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Powerlong 'seizes' first-tier cities with Mao's guerilla tactic

FUJIAN: "Encircling the cities from the countryside and finally capturing them" was a key guerilla warfare tactic employed by Mao Zedong in his campaigns against the Kuomintang. It is now being resurrected by Fujian-based real estate developer Powerlong Real Estate Holdings.

By applying a similar principle to investing in the mainland's commercial property market in the wake of the country's urbanisation, the group will prosper, said chairman Xu Jiankang, who is also known as Hoi Kin-hong.

Xu said Powerlong had slightly modified Mao's theory.

"We have encircled the first-tier cities from less-developed second- and third-tier cities" he said.

"Now we plan to 'capture' first-tier cities by establishing commercial projects."

The closing stage of the strategy could happen very soon, added the group's chief executive officer, Xu Huafang, also known as Hoi Wa-fong, who singled out Shanghai as a likely first-stage target.

Powerlong, which listed in Hong Kong in October last year, clinched 10 deals in second- and third-tier cities last financial year and has ambitions to expand even faster this year.

Xu Huafang said last month the group aimed to set up 100 mega shopping centres across the nation, up from its current 30.

The rapid expansion plan comes despite measures adopted by the central government to cool-off housing market prices since commercial projects were less affected by the policy moves, he said.

The group's latest deal was an agreement signed with the Tianjin government on June 7 relating to a commercial property investment in Tianjin's Tanggu area.

"Total investment in the project will be about 1.5 billion (RM714 million) to two billion yuan," said Xu.

"We have a 65% stake and the rest is owned by a Tianjin government unit."

The project, to be built on a site covering 30,141 square metres, will include a high-rise office tower, serviced apartments and a shopping mall.

Powerlong will own the serviced apartments and shopping mall, and the mainland partner will own the office building.

The project is scheduled to be completed by 2013.

"The area is targeted to be a new business district and we are in discussion to develop another project there," said Xu, who added that the group's financial position was healthy with 1.7 billion yuan cash on hand.

Net gearing is below 10 per cent.

Recently, the group secured a credit line of 15 billion yuan from major banks, including the Industrial and Commercial Bank of China (SEHK: 1398) to replenish its land bank.

Property sales will also help the company's cash flow position, the CEO said.

Two projects - one in Jiangsu and one in Qingdao - will be offered for pre-sale shortly.

To speed up construction progress on its projects, Xu requires management to ensure that residential towers are offered for pre-sale within eight months of obtaining a site. -- South China Morning Post

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