This article was originally published by CEIBS Business Review in Chinese. Oasis is authorized to translate and publish the content on its platform. The translation, done by Yuqian Shi, has been edited for brevity and clarity.
Chinese real estate tycoon Feng Lun is one of the founding partners of Pinqi Partners, a real estate asset management platform launched in 2020. Previously, Feng served as chairman of Beijing Vantone Real Estate from 1991 to 2014, one of China’s biggest real estate conglomerates.
In this interview with CEIBS Business Review, Feng shared his thoughts on how developers should leverage technology to survive a “post-development phase” of the real estate industry, characterized by a more stable demand but slower growth.
CEIBS Business Review (CBR): You said in an interview that one problem facing older generations of entrepreneurs is not how to start, but how to end. I wonder if you are planning a “coming-back” with the founding of Pinqi Partners?
Feng Lun (FL): Entrepreneurs have to deal with challenges arising from market changes all the time. In response to the current challenges, we established Pinqi Partners [Pinqi Partners holds an annual conference to discuss how technologies like big data, cloud computing, and AI can contribute to real estate operation and management.]
Real estate in China has entered a post-development phase that will last until our GDP per capita reaches USD 60,000 to USD 70,000. In the meantime, what to do, how to do it, and with whom to do it are the questions we have been exploring over the past three to four years.
There is an urgent need for real estate players to reach the following consensus:
First, we should phase out the practices at the early development stage of the industry. For example, the government is no longer in favor of buying land to construct buildings and selling them quickly.
Second, more focus should be put on operations and asset management. We used to compete to see who gets a larger land to develop without paying much attention to the content and quality constructions. The primary concern now has become how to wisely operate a limited space to boost its value to punch above its weight.
Third, technology plays a disruptive role in all aspects of the construction process. It improves operational efficiency, draws in more customers, and helps to build smart home systems. For traditional real estate developers, the game-changing technology may come from home appliance developers and automobile enterprises. Meanwhile, emerging technologies also come with challenges, which should be taken seriously.
Lastly, no company can be versatile enough to cover all markets in this post-development phase of the real estate industry. Focusing on specific segments will be the key to leading the competition. For instance, you cannot target both health care construction, logistics, and warehousing. Nowadays, specialization outperforms generalization.
CBR: As an entrepreneur, how do you view the business environment in China today?
FL: From my point of view as a private entrepreneur, the overall business climate in China, not only the real estate sector, is getting more and more positive. There are several positive signs:
The first sign is legislative improvements. When I started my business in 1991, there were no commercial laws in China. Then came the Company Law in 1993. As of 2020, there have been 300 relevant laws and regulations maintaining the order of doing business in all sectors in China.
Another sign is technological progress. In any industry, proper use of the internet, cloud computing, and big data will make it easier to reach clients and customers at a lower cost and make it possible to upgrade their services to a higher level. These seemed unattainable in the past. Technology also helps ensure a fair playing field for all by reducing the cost of communication with clients to almost zero.
In addition, there is now a favorable entrepreneurial environment. If I compare starting a new business to having a new baby, today, you can sign up for training as early as the preparation stage. After the “baby” is born, “postpartum care services” can take care of you. As the “baby” grows up, it receives adequate “education” from early childhood all the way to college. Similarly, you have a wealth of learning resources to start up your own business today. The support and assistance provided by entrepreneurship hubs, business schools, and the government have significantly contributed to the emergence of legendary entrepreneurs from Jack Ma to Zhang Yiming.
CBR: But I wonder how you feel about this generation of entrepreneurs you just mentioned. Do you feel a little jealous of them?
FL: Speaking of Jack Ma and Zhang Yiming, I’m not jealous of their generation. Each generation of entrepreneurs has different things to do as time changes. When an entrepreneur turns 50, it’s time to cede the stage to the younger generation.
At this point, there usually are three choices in front of you. The first is to transform your business, either by selling your shares or adopting innovations. Bankruptcy, of course, is also a possibility. The second option is to find a successor.
The last option is to engage in charity work, which is what I have been doing for over 20 years. I have set up 22 charitable foundations. In the meantime, I enjoy sharing my insights and experience with others, hoping that they will find them useful for developing their own businesses. I consider expressing my insights also a form of charity. This is something I can keep doing until I am too old to do it.
CBR: Would you become an entrepreneur like Zhang Yiming [founder of ByteDance] if you were born in the same generation?
FL: Even if Zhang Yiming and I were of the same generation, I would never become someone like him. The reason lies in three differences between them and I. First, I am not a tech geek who excels in writing codes. Second, entrepreneurs like Zhang have businessmen in their families. Third, many of them have worked for foreign companies and started from innovating products or developing software. Unlike them, I come from an arts background. I would never even dream of writing codes.
On the other hand, throughout my career as a real estate developer, I have learned how to utilize social resources and integrate political and business relationships. My educational background in humanities, history, law, and politics gave me an ‘observation perspective’ towards things around me. I feel I’m both the actor and the audience—sometimes I dive in and play, sometimes I jump out and look at myself. It is my instinct to live life passionately; at the same time, I constantly retreat to think logically.