 yuan per square meter was much higher than area’s averages of 6,000 yuan per square meter for residential buildings and 8,000 yuan per square meter for office space. Moreover, other facilities and infrastructure have yet to be completed; a subway line won’t reach the area for at least two years.
Still Under Fire
Despite the government’s good intentions, the decision to sell the headquarters for earthquake reconstruction is now as controversial as its decision to build it. One reason is that the unfinished move has already cost a huge sum. According to a government contractor handling the task, Chengdu Ants Logistics Co., the process of moving in and back has already cost the city about 1 million yuan.
The decision also sent real estate prices tumbling in the southern part of the city. A side-effect will be less land-sale revenue for the government, which expects property devaluation in the area to cost more than 400 million yuan.
Coupled with the government’s ambitious urban expansion plan, the real estate market had boomed in the south until last year. Between 2004 and ‘07, land prices increased six-fold.
The Chengdu government has released no official news about the project since July. But the Minsheng deal came to light after the bank’s directors voted 17-1 in favor of the purchase at a November 3 meeting. The bank said it needed more space because the just-finished headquarters is not big enough.
The only director to vote against the deal, Wang Yugui, said the current office is sufficient. “Any additional purchase will be superfluous,” he said.
Some government agencies may remain in the complex. So far the city’s health, technology and agricultural agencies, as well as the local chapters of the Chinese People’s Political Consultative Conference and the Community Party’s Disciplinary Commission, are staying.
Caijing learned that two new buildings adjacent to the center are nearly finished. The developer, Chengdu Xingcheng Investment Co., said the standard, square buildings will house government offices starting in June.
But another move may be on the drawing board. According to local rumors, the government has marked out another plot in the southern district for a future administrative center. However, Caijing was unable to find such a project mentioned on public postings of the Chengdu Planning Bureau.
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Can Banks Save Chengdu’s White Elephant?
A buyer has emerged for part of an elaborate office complex built by the Chengdu city government. But controversy continues
Li Weiao, Caijing
27 December 2008
After five months of waiting, Chengdu government officials have received their first offer for a new luxury headquarters that, under mounting pressure, went on the block even before most agencies moved in.
China Minsheng Bank offered in November to pay about 360 million yuan for one of seven buildings on the architecturally dramatic campus of the Chengdu Municipal Administrative Center. The building would become a new bank branch.
Caijing has learned that Minsheng is one of several major financial institutions approached by city officials scrambling to sell buildings on the campus, which was completed last winter after three years of construction and an estimated 2.5 billion yuan.
The project was controversial from the start, not only for what critics said was extravagant spending but also because the city government failed to seek budgetary support from the local branch of China’s legislature, the National People’s Congress.
Officials in Chengdu, the capital of Sichuan Province, managed to sidestep the controversy for years – until critics grew too loud to ignore after a May earthquake hit the province, reducing whole cities to rubble and killing tens of thousands.
Government officials announced plans to sell the complex in July, even while some city agencies were in the process of moving into new offices, and use the proceeds for quake rebuilding.
What the government may not have expected, however, was that debates over the complex would continue.
Elaborate Plans
The campus, also known as Xinxi City Square, is in the city’s south, about 8 kilometers from the old municipal center. It was envisioned as a centerpiece of the government’s urban strategy for developing eastern and southern Chengdu.
Built on 17 hectares, it includes buildings that resemble the Bird’s Nest built in Beijing for the 2008 Olympics. It also has an oval structure similar to Beijing’s newly built National Center for the Performing Arts; both were designed by French architect Paul Andrew. The project began in 2006 with construction of two residential compounds for senior and mid-level government officials.
The buildings are worth more than 2.5 billion yuan combined, according to a notice issued by Chengdu Xingnan Investment Co. Ltd., a company formed to promote development of the city’s southern district.
The Chengdu government applied for approval from the city’s Development and Planning Commission, but never informed the legislature. “We know nothing about it,” said Ran Yunfei, a People’s Congress member.
Ran said the project proceeded without a legislative vote or review. Moreover, the project began without an endorsement from China’s cabinet, the State Council.
Government workers started moving in last March. By the time the quake hit May 12, more than 60 agencies had settled into eloquent surroundings.
‘For Sale’ Sign
At a government press conference July 16, officials announced that the office center would be sold to raise money for reconstruction in quake areas. Most city staffers were told to stay in their old offices.
“The pressing need to raise funds to provide housing for people left homeless by the quake, and the reconstruction of quake-hit areas, left a big dent in the local government’s finances,” He Huanzhang, head of the city’s publicity department, told reporters. All sale proceeds, he added, would go toward quake rebuilding.
Local speculation was that several banks including the China Development Bank, China Citic Bank, China Merchants Bank and Chengdu Bank would buy some of the buildings.
Executives at these banks told Caijing they have no such plans. But Caijing learned city leaders have contacted several financial institutions, and that negotiations were held behind the scenes.
“Over the past few months, Deputy Mayor Sun Ping met the leaders of several financial institutions, including the People’s Bank of China and the China Banking Regulatory Commission, and tried to convince them that the (government office) center could be converted into the city’s financial center,” a source told Caijing.
Xiong Jincheng, president of Minsheng Bank’s Chengdu branch, has refused to comment on the motivation for the deal. A contract for the 36,000 square meters of Building No. 6 has yet to be signed.
Minsheng’s decision was unexpected, since the bank earlier this year finished moving into 13,000 square meters on six floors of the Hui Ri Yang Guo International Plaza, a premier office site in a busy downtown area.
The bank’s offer to the city of 10,000 yuan per square meter was much higher than area’s averages of 6,000 yuan per square meter for residential buildings and 8,000 yuan per square meter for office space. Moreover, other facilities and infrastructure have yet to be completed; a subway line won’t reach the area for at least two years.
Still Under Fire
Despite the government’s good intentions, the decision to sell the headquarters for earthquake reconstruction is now as controversial as its decision to build it. One reason is that the unfinished move has already cost a huge sum. According to a government contractor handling the task, Chengdu Ants Logistics Co., the process of moving in and back has already cost the city about 1 million yuan.
The decision also sent real estate prices tumbling in the southern part of the city. A side-effect will be less land-sale revenue for the government, which expects property devaluation in the area to cost more than 400 million yuan.
Coupled with the government’s ambitious urban expansion plan, the real estate market had boomed in the south until last year. Between 2004 and ‘07, land prices increased six-fold.
The Chengdu government has released no official news about the project since July. But the Minsheng deal came to light after the bank’s directors voted 17-1 in favor of the purchase at a November 3 meeting. The bank said it needed more space because the just-finished headquarters is not big enough.
The only director to vote against the deal, Wang Yugui, said the current office is sufficient. “Any additional purchase will be superfluous,” he said.
Some government agencies may remain in the complex. So far the city’s health, technology and agricultural agencies, as well as the local chapters of the Chinese People’s Political Consultative Conference and the Community Party’s Disciplinary Commission, are staying.
Caijing learned that two new buildings adjacent to the center are nearly finished. The developer, Chengdu Xingcheng Investment Co., said the standard, square buildings will house government offices starting in June.
But another move may be on the drawing board. According to local rumors, the government has marked out another plot in the southern district for a future administrative center. However, Caijing was unable to find such a project mentioned on public postings of the Chengdu Planning Bureau.
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