Chinese property tycoon Tu Haiming transplanted part of the Czech Republic to Shanghai by building a Czech quarter with typical apartments, villas, a shopping center and hotel. Tu, who has visited the Czech capital 51 times over nine years, is now looking to invest in Prague, with plans to buy up an old hotel, renovate it and open for business. He is one of the swelling ranks of private Chinese investors who are following where the state once led the way and investing abroad.
Fifty-year-old Tu is one of China’s most significant businessmen. His company Shanghai Hodoor International Limited is primarily a property developer. Hurun Report, which is the Chinese equivalent of Forbes’ ranking of the rich, estimated his wealth at $250 million and a position of 861 in China’s wealth ladder. It’s said that he was the first Chinese businessman to own a Rolls-Royce at the start of the 1990s. He is also a famous philanthropist.
The Czech quarter covers around 20 hectares and houses more than 10,000 people. Tu’s biggest development project dates from 16 years ago and houses 30,000 people.
Q: Why are you considering Prague for investment now. Can you give some more concrete details about your plans?
I took part in a short forum organized by the Czech-Chinese trade association. And it was then that I had the inspiration for the project. When you want to invest somewhere, you must first like the place. That is an important preliminary. Then you must get this place under your skin. That was the reason I was in Prague so much; I am now in that second phase. Many people have asked me why, after building a successful project in Shanghai with Czech architects, I did not turn things around and invest in Prague. Personally, I have enough money which I have earned from realty projects and I want to do things that have some sense. The Prague project falls into that category. I think, however, that the decision to invest must be preceded by quite a long process of getting used to things.
Q: Why? Do you expect problems?
‘They could, for example, ask that certain transactions are carried out under the table.’
So far in the Czech Republic I have only had good experiences. But I know that if I invested here I would come across lots of problems, for example, with the administration. They could, for example, ask that certain transactions be carried out under the table.
Nine years ago, when I started building the Czech quarter in Shanghai, I had to take out officials there for supper every day. There was not a single day when I did not get back late at night. That is not necessary now in Shanghai. If you do business in the Czech Republic is it necessary to take officials out to supper? I don’t know. In China there are many firms like my own. When they decide to expand abroad they usually opt for the US, France or Germany.
Q: Will your Prague project be as ambitious as that of the Czech quarter in Shanghai?
In China the rule is that when you build a new district, the bigger it is, the more successful it is. The government is ready to invest in infrastructure for bigger projects, build schools or the subway. In the Czech Republic, the same does not hold true. I came a lot to Prague in the past due to the Shanghai project. Because I like coming here a lot, I had to find another reason for that. It’s clear to me that to do something like the Czech quarter in Shanghai would be too complicated. I want to take a simpler approach. I am considering buying some older hotel. I would reconstruct and modernize it.
Q: But Prague hotels right now are not enjoying the best of times?
It’s a problem. The financial crisis in the eurozone is influencing the tourism sector. I think that the situation will get worse. I used to stay in the Hotel Intercontinental. In the past it was sometimes almost impossible to reserve a room. Now it seems that there are a lot of vacant rooms. If you invest in hotels now in Prague it’s clear that you will not get a return for some time. I am hoping though that the Czech economy improves and realty prices go up.
Q: Now is a good time to invest in realty. Have you got clearly defined criteria that you want fulfilled?
I have already worked with the architect Karel Doubner (the co-author of the Czech quarter project) for more than eight years. I have a lot of plans which we have discussed. The Prague project should fulfill three conditions. I want the approval procedures to be as simple as possible. Secondly, I want the project to get the support of the city council. And I also want the annual return on the investment to be around 6.0 percent. These are the basic criteria for selecting the project.
Q: Are you looking just around Prague or also in the regions?
When you consider investing in China, the choice mostly comes down to the big cities, Beijing or Shanghai. The same logic applies in the Czech Republic. The first choice is Prague. That intention would only change if city hall did not support the project or came out against it and, on the other hand, some other regional authority expressed their support.
Q: You are an exception among Chinese investors, most of them in Central Europe prefer to invest in Hungary. There is a branch of the Bank of China in Budapest and at the end of last year there was a lawyer’s office with a Chinese shareholding in it. Why did you choose the Czech Republic?
A lot of Chinese investments are by the state and have to fit in with government strategy. Often they do not choose projects which require immediate returns. I am thinking here about financial services or building highways. There are also a lot of businessmen - small businessmen. They are not investors and I don’t belong to that category either.