Real Estate

The Feng Shui of Moscow is about to Change

For much of the past year, airwaves and fiber-optic cables worldwide were filled with words and images of the construction going on in Beijing in the run-up to the Olympic Games this past August. All the while, another Chinese construction project, this one in Moscow, 3600 miles away from the 2008 Olympic host city, was also taking shape.

Though thus far Park Huaming (see sketch above), the Chinese-owned and -financed business center being built near the Botanichesky Sad [Botanical Garden] stop on the Moscow metro’s Orange Line, has kept a much lower profile than its sister edifices back home, it is certain to change the profile of the Russian capital — both literally and metaphorically.

The idea for the $300 million project dates back to a 2001 meeting between President Vladimir Putin and former Chinese Prime Minister Zhu Rongji. In 2002, the Chinese government created a corporation, China Huaming International Investment Corporation (CHMIIC), to oversee the planning and execution of the project. According to Mu Huadong, CHMIIC’s president, the complex is intended to be an economic and strategic bridge between the two countries as well as a cultural window between East and…less East.

Chinese landscape park

The design and now construction phases have certainly provided ample opportunity for the Russian and Chinese sides of the project to practice precisely the sort of cooperation Park Huaming is meant to foster. Although the Chinese side is supplying the investment and basic designs, the consulting and coordination on the ground in Moscow — from granting of permits from the Moscow city government to construction crews — are, of course, Russian.

Given the size, geographical location, and resources of these two countries, it is logical that they want to forge closer ties with one another, noted David Whitehouse, a principal at Savant International, the British-owned construction consultancy that is working on the Chinese project. Also understandably, both sides seem to be approaching each other with healthy doses of caution and respect, Whitehouse added, describing what he saw as a clear desire to cooperate but a more “toe in the water” approach rather than a full embrace, at least for the present.

Russia is proceeding more slowly than it did with such countries as Turkey and South Korea, for example. This also, makes sense, as the latter nations, are not perceived by Russia as a threat economically, militarily, numerically, etc. But while China’s and Russia’s status as approximate geopolitical equals has led to wary progress in building closer ties, such balance also bodes well for a healthy relationship in the future, Whitehouse said.

Whitehouse cited some similarities in the corporate structure that prevails in each country. Unlike most Western companies, where responsibility is delegated to people on the ground who are empowered to make the key everyday decisions that allow a project to stay on schedule, the Chinese model is more centralized. While one is tempted to attribute this sort of centralization to a communist influence, Whitehouse noted that it is, in fact, typical of Asian corporate structure — he has encountered the same arrangement on projects with Japanese and Korean investors. Even during meetings and negotiations, the Chinese team maintains a strict hierarchy.

While a centralized structure is also typical of Russian organizations, waiting for decisions to travel up and down the chain of command has not been the chief cause of delays on the Russian side, according to Whitehouse. Decisionmaking delays on Russian projects are often attributable less to lack of delegation of responsibility but to a general lack of willingness to take responsibility across the board, Whitehouse, who has lived and worked in Russia since 1994 and has a Russian wife, said with a laugh. And, naturally, the delays of obtaining various permits and other official documents from local governmental authorities, so familiar to anyone who has spent time in Russia, played their role in pushing back the project’s schedule.

Main lobby

But Mr. Mu of CHMIIC was less inured to the bureaucratic delays that Mr. Whitehouse characterized as “normal for Russian projects.” Mu cited his construction experience in China and abroad to support his impression that things move much more slowly in Russia. Many projects in Beijing that began at the same time as Park Huaming are now complete, where as work on the complex in Moscow has barely begun, he said. In his country, important projects such as those involving foreign investment are typically fasttracked and receive preferential, priority treatment.

Park Huaming will be a symbol of Chinese-Russian partnership, but it will also be an island of ancient and modern Chinese cultural presence in the middle of Moscow. What this means is that it will be a 21st-century 42-story skyscraper full of office and retail space, an emblem of China’s booming economy and commercial dominance. However, it will also contain a park of traditional Chinese design, featuring peaceful, landscaped pedestrian paths and a monument to Confucius. Commenting that the park will speak to a love of nature that Mr. Mu identified as a Russian national characteristic that he admired, he said that overall the spirit of Eastern hospitality and fine service will permeate the complex.

And a good dose of hospitality is something Moscow could use, according to Mr. Mu, who commented that, coming from the Chinese tradition, he has found Moscow less than welcoming. In particular, he noted that the verbal directness characteristic of Russian business culture did not jibe well with certain Chinese behavioral norms, making for uncomfortable situations at times. For example, in Chinese culture, when there has clearly been a mistake or foul-up, it is considered polite to attribute fault to oneself before accusing someone else. When faced with such a situation, Mr. Mu’s time would begin with the customary suggestion that the blame lay with them. They found, however, that instead of countering with a similar admission of guilt, their Russian counterparts were quick to agree that the Chinese side was, in fact, at fault.

Shopping arcade

The first phase of the project, originally scheduled for completion in December of 2008 but now expected for the end of 2009, will include 200,000 square meters of office and retail space, including a hotel. Eventually, a second phase, which will include more office space and some retail space is planned for across the road from phase one, though this has yet to take shape and remains far off. In addition, a light rail link is planned to serve the development. Which tenants will move in is still unclear, as it is too early to start signing leases, but Whitehouse of Savant suggested that CHMIIC would probably seek to attract Chinese clients.

While China is a larger investment presence in such former Soviet states as Kazakhstan, at present Park Huaming is China’s first foray into real estate and construction in Russia. Perhaps once this project is complete it will serve as a foothold for expanded investment in Russia, perhaps extending into the regions as other foreign investors have. So this could be the beginning of a beautiful friendship.