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204 36 A Conversation with C. Y. Leung, Director of Jones Lang Wooten (Hong Kong)1 August 31, 1988 ZRJ: Shanghai has started a pilot program for paid acquisitions of land usage rights, or you might call it land leasing. Mr. Leung, what impressions do you have of Shanghai’s trials in this area? And how are they viewed outside China? CYL: The significance of reforms of the land–usage system lies not only in increased fiscal revenues. More important, they embody the degree of reforms and opening up. Many people abroad have taken notice of the plot of land in Hongqiao that Shanghai has just leased out: it is the first piece of land in China where usage rights have been acquired by foreign investors through market means. Many people are saying that Shanghai has taken the first step in leasing land, and this is an indication both of its determination to reform and open up and of the improvement in its investment environment. Compared with cities in the interior, Shanghai has done quite well in taking land development seriously, in tangible construction and in the “seven connections and one leveling.”2 However, Shanghai is also doing more comprehensive work and developing more quickly than other cities in intangibles, that is, in “soft” conditions, including policies, laws, bidding documents, market publicity, and auction organization. This shows that there is a lot of talent in Shanghai so that when things are done, they are done quite properly. These “soft” conditions are very important to people in other countries. I believe that if future work is well organized, land prices in Shanghai will continue to rise. This is the assessment of those of us in the real estate profession. Jones Lang Wooten of Hong Kong has branches in over 40 places around the world. Now our offices in the United States, Europe, and Australia are all 1. To meet the needs of reform and opening up, China began in the mid- to late 1980s to borrow from the experiences of Hong Kong and other places in land leasing, and to do trial explorations of paid land usage of state-owned land. At that time, C. Y. Leung was appointed adviser to Shanghai’s leading group on reform of the land-use system. 2. The “seven connections and one leveling” referred at that time to connections for water, power, gas, communications, rainwater drainage, sewers, and roads, and to the leveling of sites. Zhu_Shanghai Years_1987-1991_hc_9780815731399_i-xii_1-620.indd 204 12/26/17 12:00 PM A Conversation with C. Y. Leung, Director of Jones Lang Wooten (Hong Kong) 205 asking about land leasing in Shanghai. The banking, legal, and real estate sectors abroad are all paying a lot of attention to Shanghai. You received six bids for your first piece of land—that’s quite a few. We’ve had over 40 auctions in Hong Kong this year, and on average there are only three to four bids each time. Overall, your land price can also be considered reasonable, though it was higher than most people expected. Many people felt in particular that Shanghai has already acquired a definite amount of know-how in land transfers: they thought your bidding papers and documents were quite rigorously written and understandable. This shows that Shanghai has gotten off to a good start in its land-leasing pilot program, and its significance already goes beyond that of the program itself. ZRJ: When he met with me, Mr. Hu Fa Kuang3 of Hong Kong asked, “Was the price of that land in Hongqiao really US$28 million? Were you colluding with the buyer?” I told him that price was reached through competitive bidding. CYL: There were also various comments about this in the Hong Kong papers. Losing bidders or those who might bid in the future all hope to keep current land prices low. I think that as long as open market means are used to lease out land, market price levels will find themselves after a while and the market’s credibility will be even better. ZRJ: We want to step up our reforms of the land-usage system. Mr. Leung, what suggestions and ideas do you have for Shanghai in this regard? CYL: Compensation for land usage is the broad trend. At present, enterprises in China don’t factor real estate expenses into their production costs. This doesn’t reflect the value of land resources. It creates unequal competition as well as wastage of...


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