Biggest Chinese property project in Britain on verge of collapse

February 14, 2022 09:34

The government of London has sent a “final termination notice” to the developer of the biggest Chinese real estate project in Britain. There has been no construction work on it since April 2019.

In May 2013, Boris Johnson, then Mayor of London and now Prime Minister, announced the Royal Albert Dock (RAD) project in the east of the city, costing 1.7 billion pounds, with Chinese developer ABP. It is downstream the Thames from Canary Wharf, one of the most successful commercial redevelopments in London.

Due for completion in 2023, the 15-hectare site was to provide headquarters to Chinese and other international companies and become the capital’s third financial district. Completed in 1880, the RAD was one of the principal docks of London; goods from Imperial China were unloaded there. It closed in 1981, after containerisation made shipping companies moved downstream to the port of Tilbury.

In April 2019, Phase One of the project was complete, providing 560,000 square feet of office and retail space. But the developer Advanced Business Park (ABP) ran out of money and has done no construction work since then.

“We have served a final termination notice on the developer because of delays,” said the Greater London Council. “Receivers have been appointed over six companies within the group structure of the developer.” The receivers will work to recover unpaid debts.

Unmesh Desai, a Labour member of the London Assembly for East London, said: “this was meant to be a jewel in the crown for East London and is now a ghost town.”

RAD is one of several high-profile Chinese projects in Britain that have stopped, after Beijing put a squeeze on property companies.

Greenland Holdings of Shanghai has sold most of a project in southwest London that it started in 2014. In January, Guangzhou R & F was placed in restrictive default. It has failed for months to pay workers on One Nine Elms, a 900-million-pound project in Battersea, south London.

The imminent collapse has thrown the spotlight on ABP’s chairman, Xu Weiping (許爲平). He has an unusual profile for a person to take on a foreign project of this scale.

Born in 1960 in Zhejiang, he studied at the Electrical Machinery faculty of Zhejiang university between 1978 and 1982. After working for three years at the Rural Policy and Research Centre of the State Council, he left the government in 1990 to go into business.

In Zhongguancun in Beijing, he set up China Southern Electrical Machinery Group to develop the market for high-tech and digital machines. The firm prospered and he became wealthy. He sold his firm in 1996 and became a U.S. dollar millionaire.

That year he spent three months in Hastings, southern England, to learn English. He returned to China and set up ABP.

Its website says that it is a global group, in research, investment, development and operations, with projects in Beijing, Shenyang, Qingdao, Haining and London. These include a large office park on the southern outskirts of Beijing.

When the British government chose ABP for this large project in 2013, many questioned the choice of a little-known company that had done no projects outside China. “ABP are very confident that they can deliver; they are backed by the Bank of China,” said then London Mayor Boris Johnson. “They have experience in Beijing.”

“This is land that has not been used for a very long time and there is an opportunity to create a huge number of jobs and get businesses going,” he said. He and Xu spoke through interpreters.

It is unclear how and why the RAD project ran out of money. The ABP website does not give any explanation.

Xu said in 2013 that he planned to borrow about two thirds of the investment needed from British and Chinese banks and tap investors or use his own money for the rest. He said that he planned to sell half the units to Chinese companies and had signed letters of intent with 13 others.

The Financial Times said he had been a citizen of the Seychelles since 1996 and that most of his companies were based there or in the British Virgin Islands. This makes him a “foreign” investor in China.

There are several likely reasons for Xu’s failure to attract capital. One is the pandemic that has dealt a heavy blow to international travel and investment and badly hit the British economy.

The second is that Xu signed the contract during the “golden age” of Sino-British relations, when David Cameron was Prime Minister. Since then, ties have soured over a wide range of issues. Chinese companies are less willing to invest in Britain and British banks less eager to lend to large Chinese projects.

The third is that ABP is a private, not a state, company. All China’s major banks are state-owned and give most of their loans to state companies. While the RAD project fitted Beijing’s strategic objectives in 2013, it may not do now.

The failure of the project has become part of the British political debate. Many in the Conservative Party want Johnson to resign and are using RAD as an example of his big promises that are not implemented.

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A Hong Kong-based writer, teacher and speaker.