China’s Largest Conglomerate Buys Building Housing JPMorgan’s Gold Vault

In what is the most remarkable news of the day, which has so far passed very quietly under the radar, Fosun International, China’s largest private-owned conglomerate which invests in commodities, properties and pharmaceuticals also known as “Shanghai’s Hutchison Whampoa”, announced in a statement filed just as quietly with the Hong Kong stock exchange, that it had purchased JPM’s iconic former headquarters, the tower built by none other than David Rockefeller, at 1 Chase Manhattan Plaza for a measly $725 million.

Here is Bloomberg described the transaction:

Over the past year, other Chinese developers and wealthy investors have been buying real estate in the U.S.

China Vanke Co., the biggest home builder listed in mainland China, said in February it joined a residential real estate venture in San Francisco. The families of Zhang Xin, co-founder of Soho China Ltd. (410), the biggest developer in Beijing’s central business district, and Brazilian banking billionaire Moise Safra this year bought a 40 percent stake in New York’s General Motors Building.

The landmark 1 Chase Manhattan Plaza, designed by architect Gordon Bunshaft and built in the 1950s, was once the headquarters of Chase Manhattan Bank. Rockefeller, as head of the bank’s building committee, selected the site and oversaw its construction.

JPMorgan intends to relocate about 4,000 employees, most of the people who work in the 60-story skyscraper, to other New York locations, Brian Marchiony, a spokesman, said in August. JPMorgan occupies about half of its space.

None of this is particularly newsworthy What is, however, is what Zero Hedge exclusively reported back in March, namely that the very same former JPM HQ at 1 Chase Manhattan Plaza is also the building that houses the firm’s commercial gold vault: incidentally, the largest in the world.

Recall:

What do we know about 1 Chase Manhattan Plaza. Well, aside from the fact that the 60-story structure, built in the 1950s, was the headquarters of the once-legendary Chase Manhattan corporation, and which when it was built was the world’s sixth tallest building, not much.

So we set off to learn more.

To learn more, we first went to the motherlode: the Landmarks Preservation Commission, whose report on 1 CMP describes everyone one wants to know about this building and then much more, such as that:

One Chase Manhattan Plaza combines three main components: a 60-story tower, a 2½ acre plaza, and a 6-story base, of which 5 floors are beneath grade.

So the old Chase HQ, once the stomping grounds of one David Rockefeller, and soon to be the other half of JPMorgan Chase, has 5 sub-basements, just like the NY Fed…

Reading on:

Excavations, said to be the largest in New York City history, reached a depth of 90 feet

Or, about the same depth as the bottom-most sub-basement under the NY Fed…

But then we hit the jackpot:

Originally constructed with white marble terrazzo paving and enclosed by a solid parapet of white marble travertine that was personally selected by Bunshaft in Tivoli, Italy, the L-shaped plaza levels the sloping site and conceals six floors of operations that would have been difficult to fit into a single floor of the tower, including an auditorium seating 800 [and] the world’s largest bank vault.

And there you have it: the JPM vault, recommissioned to become a commercial vault, just happens to also be the “world’s largest bank vault.”

Digging some more into the curious nature of this biggest bank vault in the world, we learn the following, courtesy of a freely available book written by one of the architects:

On the lowest level was the vault, which rested directly on the rock – the “largest bank vault in the world, longer than a football field.” It was anchored to the bedrock with steel rods. This was to prevent the watertight, concrete structure from floating to the surface like a huge bubble in the event that an atomic bomb falling in the bay would blow away the building and flood the area.

In other words, the world’s biggest bank vault, that belonging to the private Chase Manhattan empire, and then, to JPMorgan, was so safe, the creators even had a plan of action should it sustain a near-direct hit from a nuclear bomb, and suffer epic flooding (such as that from Hurricane Sandy).

