Go big, go west: How one homegrown real estate developer expanded its logistics business in China

This article was first published on IE Singapore's website in June 2017. Head here for more stories from its #SgGoesGlobal series.

China has long been urging industries to "go West." As the One Belt, One Road initiative and burgeoning e-commerce industry open opportunities across the country, companies are now eagerly following that directive, surging into China's central and western regions. Once seen as less economically attractive than areas on the country's eastern side, central and west China are booming today with both regions enjoying 8 percent GDP growth or higher in 2016, significantly overshadowing the national average.

One company that's witnessed, and benefited from, this spectacular economic transformation is Mapletree Investments, a leading real estate development, investment and capital management company headquartered in Singapore. The company first entered China in 2005, and currently has presence in over 20 Chinese provinces -- the most of any Singapore real estate firm. The company, which is growing rapidly in the logistics development space, currently has almost 11 billion yuan (more than $2.2 billion) worth of completed and ongoing logistics projects in the country.

Mr Goh Chye Boon, Mapletree's Regional Chief Executive Officer for China, credits a customer-first strategy for the company's success in China. "We weren't chasing numbers," he said. "We were chasing our customers — the e-commerce companies, express delivery firms and cold storage companies. We followed them to the key hubs they are operating in."

"We weren't chasing numbers. We were chasing our customers. We followed them to the key hubs they are operating in." - Goh Chye Boon, Mapletree's regional chief executive officer for China

Most of Mapletree's customers, said Mr Goh, have been increasingly moving into second- and even third-tier cities, having already established a base in first-tier cities like Beijing and Shanghai. "This has provided good opportunities for us to scale our logistics operations forward," said Mr Goh.

Mapletree has expanded into regions across China — from the centre of the country, where the Group first established itself, to the north and south of China. It is also rapidly-growing in the western region, where Mr Goh said that the company has been flourishing.

"In the last two years, we have expanded the most into western China. The bulk of our investment goes into Chengdu and Chongqing where the growth has been phenomenal," he said. Chongqing is one of the fastest-growing cities in China, boasting a GDP of 11 percent in 2016. Mapletree has six logistics projects there and another four in nearby Chengdu.

Two major trends have been fuelling the economic growth in China's western -- and also central -- region: the One Belt, One Road initiative, which China recently pledged an investment of more than 100 billion yuan, and the growth of e-commerce, an industry that saw a market growth rate of almost 25 percent in China last year.

Both trends have been bringing businesses to areas in China once considered far-flung. The Belt and Road initiative seeks to open trade opportunities across China and beyond; and since "everyone can go online," e-retailers are now moving their hubs to second- and third-tier cities to better cater to their customers who are increasingly expecting faster and faster delivery of products purchased online.

Mr Goh also said that for all its success in China, Mapletree's journey in that country hasn't always been smooth. Finding and securing the best locations for developments can be a challenge, and working with local governments — especially those from different regions — can be complex.

"China is like Europe in disguise," said Mr Goh. "What the governments in the north thinks, for example, is very different from what those in the south thinks. Appreciation of local government culture is very important. You cannot use a cookie-cutter approach."

But Mapletree says it's had one important partner through all this who's helped the company navigate these complexities and avoid many pitfalls: "IE Singapore has been with us in China from day one," said Mr Goh. "They have been very helpful … helping us get our foot in the door [in many cities]."

IE's biggest contribution to the firm has been its ability to engage with local governments on Mapletree's behalf, said Mr Goh. "IE has very good political connections," he said. "They will talk to local governments and prepare them before we even arrive, briefing them about what we are looking for and laying that groundwork."

With officers in several Chinese cities, IE also has a deep understanding of different regions and regional governments, Mr Goh added — which is crucial for doing business. "Imagine, we are operating in 70 to 80 cities so we don't always have the luxury to have [our people] all over," he said. "When you go out there, you need a lot of help. IE has helped us navigate all of that faster."

IE has also helped connect Mapletree to local customers and partners, and helped scout out prime locations -- a critical part of Mapletree's business. "How do we connect people to goods? Traditionally, it was roads in China and railways. But now we're seeing more cross-border trains and air travel too," said Mr Goh. Establishing sites near airports, railways and highways are thus ideal.

"IE looks out for these opportunities for us," said Mr Goh. "They also talk to local governments to figure out the best locations."

When asked to give specific examples of how IE has helped Mapletree in China over the years, Mr Goh shared several examples: Its expansion into western China, including into cities like Chongqing and Chengdu, was facilitated by IE, he said; as were projects in the northeast, like in Harbin, Shenyang and Dalian. In the southern city of Kunming, IE's assistance was indispensable in helping the company secure a site near the airport, said Mr Goh.

"We really wanted to get into Kunming, a vital hub for Southeast Asian countries due to cross-border trade, but we couldn't get access," he explained. "IE was able to help us open that door, initiating meetings and missions with the local government."

With the Belt and Road initiative still in its early stages, and e-commerce poised to continue to boom in China, Mapletree says it's aiming for even greater growth in the country. In May, Mr Goh projected that Mapletree could increase its logistics gross floor area across China from 2 million sqm to 4 to 5 million sqm over the next few years with good demands and opportunities.

The company's strategy will remain the same: Bolstered by the support of IE Singapore, Mapletree will keep following its customers to the growing second- and third-tier cities across China.

"IE is our facilitator and partner," said Mr Goh. "With their help, we are able to plant our footprint overseas."

This article was first published on IE Singapore's website in June 2017. Head here for more stories from its #SgGoesGlobal series.