China | Xiongan, Xi's legacy project, may not live up to its vaunted promise

Xiongan, Xi’s legacy project, may not live up to its vaunted promise

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Deng Xiaoping had Shenzhen, Jiang Zemin had Pudong. Xi Jinping wants his own legacy — and Xiongan is it. To that end, on April 1 the Central Government unveiled plans for the Xiongan New Area in Hebei province, about 100 kilometers southwest of downtown Beijing.

Encompassing the counties of Anxin, Rongcheng and Xiongxian, the Xiongan New Area will eventually cover 2,000 square kilometers, with a population of up to 2.5 million, many of them from the country’s capital, which is groaning under the strains of extreme pollution, crippling traffic jams and an overheated housing market.

Morgan Stanley forecasts the new area could lure as much as 2.4 trillion yuan (US$347 billion) in investment during the next decade, adding as much as a 0.4 percentage point to economic growth every year, making it the largest infrastructure project in the history of modern China.

Political scientist Chen Daoyin, from Shanghai University of Political Science and Law, said it was clear that the scheme was Xi’s personal project, noting that the State Council and the National People’s Congress were barely mentioned in the decision-making process.

“By creating Xiongan, Xi is trying to match his economic achievement with his political power,” Chen said.

‘A good choice’ and no trouble for the locals

The idea of the Xiongan New Area has been bouncing around for at least two years, but the first official mention came at a Chinese Communist Party meeting in April 2015 when Xi suggested investigating the possibility of a new city in Hebei to relieve Beijing of its many problems. But it wasn’t until May 27 last year that the project was reviewed at a meeting of the Politburo.

Xi made a much-publicized visit to the area in February this year during which he declared it “a good choice, as it will not create too much trouble for locals.”

China has seen similar initiatives in its recent history. The Special Economic Zones created in the 1980s in the southern and coastal region spawned China’s economic miracle. Shenzhen, Xiamen and Zhuhai were relatively quiet villages before they were singled out as testing grounds for Deng’s economic reforms and openness, and partial abandonment of the planned economy.

Then came the Pudong area of Shanghai, whose remarkable re-purposing in the early 1990s helped make the city one of the world’s key international trade and financial centers.

Pundits are dubious about Xiongan’s potential

And while the Xiongan New Area will revive memories of those glorious projects, some pundits have doubts about its true potential. For Rafael Halpin, head of research at investment bank NSBO, “It is essentially a greenfield site, with very little in the way of existing manufacturing expertise and no nearby financial centers to call upon,” suggesting that all the initiative will create is “another political center.”

Raising concerns is a Western prerogative, yet this time the doubts seem legitimate. In the 1980s and early 1990s there was space and scope for such grand projects, but the Xiongan New Area seems to lack the context to fully succeed. It is being touted as a cure-all to address long overdue economic reforms and to provide relief for Beijing, but the cracks in this strategy are already starting to show.

[Property] speculation will be a difficult beast to slay and will inevitably leave behind the latecomers or those unable to take advantage of the situation, especially local people, who are already showing mixed feelings about the project

The former Communist Party boss of Shenzhen has been appointed governor of Hebei province and has been presented as the right man for the project. However, Xiongan is not Shenzhen. Far from it. While the latter is on Hong Kong’s doorstep — with its solid financial background — and enjoyed easy access to the fluvial and maritime ways to make it a hotspot for economic development, Xiongan is considered a backwater, poorly connected and with little or no experience in manufacturing or the services sector.

It is also doubtful whether it will have what it takes to become a center of innovation as major research companies will be reluctant to move so far from the top Chinese universities in Beijing. The same might be said of foreign companies that will not appreciate relocating or establishing their headquarters in a de facto suburban area.

Perhaps even more significantly, the frenzy surrounding the project saw property prices in area soar, forcing the government to halt all sales. Speculation will be a difficult beast to slay and will inevitably leave behind the latecomers or those unable to take advantage of the situation, especially local people, who are already showing mixed feelings about the project. Those concerns were given voice recently by Vice Premier Zhang Gaoli who noted that “[the zone] will be developed gradually and methodically” with “no large-scale real estate development or illegal constructions.” Easy to say, not so easy to deliver.

Meanwhile, the Hebei province administration filed documents in the hope of creating up to 10 financial institutions to help in the creation of the Xiongan area, an application that was promptly dismissed as unnecessary by central authorities.

The project comes at a time when the One Belt, One Road initiative gets off to a bumpy start and, even if Zhang Gaoli has declared the Xiongan New Area a partner of the OBOR, it is hard to imagine any relationship between them.

 

Alberto Sperindio
Alberto Sperindio graduated in Oriental Languages and Civilizations from the University of Naples L’Orientale. He is studying Chinese language and economics at Xi’an Jiaotong University, China.
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