Hong Kong Tycoon Does Little Business in Israel but Loves It Just the Same

Yes, Ronnie Chan is impressed by the high-tech prowess — so much so that he’s sure Chinese firms will open development centers here a la Intel, IBM, Microsoft and Google.

Bloomberg

When real-estate mogul Ronnie Chan, one of Hong Kong’s richest people, walked into the room where he would be interviewed, he asked everyone how they were doing. His personal approach was evident throughout the talk – telling jokes, holding the interview standing up, noting that he had gotten little sleep, providing friendly pats on the back and even offering romantic advice.

He’s a constant visitor to the country, even though he has no significant dealings here. He’s highly impressed by Israelis’ entrepreneurship, creativity and technology. This time he arrived to receive an honorary doctorate from Tel Aviv University as part of the board of trustees’ annual meeting. He visited for the first time in 1975.

“Oh, much has changed,” Chan says. “Tel Aviv had no high-rise buildings at all. I remember staying in a cheap hotel by the sea. Imagine today how much that property is worth,” he says, adding with a smile: “Once a real estate developer, forever a real estate developer.”

Chan is the chairman of the Hang Lung Group, a family-owned batch of real-estate firms, and Hang Lung Properties, which also owns shares in Chinese smartphone maker Xiaomi. Like many Chinese companies in that industry such as Lenovo, Xiaomi is expected to tackle Western markets. In the meantime, it grabbed 10% of the Chinese smartphone market in the first quarter of 2014, according to research firm Canalys.

Chan introduces himself as a devoted follower of Israel. He’s not afraid to admit that he’s in love with the country and serves as its ambassador to Chinese businessman. When we mention Israelis’ fears about Chinese investors taking over prized companies, his friendly tone changes. Israel simply can’t afford to forgo business with the giant of the east.

He urges friends from China and Hong Kong to put money in Israel, but his explanation for why he doesn’t do the same is simple: He never invests in cities with fewer than 6 million inhabitants. Unsurprisingly, high-tech is the Israeli industry where Chinese businessmen are showing the most interest.

“My friends are very interested in Israel. Why? Because it’s so successful in technology. My friends, they line up to come with me to Israel because they want to know how the hell you guys did so well in technology. So I’m bringing them to Tel Aviv University. I told the president, Yossi Klafter, Israel is a startup nation,” Chan says.

“What is the capital of the startup nation? Not politically. Entrepreneurship, creativity, technology — it’s Tel Aviv. I was in Jerusalem a few days ago and one of the top technologists was complaining to me: ‘We have to bring more to Jerusalem’ — because it’s all in Tel Aviv. And what is the seat of government of the startup nation? It’s Tel Aviv University.”

Chan, a graduate of the University of Southern California, points to his gold cuff links that bear the USC logo. He says the university is a leading place to study engineering, law and business, but also the arts and cinema.

The Chinese are coming

In recent years, Chan has taken part in several delegations of Chinese and Hong Kong businessmen to Israel. One group included Yang Yuanqing, the CEO of computer maker Lenovo. Chan says the best advice he can give the Chinese is to get to know Israel from up close, and since so many officials have never visited the place, they all want to come here with him.

He recalls how he brought officials from China’s largest food company, serving a market of 1.36 billion people, to Israel, as well as Yuanquing, who had never been here even though he had an office here. On tours to Israel, Chan takes his colleagues to the Negev, Masada, the Dead Sea, Yad Vashem and the Israel Museum.

Does Chan believe that Chinese companies will open development centers in Israel, as Intel, IBM, Microsoft, Google and others have done? “They’re already doing it,” he says. “You bet they will come.” But Chan makes clear that Israel can’t be compared to China.

“You guys are a small country physically and population-wise. You’re not a continental economy. There are only two continental economies in the world today, and only four countries with the chance to become continental economies today — meaning you have upstream, midstream, downstream, both the vertical and horizontal. Not necessarily self-sufficient, but at least that you have enough. The United States is by far the number one. The only other in the world today is China,” he says.

“There is no number three in sight. India, possible, but they’re still backward. Indonesia, still backward. Russia, one-industry state. Brazil, still too natural-resource concentrated .... You cannot think about China the way you think about Israel, just like I cannot think of myself vis-a-vis [retired Houston Rockets center] Yao Ming, Kobe Bryant, LeBron James. By virtue of size, you are a niche player. Play to your strengths. Don’t try to be everything to everybody.”

Can the Israeli government afford to be afraid of Israeli companies such as food maker Tnuva being bought by Chinese companies?

“You know, [first Prime Minister David] Ben-Gurion was right about China. You cannot ignore a big country like that. China, historically, is exactly like Israel. Historically, China never became aggressive to its neighbors. Historically, never — nor today. Only when attacked, then they have no choice. Israel has never tried to take land from its neighbors — only when you’re attacked. China, the same. But I would say that China is more amazing, because Israel is small. You have 7 million people.

