Tangshan takes its name from a stop made by the Tang emperor Li Shimin on his campaign against Goguryeo, and it has long been known as the porcelain capital of northern China. The city produced China's first mechanised coal mine, first standard-gauge railway, first steam locomotive and first barrel of machine-made cement, and it is a city that has risen again like a phoenix. Yet over the past decade, while newer first-tier cities built reputations on technology and the internet economy, this coal and steel city was cutting steel capacity year after year to help clean up the air around the capital, and it never joined the club of cities with a trillion-yuan economy. Then, during the epidemic in March and April 2020, Tangshan housing prices rose sharply and quietly: new-home prices climbed 13.2% year on year, the fastest rise in the country.
What allows Tangshan to move upward while other second- and third-tier cities slide? To find out, we spoke with Hu Jian, founder of BSC, who has worked in the Tangshan property market for twenty years. In an online interview of nearly an hour, he gave a measured, detailed account of the local housing market, the position of local developers, and his feelings and hopes for the city as a native of Tangshan.
On the market: record land prices are lifting housing prices
Tangshan sits directly east of the midpoint between Beijing and Tianjin, the third corner of a triangle with those two cities. From Beijing's Guomao district it is a two-hour drive east along the Beijing-Harbin Expressway. When the Beijing-Tangshan intercity railway opens along its full length in 2021, the journey will take only 30 minutes.
The urban core of Tangshan is not large. Xinhua Road, built during the late Qing self-strengthening movement, divides the centre into two districts, Lunan and Lubei, which together form the heart of the city. Lubei District is home to the municipal government and has the most developed commercial and residential services.
Lunan District developed earlier but has been held back by a limited amount of buildable land. The Nanhu area, where Lunan meets Fengnan District to the south, is the zone the municipal government is now concentrating on: the Nanhu eco-city industrial belt and the Nanhu central business district are under construction, and it is the part of the city centre closest to the Caofeidian deep-water port, the Caofeidian bonded zone and Jingtang Port.
In commuting terms Tangshan can be counted as a city on Beijing's periphery, but looking at it only through that lens misses the full picture. While transaction volumes and prices have been falling in neighbouring cities such as Tianjin, Baoding and Cangzhou, prices for newly launched homes in Tangshan have kept rising, and new projects are frequently sold out.
Why do prices keep climbing? The direct cause is that land, the largest component of housing cost, has become much more expensive.
Last year the record floor-area land price in Tangshan was 9,600 yuan per square metre. In April this year, auctions produced floor prices above 10,000, 11,000 and 12,000 yuan per square metre in succession. On 8 May, Risesun Real Estate set a new record at 14,010 yuan per square metre, a premium of 43.25%. That record stood for only a month before Longji Taihe, another Hebei developer, paid 16,000 yuan per square metre. Hu Jian points to supply and demand as the main driver. Although Tangshan has released a large volume of land since April, supply in the two previous years was very thin, inventory was tight and the sell-through period hovered below nine months, so demand exceeded supply overall. With few new homes available and high total prices, part of the demand for new homes has spilled into the resale market.
Land auctions are the strongest support for housing prices. Each time the record changes hands, the fall of the auction hammer gives a boost to resale homes nearby, and owners become more inclined to hold out for higher offers. Many owners in compounds next to record-setting plots raised their asking prices almost as soon as they heard that the neighbouring land had sold for 16,000 yuan per square metre, reasoning that prices would rise again once the plot was developed, so there was no hurry to sell. Rising land prices are the reason Tangshan's resale prices grew faster than anywhere else in China in 2019.
"Demand in Tangshan comes mainly from local residents upgrading their homes, supplemented by people moving in from surrounding districts and counties and by young couples buying a first home to marry. It is all genuine end-user demand, with very few speculative investors," Hu Jian says. "When young people here marry, the bride's family often expects the groom to own a flat in the city. Large numbers of rural residents moving into the city, together with upgraders from the districts and counties, add further demand. New homes are mostly large three- and four-bedroom units aimed at upgraders in the urban core, while resale homes are typically large two-bedroom or small three-bedroom units with lower total prices, which suits first-time buyers."
On the company
Product quality and access to finance are the survival strategy
Another feature of the Tangshan market is that, after a period of consolidation, it entered the era of national brands in 2010. Long-established players such as Vanke, China Resources, Greentown and Country Garden, and more recent arrivals such as Sunac, Seazen, Longfor and Yuzhou, have all invested heavily, drawn by a market that has kept improving.
Constrained by financing costs, scale, development cycles and channels, local developers have seen their room to operate steadily squeezed. Many survivors have had to partner with national brands to stay in business. A few, like BSC, known locally for its products and marketing, have used the support of diversified capital markets to keep pace with the national brands and compete alongside them in the local market.
