China’s dream city in Hebei

President Xi Jinping has decided to develop “Xiongan New Area” in northern Hebei province as a metropolis to rival the two special economic zones. The area, about 100 km southwest of Beijing, is planned to become an annex of Beijing, to take pressure off the nation’s capital, with it struggling to cope with a population of more than 20 million people. It is hoped that a big slice of Beijing’s “non-capital functions”, from business to universities, will be relocated to Xiongan.

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The Communist Party’s Central Committee announced on 1 April that Xiong, Rongcheng and Anxin counties would be home to a new area to rival special economic zones like Shenzhen. The new area is planned to cover 100 sq km initially, and will eventually reach 2,000 sq km. Beijing’s traffic jams are terrible, its subways overloaded and its water supply running low. In recent years planners have encouraged people to move away from the centre, to suburbs and nearby cities. The creation of Xiongan marks an escalation in these efforts: China wants to make it a model city, with a clean environment, fast transport and high-tech industries, to attract millions of people.

Although there are no blueprints yet and details are hazy, many people are expecting to entail a massive amount of investment. Once the development was announced, local hotels were booked up and roads packed with cars as prospective investors flocked to what is still largely farmland. The shares of companies such as local cement-makers and real-estate developers soared in value. Moreover, speculators rush in to snap up real estate bargains in Hebei. Housing prices in Xiong county, an economic backwater, soared overnight from RMB 10,000 per sqm to RMB 17,000 per sqm. The flood of bargain hunters has prompted officials from Xiong and Anxin counties to impose a ban on all property sales.

The government has pointed to Shenzhen, a southern metropolis, and Pudong, Shanghai’s financial district, as examples of successful urban developments that it hopes to replicate. Yet there are also plenty of new areas—notably, Binhai in Tianjin, just east of Xiongan—that have failed to take root. One problem that has plagued these urban projects is changes in government leadership, which have made them to lose their funding. Xiongan should fare better in this regard as it has strong backing from Xi Jinping, China’s powerful president who has another five-year term.

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