Next week's journal of finance and economics (id:economic-weekly)
Photo by yoon yin yao
The biggest confusion we encountered in 2016 was inflation — “money is becoming less valuable”. The value of the money is reflected in the devaluation of the renminbi against the united states dollar, reflected in the exchange rate, which has somewhat troubled soho china。
At the end of 2015, 56 per cent of all soho china's debt was foreign exchange debt, which, if not addressed as soon as possible, would have caused us even greater losses due to exchange rate fluctuations。
Rental income has been an important source of income since five years ago, when we announced a transition from sales to holdings. This part of the rent is fully charged in the renminbi, and inflation and the devaluation of the renminbi mean that we need to pay more rent to pay the united states debt, which is obviously a bad news for us。
So, in april-may of this year, when the renminbi was on a downward trend, we decided to pay our external debt earlier. In mid-year, we paid $644 million in foreign syndicate loans and $4. 05 billion in hong kong dollars in advance, redeemed $253 million in foreign priority instruments and reduced the proportion of foreign debt to total debt from about 56 per cent at the end of 2015 to 6 per cent today. Such a ratio of external debt can be ignored in my concept, which means that the risk of foreign exchange volatility has been overcome by us, so it seems more right now that we decided six months ago。
Another effect of inflation is the rise in housing prices。
From a real estate point of view, china’s housing market and the dramatic changes that took place over a decade ago, the age of uninhabited housing for all is over, and basic needs for housing have diminished, which should have led to a fall in housing prices. But what is less valuable than housing is money, and inflation is faster than the decline in the price of housing, which is more valuable than money, which is why the price of housing will suddenly rise this year。
For soho china, we will consider market conditions and sell some of its properties at a time when housing prices are rising in order to balance returns and risks. We consider how the ratio of property to money can be allocated so that companies can make a smooth transition at risk。
So, after careful consideration, we decided to sell a part of the property this year to balance the ratio of assets. In july 2016, we will sell soho century square, located in the shanghai luk family's mouth area, to china's life insurance, with over 3. 2 billion. Of course, the price of the office building is not as high as the price of the house, but this offer is twice the net price at the time of the acquisition。
But this property is only over 40,000 square metres, which, in terms of the millions of square metres of property we hold, represents only about 3 per cent of our total property area and, in the future, will sell a portion of our non-core property, such as soho in shanghai, but the vast majority of our assets will continue to be held。
Q: what do you think of the chinese economy next year in the context of the economic ecology of your field
A: i have also interacted with many people on this issue, and i think that some have neglected a particularly important issue when considering it — the future dynamics of the global economy。
There is no doubt that developments in the global economy will have a very significant impact on china. Membership in the wto has been the most important event driving china's economic development in the past few decades, regardless of the angle from which it was calculated. When we joined the wto, we became the world's king of manufacturing, and it was only then that we brought the entire chinese economy to work. The future development of the chinese economy must therefore depend on the dynamics of the global economy。
But now the global economy is not very optimistic, and there's a very bad trend. – trade protection by individual countries, the year of british graduation, and the new president of the united states, who said that he would build walls on mexico's borders and increase tariffs on chinese products. This reflects a wave of anti-globalization thinking and trade protection initiatives that have a very negative impact on the global economy and will ultimately affect the chinese economy。
Q: what do you think of entrepreneurship
A: i think entrepreneurship is necessary for china, which is currently in transition. Many people think that entrepreneurship is a waste of money and a lot of meaningless things, but i think it's worth doing even if 70-80 percent of start-ups eventually collapse。
Because, in the process of economic transformation, old enterprises had no way out, and finding new ones required a different path。
Both the internet and biotechnologies are now more mature and have a full chance of changing our past markets, consumption patterns and even economic structures. As a result, these young people are using these new and emerging technologies to fight for entrepreneurship, and the social impact of so many start-ups will be great if they are able to succeed。
In the mid-1990s, i went to a class in tsinghua, and one day at the gary center, ma yun was invited to speak. Ma yun started telling us about his electrician set, and there were huge entrepreneurs down there, and everyone thought he was joking and ma yun couldn't convince them. But today, looking at the treasure hunt, the skycat, has brought particularly high efficiency and changed the way we live, and i think that's what this means。
