(CNN) — It might just be the most controversial McDonald's outlet in the world. The fast food chain has opened a McCafe franchise in an historic building in the eastern Chinese city of Hangzhou.
Located near the city's famous West Lake, the 84-year-old villa once briefly housed a former Taiwan leader. The McDonald's-owned food and drink outlet made national and Taiwanese headlines following its opening last weekend.
Public opinion has framed it as a classic example of Western cultures invading China and business owners desecrating old villas. It mirrors similar controversy that erupted in 2000 when coffee chain Starbucks opened a branch in Beijing's ancient Forbidden City -- only to close it in 2007.
But the Hangzhou McCafe story is further complicated by the building's history and local red tape.
History and controversy
Chiang Ching-kuo, former Taiwan leader and son of former Kuomintang (KMT) leader Chiang Kai-shek, stayed at the two-story wood-and-brick villa for nearly a month in the 1940s before the KMT lost the civil war to the Chinese Communist Party and receded to Taiwan.
When the Communist Party entered Hangzhou in 1949, the government seized the building and used it as an employee residence until 2004, when it was declared a cultural relic.
Local authorities then sublet it to a real estate company that ran it as a private club until 2014 when all such venues were closed as a part of an anti-corruption campaign by Chinese President Xi Jinping.
Local businessman Shen Chunlei, who owns a real estate planning company, took the lease over, renovated the villa and opened the McCafe on November 15. State media first reported the renovation plans back in January, sparking public anger.
Many locals decried it as an act of Western cultural desecration.
But the move doesn't breach Chinese law, a local Cultural Relics Bureau official surnamed Wang, who refused to give his full name, told CNN.
Shen, who rented the villa from the government in 2014, defended his actions to CNN.
He insisted that the building had only briefly hosted Chiang and had fallen into disrepair before he took over the lease, leaving him with the bureaucratic nightmare of getting renovations approved.
"I paid to renovate and manage an old, poorly maintained building that barely had been laid eyes on, and everybody found fault with me," he told CNN.
He says he doled out $800,000 to fix up the villa, on top of which he must pay rent to the local government.
Shen says he now regrets embarking on such a challenging venture only to be accused of being a greedy, money-driven businessman.
"I spent all that money maintaining and managing the property, of course I would hope for it to generate revenues," he said.
Why a McCafe?
While the building's exterior remains unchanged, inside the McCafe is decorated with posters about Chiang's life, as required by the local Cultural Relics Bureau.
To Shen, it is a way to pay respect to the old building, while complying with regulations on using historic properties in Hangzhou -- a popular tourist destination that has been home to hundreds of famous Chinese over the centuries.
Government rules insist historic villas near West Lake can only be turned into retail properties if open flames are not used. That rules out most Chinese restaurants, but not Western coffee chains that rely only on electricity, says Shen.
That's why, he adds, foreign brands like Starbucks and Costa are already well established in the area.
Wang, of the Cultural Relics Bureau, says opening the McCafe is an efficient use of a building that until now had mostly been closed to the public.
"From our point of view, we would hope to fully utilize its public value, turning it into a museum and make it open to the public."
"But it doesn't mean it couldn't be commercialized -- the law doesn't ban that, and the coffee shop meets the municipal planning criteria. It's not a restaurant after all."