So, what the real news of today is not that JPM is selling its gold vault, we knew that two months ago, or that it is outright looking to exit the physical commodities business, that too was pre-announced. What is extremely notable is that in one very quiet transaction, China just acquired the building that houses the world’s largest gold vault.

Why? We don’t know. We do know that China’s gross gold imports from Hong Kong alone have amounted to over 2000 tons in the past two years. This excludes imports from other sources, and certainly internal gold mining and production.

One guess: China has decided it has its fill of domestically held gold and is starting to acquire gold warehouses in the banking capitals of the world.

For now the reason why is unclear but we are confident the answer will present itself shortly.

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What China Really Thinks of the Shutdown

In the midst of a domestic crisis, it is easy to forget that the rest of the world is watching. Now that the U.S. federal government has shut down for the first time since the mid 1990s, the talk of the town is the political problems of the world’s largest economy and sole superpower. In China, most media reports about the shutdown have been merely informative, but every now and then they offer a rare insight into what the Chinese have learned about America’s shortcomings.

“As far as the Chinese populace is concerned, the government shutdown is like the Arabian Nights,” writes Wang Xuejing of Hong Kong Daily News. Evidently, for the citizens of a totalitarian state, the prospect of a government shutdown seems otherworldly. The newspaper Qilu Wanbao complains, “To us, far on the other side of the ocean, the information appears contradictory. Some say Americans are furious […] Some say [everyday] life remains unchanged. Have or haven’t Americans been affected by the federal shutdown?”

The notion of a government shutdown is strange for the average Chinese person because its consequences in the People’s Republic would go far beyond closed federal agencies and parks. In mainland China, and increasingly Hong Kong, every school and every agency (national and local) answers to a party minder. Banking and internet traffic are also closely monitored by Beijing. Should the party overseers be absent one day, many organizations crucial to China’s social structure would suddenly find themselves without official guidance. The effects of such an abrupt and unfamiliar decentralization are impossible to predict.

Yet other commentators find the federal shutdown inspiring. Dr. Li Xiaohui, Assistant Professor of Law at Xiamen University writes, “The life of the average American has not been greatly affected by it and the economy has continued to grow. This reflects the clear limits between America’s government and the market. Our country should likewise move forward and decouple the government from the economy.” Similarly, the newspaper Nanfang Dushi Bao commended the strength of American society for being able to function without the government.Interestingly, while the American public sees the shutdown as a government failure, some Chinese are seeing it as a sign of efficiency. The common belief that the Chinese words for “opportunity” and “crisis” are the same, though wildly untrue, seems applicable in this case.

While common Chinese citizens muse over the implications of a shutdown, China’s leadership has been giving the impression of merrily promenading through Southeast Asia, stealing the international spotlight. Taking advantage of Obama’s absence at the recent APEC and East Asia summits, President Xi Jinping visited Malaysia and Indonesia with a friendly demeanor that his predecessor would have likely avoided, greeting the Indonesian parliament in the local language and visibly travelling with his celebrity wife Peng Liyuan. In Brunei, on the other hand, Premier Li Keqiang stuck to the usual rhetoric of making progress on a code of conduct for the South China Sea disputes and indirectly urged the U.S. not to get involved.

But aside from bewilderment and contentment over the shutdown, there is also concern in China about the possibility of a future U.S. default. At a recent news conference in Beijing, China’s Vice Finance Minster Zhu Guangyao said that the U.S. must protect its creditors, stating, “safeguarding the debt is of vital importance to the economy of the U.S. and the world […] This is the United States’ responsibility.” Dr. Li echoed the Minister’s message, “The shutdown of the American government is a warning to our compatriots that we should optimize the allocation of our foreign exchange reserves.”

As the largest holder of U.S. debt, China unsurprisingly appears more concerned about American solvency than about the unfamiliar mechanics of a representative democracy. Despite this, China as a whole also appears to be learning a great deal from the shutdown, not only about the American political system, but also about itself and its future. As the shutdown enters its third week, it remains to be seen if America will learn something as well.

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