Bringing best practices to China

Donnie Sherwood

This summer, I traveled to China on behalf of the International Right of Way Association (IRWA) to teach two courses – Ethics and Appraisal for Partial Acquisitions to practicing real estate appraisers in China. As a first time visitor, I arrived with some pre-conceived ideas and impressions. I was well aware of China’s rapidly growing power in the world economy and I was prepared for a big language barrier. What I found surprised me and opened my eyes to the globalization taking place in our world and within the real estate industry. Upon arriving in Beijing it became immediately obvious there are a lot of people in China. In fact, China has a huge population of 1.3 billion, more than three times higher than the U.S. It also became obvious that our traffic congestion in the Dallas-Fort Worth area is nothing compared to the traffic congestion in Beijing. Fortunately, my host Mr. Shu Wu, president of Beijing Orient U.S. – China Consulting Inc., met me at the airport and whisked me to my hotel. Wu is a graduate of the University of Denver and a leading real estate practitioner. He and his associates would serve as guides and interpreters during my visit.

After a short stay in Beijing, I traveled to Guangzhou, China’s third largest city and situated on the Pearl River about 90 miles from Hong Kong. My class in Guangzhou consisted of 42 real estate appraisers who were very eager to learn. The Ethics class began with many questions such as “How much do you pay to get an assignment?” and “What percentage of value is your fee?” Of course, this opened the door to a whole host of ethical questions. During the class, the students wanted to know about my religious beliefs and if all Right of Way professionals shared the same beliefs. According to our guide, most Chinese don’t follow any religion and don’t dwell on the eternal. Needless to say, the discussion was interesting and hopefully enlightening to the class. The second course I taught dealt with eminent domain. Before the class, I wasn’t aware China had a condemnation process or the right of eminent domain. Its land ownership is different from the U.S. in that there is no private ownership. However, there is a need for public projects and sometimes people are forced to move. Chinese leaders are very concerned about public sentiment and the disruptions created by public infrastructure projects. They wanted to know how we evaluate the risk of public outcry and unrest prior to commencing a public project (such as a new road, new electric route, etc.). This is such a concern that the Chinese have developed a special form to evaluate such risks.

They also wanted to know if we appraise property based on its current risk or its highest and best use. Apparently, it is not unusual for the acquiring entity to pay compensation based on its current use and purchase more land than needed. Subsequently, the land is re-zoned (an arduous and expensive task), and the surplus land is then sold at a higher price to fund the project. The warmth and hospitality shown by the people I encountered was great. While there is still a lot of government control, many businesses have become privatized. American retail stores seem to be thriving and the number of building cranes I observed was staggering. Though the professional real estate people indicated that there is no overbuilding, my observations would indicate China (at least the cities I visited) were over-built. Multi-story apartments were being constructed everywhere. When I inquired about demand, my interpreters indicated that China is undergoing a huge shift in population from the rural markets to the urban centers. I then asked about employment – “Where will these new people work?” The reply was that some simply will rely upon the government while others will do low-skilled jobs. My observations were of course limited to a short stay and I certainly have much to learn about China. However, it appeared to me that the Chinese are trying to learn and adopt the best of what we do in the real estate field. I believe that over time, the ownership system will evolve to allow some form of private ownership and fairer treatment of those affected by Right of Way projects. The days of paying a farmer $30 and a new bicycle for his farm are thankfully coming to an end.

- FWBP Digital Partners -

Donnie Sherwood MAI, SR/WA, FRICS is a director in the Fort Worth office of Integra Realty Resources DFW. He can be reached at