The document discusses China's growing real estate and construction sectors and efforts towards more sustainable "eco-cities". It notes that China will need to build massive amounts of new residential and commercial space to accommodate continued urbanization. While some "eco-city" projects have faced issues like unsuitable locations or being more about business than sustainability, the Chinese government is supporting initiatives to promote low-carbon cities through policies like solar energy subsidies and smart city projects. There is both opportunity and uncertainty around China's real estate market in coming decades as urbanization continues.

1. Energiatehokkuudesta liiketoimintaa
seminaari 22.5.2012
Väläys Kiinasta
Kari Hiltunen
Head of Tekes Beijing
Councelor Science and Technology

2. The year when the Chinese economy will truly eclipse America’s is in
sight

3. Pros and Cons
 Vast, rapidly growing Market  Lack of transparency
 Predictability  Severe competition
• FYP, long term strategies, Foreign • Sometimes unfair treatment for
Investment Catalogue foreign enterprises
 Technological advantage  Unpredictability
• International cooperation wanted • Implementation of legislation
 Subsidies  Public purchasing practices
• Go west policy, high-tech status • China hasn’t approved WTO’s public
purchasing agreement
 Still low cost structure
 Protectionism
 Country risk?
 IPR
 Need to scale up production fast
• Capital?

4. Real Estate and construction sector

5. Mapping & Investment
At the trend of 80% urbanization population, China's
cities will need to build 46 billion
square meters of new floor space in residential and
commercial buildings by 2030.
Construction investment for floor space would be a
cumulative 39 trillion RMB by 2030.
For the next two decades, China would need to spend
€150 billion to €200 billion a year
—on top of currently planned spending on energy
efficiency—to realize the full potential
of the technologies.
China's government is pushing for the expansion of
urban mass-transit systems, and
spending on transport infrastructure will remain robust.
Investment in urban transit will
increase between three and five times to 2030 (around
9,399 billion RMB).
Up to February 2011, there are 259 cities at
prefecture level or above proposed to adopt
ecological city development model, and
90.2% are promoting ‘eco-city’ and ‘low
carbon city’ as slogans.
Source: McKinsey

7. Real Estate Bubble?
 Pessimist: China’s housing market is a playground for nouveau
riche who buy multiple fancy homes they don’t need. Prices are too
high and speculation is rampant.
=> Clearly, the trend is unsustainable.
 Optimist: China is transitioning from a rural to an urban society. New
construction is driven by rising incomes and urbanization, and
reflects genuine demand for better housing.
=> Clearly, the boom has a long way to run.
 Dragonomics: Both views are correct.

8. Future?
 Suisse Group AG: sharp fall in property investment growth
 Demand is being artificially constrained: prices and sales will drop
• Nationwide housing sales fell -15% in Q1/12 after a -8% drop in Q4/11
• Foreign investment in the development of land, the construction and operation of
high-end hotels, villas, high-class office buildings and international exhibition
centers, as well as foreign investment in secondary real estate markets
(e.g.realestate and brokerage firms) are listed as ‘restricted’.
 The Economist: end of 2011 the residential land bank is expected to be
140.000 hectares => will take 5 to 10 years to profitably digest.
 Dragonomics: China’s urbanization drive still has at least 20 years to run.
 2030: Beijing and Shanghai have more than 50 M people
 Chinese contractors are targeting to developed market
• Slowing domestic market and political turmoil in Middle East and North Africa
• M&A, especially infrastructure projects, 2011 1-10: 76.1billion USD revenues
from international contracts

9. Incentive Policies towards low-carbon cities
- Solar Energy Roof Plan
Providing the project with subsidization.
- Renewable energy demonstration city
50-80 million RMB subsidization for each selected city.
- More than 50 Eco City project labeled by NDRC
Set criterias, monitored annually
- More than 100 Smart City projects under development
- Heat Metering and Reconstructions for Energy
Conservation of Established Buildings
- Water-saving city creation

10. Vice Minister of MOHURD : problems in eco-
city projects
 Wrong location
• Often in fragile ecological areas, Chongming Island was mentioned as an example
 Bad traffic solutions
• Lack of density, doubling the density of an area can reduce driving by more that 30
percent
 Not really eco or smart cities
• In the end of the day basic developing business
 No understanding of local culture and requirements
• South Railway Station in Shanghai was mentioned as an example
 Lack of recycling
 Too expensive technologies and solutions
• garbage collection system was mentioned as an example: expensive and consumes lot of
energy
 Bad general planning
• Housing diversity, Occupational integration,Transportation diversity
 Lack of use of local resources

11. The eco-city concept is taking
off in China,
but with mixed results

12. Eco-Valley in Mentougou, Beijing
Design Phase
• Main technology/ Specific technology related to building energy efficiency
• Recycling and reuse of urban waste water and garbage
• Using clean energy on vehicles
• Wind power generation
• Self-sufficiency on food, and adopting energy ecological cycles in all the grain fields, orchards and
vegetable gardens.

13. Eco-Valley in Mentougou, Beijing
 Villas for super rich
Construction Phase
 Selling prices starting
from 10 M USD
 Living area > 1000 sm
 Very little or nothing
to do with ecological ideas

14. But we have hope?
 Li Kegian:
“ 75% of China’s building stock should be demolished or
renovated ”
 Beijing Government Working Report 2012:
the project of reconstruction & renovation simple & old buildings in Beijing
will start from the first phase of reconstruction 882 buildings with total area
of 15 million square meters and more than 1 million families being
involved. The government will finance 15 billion RMB to the project.
 The first demo renovation project has been carried out at Xinyuanli
community in Chaoyang district in April 2012.

15. "Nothing is easy
but
everything is possible in
China"