“But China is a big country. But because of the deep-rooted Confucianism, China never tried to expand. No need. That’s why they call themselves China, the Middle Kingdom. We’re the center of the universe — they thought. Why do we need anybody? So China is a very peaceful country. But at the same time, don’t try to make China an enemy. Just like I advise your neighbors: Don’t try to make Israel an enemy. It’s bad for your health. Take Iran, for example.”

Green grow the skyscrapers

Chan’s real-estate program, which invests mainly in Hong Kong and China, focuses on the environment — for both environmental and business reasons.

He notes that Hong Kong is a small real-estate market in terms of price per square meter, while China is an enormous market that has greatly developed over the past 20 years. He says the potential is still huge. “If I worried about the bubble, I shouldn’t be in real estate,” he adds. “Bubbles are wonderful if you do the right thing.”

So what’s the right thing?

“Buy when the price is low and sell when the price is high – just like in everything else. For the last 10 years, every one of my projects in mainland China has received the LEED gold standard: The U.S. Green Building Council has a standard, Leadership in Energy and Environmental Design. Our buildings have received the gold standard, the second highest.

“As commercial buildings, we have to balance functionality and aesthetics, so we aim for the gold standard – and every one of my projects has met the gold standard. I suspect – and it’s not just one building, this is $12 billion worth – we are the only real estate company that has achieved that. And right now I’m completing a residential building in Hong Kong. That project is the first – and so the only – residential building in the world that has received the LEED gold standard.”

Does that stem from environmental responsibility?

“That and practical considerations. Let me put it this way. China has been developing very, very fast over the last 30 years. In the process, they polluted the water and the air. Is that sustainable? No, that’s not sustainable. Do the top leaders know it? They know it very, very well. In fact, they are far more environmentally conscious, I can argue, than the United States government. But they have practical economic constraints and social constraints, so they cannot do everything they want to bring down pollution.

“They are doing their best. So what will happen? As the economy progresses, they will increasingly be affluent and hence able to deal with environmental issues. Sooner or later the government is going to come to all the owners of commercial property. They’re going to come to you and say you must meet minimum environmental standards. That’s the government pressing down.

“Many of our tenants — IBM, Microsoft, General Electric, KPMG, etc. — their boards made a decision, everywhere we go, we must be environmentally conscious. So we cannot rent buildings that do not meet certain environmental standards. So my tenants are going to squeeze me from below and the government will squeeze me from above.”

Real capitalism in China

Chan has firm opinions about addressing inequality in China – a division of wealth, but under conditions set by the owners of that wealth, such as keeping taxes low and prudent regulation.

“First of all, there are three possibilities: everybody wealthy, some wealthy some not wealthy, everybody poor. Which one do you want? Of course, if not wealthy, at least everyone well-to-do, comfortable. China, for 200 years, everybody poor. So how do you get from here to here — from everybody poor to everybody well-to-do? You have a process.

“You cannot get there overnight. Only fools think you can get there overnight. And China turned the clock back 30 years ago — and not only has physical constraints because they’ve been poor so long, technologically backwards, with a system that doesn’t work. It also has ideological problems because of communism, which is so foolish, so foolish, keeping everybody poor.

“Today it has opened up so much that it makes America look communistic. Well, socialistic. Europe certainly is extraordinary socialistic. Today one of the most capitalistic places in the world is China. It is 1900, or 1880s-1890s United States. It is robber barons. ‘Go west, my son, go west.’ That is China today.

“So how do you go from all poor to most people well-to-do? You have to go through a process. And that process is painful. And that process is not ideal. So today you have a wealth differential in China that is quite large – no worse than the United States, by the way. Look at the Gini coefficient. And I go to India a lot. The poverty in Mumbai is worse than what I have seen in any corner of China. At least in China, people can survive.

“What is the ideal world for me? You don’t tax the rich man in terms of inheritance tax. In fact, don’t tax anyone if you can – just tax minimally. But everybody give all your money away. I mean philanthropy! Everybody give all their money away. My family has been practising that for many decades. When my father died, I didn’t get a penny.

So do you support the philanthropic ideas of people such as Warren Buffett and Bill Gates?

“No, no, no. We were way ahead of them. They support us. We have done it long before. Well, first of all, let me say that they are doing a great job. Given their prominence, their name recognition, what they do is fantastic, giving all their money away. But they went to China, tried to convince the Chinese business leaders to give all their money away – that is shameful. They didn’t do their market research. No economy in the world at such an early stage of development has had so many rich people giving all their money away like China.”

Chan says he’s probably one of 10 people in Hong Kong on whose door every group that seeks money knocks. He says he’s good at saying no — politely but also firmly: “I earned my money, so I decide whom to give it to.”

He says he’s not a political person, so he rarely donates to political causes. As Chan puts it, the silliest thing a rich person can do is give the money to his children.

Bloomberg