What is the secret to surviving, and thriving, in the gaps between these powerful national brands?
In an era defined by product quality, joint development between brands has become the norm. Cooperating to combine strengths and offset weaknesses gives customers the best result, and it is a smart approach. Hu Jian trained in advertising design, civil and industrial building design and industrial design, and brings a designer's way of thinking: he is quick to see what customers want and to act on it. After the epidemic, for example, quality property management became a major factor in purchase decisions, so BSC brought in Greentown Property Services, ranked first nationally for customer satisfaction for ten consecutive years, to manage its Majestic Palace project in Fengnan District. The move raised the quality of life for owners, met a clear need, and was warmly received by the market.
BSC's corporate creed is "great trust and deep integrity, great sincerity as the foundation". In nearly twenty years the company has never had a single adverse credit record, a reflection of its honesty, discipline and caution. Hu Jian explains that the name Baoshengchang comes from an inscription on a set of bronze ding vessels from the Zhou-era state of Guzhu: "the emperor's treasured ding rises like the midday sun, and the nation prospers". The three characters stand for treasure, voice and light, symbolising the company's value, influence and contribution.
Real estate depends heavily on financial leverage, and many local companies have failed to grow because they never learned to use financial tools well. Hu Jian therefore enrolled in the Master of Finance programme at Cheung Kong Graduate School of Business in 2015 and in the doctoral finance programme at Tsinghua PBC School of Finance in 2018. While studying he put the lessons to work, making equity investments across emerging sectors including the internet of things, artificial intelligence, 5G, biomedicine, smart hardware and cross-border e-commerce. He went on to found the BSC national-level incubator, a national-level maker space, a provincial-level innovation and entrepreneurship base and a provincial-level cross-border e-commerce demonstration park, making BSC a front-runner in Hebei's innovation and entrepreneurship programmes.
Small streams feed the ocean: lasting long matters more than running fast. Adapting to the market, embracing capital, keeping in step with the cycle and growing steadily, BSC has built up its strength patiently. That may be the essence of how it survives.
On the future
The confidence of a home-grown market
Because Beijing and other large cities concentrate so many resources and jobs, losing population seems to be the fate of the satellite cities around Beijing and Tianjin, with graduates and young people heading for Beijing, Shanghai, Guangzhou and Shenzhen. Tangshan is the opposite, one of the few cities whose population keeps growing.
Statistics show that at the end of June 2020 Tangshan had a total population of about 7.9 million, with roughly 2.9 million in the central urban area and the rest in the surrounding districts and counties. The urbanisation rate reached 64.32% in 2019, leaving considerable room to grow compared with rates above 80% in Beijing and Tianjin.
As a native of Tangshan, Hu Jian admits he is attached to home. His business is rooted here, he has no wish to leave, and he feels a strong sense of belonging.
His view is shared by many in the city. Residents often describe Tangshan as friendly and comfortable: a complete and advanced industrial base, the best business environment in Hebei Province, jobs that are relatively easy to find, and less pressure over schooling and housing than in many cities, so most people are content. The city is large and rich in resources, with strong agriculture and fisheries, and people say they feel settled and do not want to leave. The pull of the urban core on the surrounding districts and counties is a key support for the property market. In 2019 Tangshan had 542,000 primary school pupils, up 3.4%, and 226,000 children in kindergarten, up 2.2%. Primary school enrolment correlates closely with resident population, and behind these figures are growing numbers of young people choosing to settle, work and raise families in Tangshan. Rent is another hard indicator of whether a city is gaining or losing people, and residential rents in Tangshan have risen steadily, further evidence of population inflow.
Besides inflowing population, housing prices are supported by the local economy. Hu Jian notes that Tangshan's prices rank behind only Langfang, the city closest to Beijing, and the provincial capital Shijiazhuang within Hebei, which he considers reasonable. Tangshan leads Hebei in GDP and ranks third in the Beijing-Tianjin-Hebei region after Beijing and Tianjin, with GDP of 700 billion yuan in 2019, 29th among Chinese cities. Its lead over Shijiazhuang has kept widening, from 44.84 billion yuan in 2016 to 149.7 billion yuan in 2019.
In Hu Jian's view, Tangshan is a classic home-grown property market, and its urbanisation rate largely determines how much room it has to grow. Building on its strong early industrial base, the city's transition away from steel is advancing quickly. With services growing faster and coordinated development across Beijing-Tianjin-Hebei, he believes Tangshan will achieve high-quality growth and that the trillion-yuan club is waiting for it.