China’s Xi Jinping in High-Stakes Gamble on Development Zone
China’s President Xi Jinping recently unveiled an ambitious plan to turn a massive underdeveloped area southwest of the capital into a technologically advanced economic zone.
The landlocked Xiongan New Area will be three times the size of New York City and is expected to become the next Shenzhen, China’s modern southern high-tech hub that is a bridge between Hong Kong and the mainland.
Together with Tongzhou, another new city just east of Beijing, Xi says the two will become the “wings” of the capital and create new growth engines for the entire area of Beijing, Tianjin and Hebei.
China’s North has long lagged behind the south as an economic driver and innovator in many sectors. And authorities efforts to reshape the capital are aiming to create new models of growth.
Critics, however, argue a state-led, top down approach, instead of allowing market forces full sway, is doomed to fail. Just as quickly as a plan was announced and starting to take off, it is already hitting some turbulence.
Locally related construction and other stocks initially soared following news of the plans for the new area. But after trading was halted for those shares for several days last week, many plunged on Monday when trading resumed.
News of the plan triggered a spike in housing prices after it was officially unveiled earlier this month. And in response, authorities have completely shut down the housing market and halted all development projects, including home remodeling.
State media say the central government has begun to map out a “high-quality master plan” for the new area.
For local residents, real estate companies, potential investors and homeowners, the situation is nothing but chaotic. And while news of the plan has only surfaced recently, the uncertainty has been going on for months, local residents say.
“Last year, the rumors were already starting to fly,” one farmer tells VOA. “We don’t know what’s going on? At first you couldn’t plant crops and now you can’t build? This is not normal.”
Another resident who drives a small electric tuk tuk for a living says that while his home was recently finished, he has been barred from moving in.
“Authorities haven’t said anything yet, but they will definitely demolish it,” he says. He also doubts the compensation authorities will offer will be enough.
Online the speculation is that authorities have stepped in to control housing prices to minimize what the government will have to pay for demolitions. How long the restrictions on the real estate sector will last is unclear.
Li Jie, managing director of North China, global real estate company Colliers International, says “it seems that the government is extraordinarily determined to apply the ban permanently.”
Li adds that Colliers believes that the central government has put the real estate industry on a negative list.
“In Xiongan there will be no residential development by private companies and no residential units,” Li says. In Colliers view, the Xiongan New Area will be different “from the rest of the country, where the real estate industry plays a vital role in economic growth.”
In recent comments about the new area, Vice Premier Zhang Gaoli says large scale property development will be prohibited in Xiongan.
What authorities will do with already finished or projects under construction is unclear.
Closed for business
At one development project not far from the area’s key natural attraction, Baiyan Lake, several white strips of paper with the Chinese characters “sequestered” on them, crisscross the door of a sales office for a big development project called Lugang New City.
All of the other offices VOA visited had similar sequestration strips and warnings about the halt of property sales.
Lugang New City’s office was deserted. On the wall, a large map of the area that shows a high-speed rail train leading to the city’s second airport, which is just south of the capital, and on to Beijing and Tiananmen Square.
Eventually, with such links, travel to the zone would be much more convenient.
Currently, however, it takes about two hours to drive to Xiongan from Beijing. When rail links are complete, it is expected that residents will be able to travel to both Beijing and Tianjin in about 30 minutes.
A red banner that hangs above the entrance to Lugang New City’s closed office reads “Maintain financial stability, together create a harmonious society.” Across the street, banners call for a crackdown on real estate speculation and the need for complete control of the housing market.
Market or state?
Local residents feel like they are caught in the middle. The surge of real estate prices will mean that it is even more difficult to buy a home. Some say they may have no choice but to move elsewhere.
“All I wanted to do is cry,” says one woman, when asked what her reaction was to the news of the new zone. “I haven’t been able to sleep or eat for days. I’ve worked half a lifetime and now I have to throw it all away.”
Before she could say more, her friends, quickly pulled her away and another man added. “It’s inevitable that some will get emotional.”
Online, criticism of the project is becoming heated.
A lengthy post by well-known businessman and blogger Ren Zhiqiang that was taken down from China’s Wechat social media app, argues that it is the market that drives the creation of cities, not grand state-led plans like the one that Xiongan is a part of, the merger of Tianjin, Hebei and Beijing.
“An unwillingness to accept these differences and competition, and instead use administrative power to force the creation of a unified city will inevitably fail,” Ren says.
The central government has characterized Xiongan as an auxiliary capital and there is talk that schools, universities and non-essential government departments will be relocated there. There are also rumors that state-owned enterprises will be forced to move there as well. But many argue that is highly unlikely.
An opinion piece on the influential Hong Kong based Website Inintium argued that the new zone was crucial for Xi Jinping’s legacy and efforts to promote his “Chinese Dream.”
The article argues that the new zone if handled well could provide a model that embodies that dream. It could also help dampen the impact of social issues or as the article put it “time bombs” threatening the legitimacy of his regime such as overpriced property, a yawning gap between the rich and poor and pollution.
Joyce Huang and Brian Kopczynski contributed to this report