Ask most chief executives what their business targets are, and profit or revenue numbers invariably roll off their tongues. The wilder the ambition, the more exciting their firms appear to be.

But ask Yanlord Land Group chairman and chief executive Zhong Sheng Jian the same question, and you get none of the usual hype. Sure, growth is on the cards, but his vision goes beyond turnover and other accounting riches.

'We hope that Yanlord will be a lasting establishment,' he said calmly in an interview with The Business Times. 'I hope that a hundred years from now, Yanlord will still be around and doing well, though it may not be clear what it will be doing then.'

That statement speaks of two things - of Mr Zhong's aim to grow Yanlord sustainably, and of his acumen in going where the money is.

Eye on the prize

Yanlord is a product of its times, having shifted its business focus as China's economy transformed. Yanlord started out in the 1980s as a trading firm, importing materials for the paper-making industry in China just as the country was opening up.

'The company had no funds and talent then,' Mr Zhong said. 'It started out with trade to accumulate capital and to understand the market.'

In the later part of the decade, multinational corporations began setting up manufacturing facilities in China and this kickstarted the period of industrialisation. Yanlord saw potential in this new phase of growth and went from trading into production, setting up its own papermaking factory. The new venture worked out and the company grew.

By the mid-1990s, China was prospering and its citizens turned their attention from needs to wants. The desire for good accommodation gradually became mainstream, but the government had yet to liberalise the residential market and urban sophistication was lacking, Mr Zhong recalled.

'Urban planning, design and quality were backward. As a result, there was a lot of bad construction in the early stages of urbanisation.'

This was when Yanlord sensed the emergence of an unfulfilled market need, and shifted its core business from manufacturing to property. It made its first foray in Shanghai in 1993 and has not looked back since. Today, the group is in several other cities - Nanjing, Suzhou, Chengdu, Guiyang, Tianjin, Zhuhai and Shenzhen.

As at March 31, the developer had assets worth $7.26 billion, up from $6.71 billion three months ago.

Yanlord was in step with China's progress, Mr Zhong said. 'On the macro level, an enterprise's growth has to be in line with the times and the country's development needs.'

But picking the right industry to enter is just the beginning. 'From the micro point of view, a company must satisfy customers' needs. That is the aim.'

Shaping tastes

Knowing what customers want hasn't always been easy. Yanlord aspired to bring high-end, high-rise and well-managed residences - not unlike Singapore's condominiums - to China. But that meant introducing a whole new concept of living to mainlanders who, until the 1990s, were used to tougher conditions.

In Nanjing, for instance, it took some time for residents to embrace high-rise living. 'People were afraid the lifts would break down, and it would be a hassle for them to climb the steps home,' Mr Zhong said.

With time, people got used to Yanlord's residential concepts and the group has introduced them to more cities since. Its projects include Yanlord Riverside City in Shanghai, Bamboo Gardens in Nanjing and Hengye Gardens in Suzhou. It has also branched out into developing commercial and mixed-use sites, such as Yanlord Marina Centre in Zhuhai and Xintian Centre in Guiyang.

Bubble spotting

The challenges which Yanlord faces today are on a different scale. With increasing wealth and liquidity in China, home prices have shot up rapidly, causing market watchers to warn of a property bubble. This has forced the Chinese government to respond with several cooling measures in the last few months, including a ban on loans for third homes and higher mortgage rates.

The situation leaves developers in a bind. Higher home prices should be good for business, but they create uncertainty as to whether more government measures will come. There is also worry that too much intervention will cause prices to fall markedly.

Yanlord's revenue has weakened in the first quarter ended March 31, down 7 per cent year-on-year to $173.1 million. Net profit slipped 23 per cent to $18.8 million.

Even Mr Zhong is unsure as to how the market will move in the short term. China's property sector is very complex as it is influenced by factors which are global, domestic, economic, political and even cultural in nature, he said. In such times, Yanlord's strategy is to buckle down and focus on building homes which consumers want.

'I've been in the business for so many years, and I still find it hard to grasp,' he said. 'There have been rises and falls in the last few years - big movements in fact - and developments have been unexpected... What Yanlord needs most is stability, but I'm afraid that in the near term, the market will still be volatile and unpredictable.'

Things get trickier when it comes to buying land when prices are steep. 'No developer can do without land,' Mr Zhong said. What is important is that the developer build something that can meet consumers' needs. 'If there are no buyers, there is no use even if the land is cheap.'

One way to overcome huge capital outlays is to find a co-investor. Yanlord took on this strategy lately, partnering Ho Bee to buy a 3.82 billion yuan (S$785 million) residential site in Shanghai. A company has limited capabilities, Mr Zhong said. The partnership model has been around in developed cities such as Singapore and Hong Kong, and is starting to emerge in China, he added. 

In for the long haul

Despite the uncertainties today, Yanlord remains optimistic about the Chinese property market in the long run. Continued urbanisation and rapid economic growth will support demand for homes, Mr Zhong said.

'And we cannot underestimate the consumption habits of the Chinese... The Chinese will buy a house for themselves and buy another one for their sons. And that's not all, they will buy another one for their grandsons.'

Yanlord is taking its cue from the government in deciding which other cities to enter next. State influence is still strong, and regions which the authorities pay more attention to will grow faster, Mr Zhong explained. 'Where there is money to be made, where the returns are highest, that's where we will go.'

But property development is not just a money-making venture to Mr Zhong. He also sees it as a business which carries huge social responsibilities. 'China's culture revolves around the home... Consumers may spend most of their time or even their entire lives in the homes that you build. If we cannot design and build houses which allow them to settle down comfortably, we have not fulfilled our responsibilities. Even if we make money, we won't feel good.'

Houses affect not just families, but entire cities. Buildings exist for a long time and are visible to all, Mr Zhong added. 'If it's a good piece of work, it can help lift spirits and lives. But if it's a bad piece of work, it will bring long-term pain to a city's residents.' Yanlord has the responsibility to bring advanced practices in urban development to China, he said.

Yanlord's guiding principle, 'building quality accommodations with passion', sums it all up. 'We may have to invest a little more, make a little less profit, but we must build the homes well, and treat consumers just as we would treat ourselves,' Mr Zhong said.

Company culture

Yanlord has crossed several milestones since its establishment - entering new cities, or listing on Singapore Exchange for instance. But what Mr Zhong values is something intangible.

'Yanlord's greatest achievement is not about the amount of wealth it has accumulated,' Mr Zhong said. 'Its greatest achievement is to have created the 'Yanlord' system and culture after more than 30 years of effort.'

According to him, Yanlord focuses on people's abilities. 'It is with such a system that we can attract and retain a large pool of talent, and accumulate significant human capital. It is human capital which creates material wealth.'

And having a formal system in place is not enough. Yanlord also strives to build a culture around the principles of benevolence and perserverance, embodied in its Chinese name, Ren Heng.

Mr Zhong hopes to challenge the notion that family wealth does not last more than three generations, and he is counting on these intangibles to keep Yanlord going. The key to building a lasting enterprise is to create an effective and adaptable system and culture, he said. 'No matter who controls and runs this enterprise, the system and culture must guide him into overcoming challenges and creating new breakthroughs.'

Source : The Business Times © Singapore Press Holdings Ltd. Reprinted with permission.