The Short March

(3 of 5)

If You Build It, Will They Come?

It has been less than 10 years since this land was nothing but farms and mosquito-infested swamps. The truth is, there are days even now when it still feels a little lonely. Tens of thousands of square feet of retail space have already gone up, about half of which sit empty, at least for now. On most days this past summer there was so little traffic on the streets in town that drivers didn't pay attention to the traffic lights — except, that is, the student drivers from the Li Zhong Driving School, who creep slowly down the town's wide, untrafficked thoroughfares. But life won't feel lonely for long. There are 200,000 houses and apartments either under construction or planned for this city. Multiply that by 10 — the number of satellite cities going up around Shanghai alone — and you get a sense of the economic forces at work. To the developers who conjured this place out of nothing, the payoff is as close to a matter of fact as any investment can be. Listen to Guo Guangchang, the co-founder and CEO of Fosun Group — whose subsidiary, Forte, is one of the primary developers here — and the message is clear: if you build it, they will come.

Guo, 40, is one of the richest men in China. He founded his company, now a huge conglomerate, in the early 1990s, with three friends from Shanghai's Fudan University. Today, like so many successful Chinese businessmen of his generation, he seems preternaturally calm when talking about why he believes the future is going to look a lot like the present: new houses go up, new houses get bought, more new houses go up.

We sat in his office on Shanghai's famous Bund, and I half-jokingly told him I was a little nervous about my investment. Analysts' reports these days are full of tales about China's real estate bubble. Was it possible that the skeptics might be right — that Shanghai itself is already overbuilt, and the suburbs Guo is helping create are a bridge way too far? He looked at me as if I were from another planet, then smiled politely. "There is only one Shanghai in China," he said. "People want to come here from all over the country. People need good quality housing at a decent price, and that will continue to be true for a long, long time. Sure, there might be periods where the market slows down a bit; but the underlying things that are driving it, no, they won't slow down." There are about 20 million people in Shanghai now, Guo noted. In 20 years, he said, that number could easily double.

And that's where the simple comparison to the U.S. after 1945 breaks down. Journalist turned businessman Jim McGregor, one of the most astute observers of modern China, says that the country is cramming three different eras of U.S. history into one. In U.S. terms, the postwar prosperity that fueled the flight to the suburbs is happening at the same time as the 19th century Industrial Revolution that lured people from the farm to the cities, and also as Progressive Era efforts to rein in the worst abuses of capitalism take shape. I asked Guo if he agreed. He nodded, but added a caveat: "What's different about China is the sheer scale of things. The simple fact is there are still 800-900 million people living in poor, agricultural provinces. That's about three times the population of the United States."

Guo, suffice to say, doesn't believe you can keep them down on the farm, and neither does anyone else. So people will continue to pour into Shanghai — and other major cities — and a good portion of the middle class will escape to the suburbs as the cities grow ever more crowded. So no, Guo added, he doesn't lose sleep over the prospect of real estate booms and busts here. "And neither," he added, smiling broadly, "should you."

1. Obama's Private Prayer 'Leaked'
2. Randy Pausch — Life Teacher
3. Israel's Debate Over an Iran Strike
4. 10 Questions for Randy Pausch
5. Hasbro's Legal War On Scrabulous
6. Obama Gets Love from Sarkozy
7. McCain's Foreign Policy Frustration
8. LeBron's Gold Guarantee
9. "Last Lecture" Professor Dies at 47
10. Goodbye to France's 35-Hour Week