In a bid to decongest the sprawling and polluted capital of Beijing, the government is developing a “subsidiary capital” covering 2,000 sq. km. about 160 km. south of the capital city that President Xi Jinping envisions as a “world-class, green, modern, elegant first-class city.” It is potentially the largest development project in modern Chinese history and one that Xi considers a symbolic legacy of a leader described as the most powerful Chinese since Deng Xiaoping.
Once finished, the Xiongan New Area, with an eventual populationof 2.5 million, will take over some administrative and public institutions from Beijing along with accommodating company headquarters, financial institutions, higher education institutions and sci-tech units.
There are fears that the project could end up a monument to Xi’s hubris instead, given a long series of concerns including skyrocketing land prices, severe pollution in Hebei, massive public debt and other issues. Nonetheless, three years ago the government began transferring facilities away from Beijing to nearby regions and curbing its population growth, which has fallen by 353,000 in 2016 to “just” 23 million.
Since 2014, the Xi Jinping-Li Keqiang administration has been working on an ambitious urban integration project between Beijing, Hebei and the port city of Tianjin. The new-born megacity is known as Jing-Jin-Ji (“Jing” for Beijing, “Jin” for Tianjin and “Ji,” the traditional name for Hebei). At the time of the announcement, the Tongzhou District was designated for the relocation of structures deemed to be overcrowding the capital. Now Xiongan is about to become the second wing of the project.
Once completed, the area – encompassing the counties of Anxin, Rongcheng and Xiongxian – is expected to eventually be nearly three times the size of New York. With good road and rail access, Xiongan commuters will be able reach Beijing, Tianjin and Shijiazhuang, the Hebei capital, in about 30 minutes. The site is only 55 km from Beijing's international airport and 160 km from the city’s center.
The plan, officially announced on April 1, stems from a personal desire of Xi, who visited the area in February. On May 27, 2016, Xiongan New Area appeared for the first time in a report reviewed at a Political Bureau meeting of the CPC Central Committee. According to the Chinese leader, this is a "major historic and strategic decision" that would be "crucial for the millennium to come." Xi said the subsidiary center of Beijing and Xiongan New Area “should withstand the test of history, and be the legacy of this generation of CPC members.”
The acclaimed goal is to compete with the Pudong and Shenzhen Special Economic Zones. It is no coincidence that the former Communist Party boss of Shenzhen was recently appointed Hebei governor. Just as the first two pilot projects were launched by former leaders Deng Xiaoping and Jiang Zemin, Xiongan is expected to become the flagship project of the Xi Jinping era. The leadership reshuffle at this fall's 19th Communist Party Congress poses a political test for Xi and it has not gone without notice that the project is also aimed at strengthening his position among the ruling elite. Indeed, Xiongan has much to do with the “new normal” promoted by the president.
To date, there are 19 "New Areas" in China, 13 of which were established after December 2013 on the heels of the announcement of a new plan for sustainable urbanization aimed at having 70 percent of the Chinese population living in cities by 2030. The adjective "sustainable" highlights Beijing’s willingness to move away from the old pro-growth urbanization model of the last 30 years, which has caused severe air and water pollution, unbalanced services and the constant threat of the real estate bubble. The Hebei New Area is thought to boost this transition.
Nonetheless: why Xiongan? First, because – given its level of underdevelopment – thezone is in urgent need of infrastructure development. At present, Hebei local government revenues are mainly funded by land sales to real estate developers, who have no interest in building infrastructure. Considering that investment share of GDP was close to 50 percent, in the view of the central government, the project is primarily aimed to boost economic growth, which has dropped to its lowest level since 1990. According to Morgan Stanley, the New Area will lure as much as RMB2.4 trillion (US$348 billion) of investments over the next decade, adding as much as 0.4 percentage points to China’s economic growth every year. All this will be music to the ears of resources-related companies, which are struggling through a supply glut.
State media has spared no efforts to praise the extraordinary credentials of the “New Area,” one of the few places in the country where domestic heating comes from geothermal energy. The presence of Banyangdian Lake, the largest freshwater lake in the North China Plain, allegedly contributed to lay the groundwork for a green development, as Xi hopes. Intrigued by the fanfare, recently about 18,000 tourists came to the lake shore to celebrate Qingming Jie, or tomb-sweeping day, more than double the amount of the previous year.
Yet, behind the pretentious statements and the dizzying figures there are several pitfalls. Although the project is still little more than an idea, housing prices in the three counties have abruptly risen from RMB8,000 to RMB30,000 per square meter as speculators started flooding into the area, forcing authorities to impose a cap on sales. And while Beijing hopes to increase the local population from the current 100,000 inhabitants to 2.5 million, there are fears that many of the small local businesses will be relocated to make room for the new arrivals. The so-called “strategic” location of the project seems to be a matter of concern, too, as Hebei province is home to six of the 10 most polluted cities in China and the Banyangdian waters are severely contaminated, endangering the quality of the surrounding groundwater.
Last but not least, public debt – whichat the end of 2016 amounted to 277 percent of gross domestic product– castsa shadow over the profitability of the plan. Considering the many white elephant projects (mixed blessing for local governments) sparked in recent years, some have expressed perplexity about the actual functionality of the New Area.
As the Wall Street Journal points out, “other projects to build cities from scratch have misfired. The US$91 billion project of Caofeidian, a deep-water port built on reclaimed land, is mired in debt, full of abandoned buildings. Its steel mill is unprofitable. Massive government investment projects in Binhai New Area in Tianjin have since stalled. Both Binhai and Caofeidian are near Xiongan.”
What’s more, as some analysts have pointed out, while Shenzhen and Shanghai have been nourished by foreign capital, the substantial distance from the sea forces Xiongan to rely primarily on national resources.
Still, pitfalls notwithstanding, the supporters of the work can boast a formidable sponsor: Xi. In fact, of all the 18 new districts, Xiongan is the only one backed by both the Central Committee of the CPC and the State Council. It means that Beijing has full power and authority to relocate universities, public offices and state companies to the New Area. It is no wonder about 30 central state-owned enterprises (SOEs) have already showed their determination to underpin the development of the project. Put simply, it seems that the project – profitableor not – isdefinitely too big to fail.
Alessandra Colarizi is an Italian Sinologist, translator and freelance journalist. She is a regular contributor to Asia Sentinel