The city of Baoding has become the focus of speculative attention with rumors that it will become a “mini capital” or a political center as Beijing, Tianjin and Hebei province integrate. As a result, related stocks have become hot picks and home units there investment targets. The Hong Kong Economic Journal’s EJ Tactics column takes a closer look at Baoding’s prospects.
According to data from property portal SouFun.com, 10 residential projects in Baoding raised their prices shortly after the rumors started circulating. The increment ranged from 300 yuan (US$48.31) to 700 yuan per square meter. More than 2,000 units together valued at over 1 billion yuan have been sold in past seven days.
The Hebei provincial government confirmed in a document last week that some administrative functions would be transferred from Beijing to Baoding. The document laid out plans for the province to integrate in the interests of national strategic development, with Baoding to shoulder some functions of the capital and to be at the core of an economic zone.
Market observers saw the plans, which first appeared in another document on urban development, as a sign that Baoding will become a mini political center.
In these documents from Hebei, the provincial government listed the roles that Baoding might take over, including responsibility for certain administrative units, tertiary institutions, research institutes, hospitals and nursing homes. The city is also poised to make a name for itself in high-end equipment manufacturing, alternative fuels, energy conservation, environmental protection and modern logistics. But the National Development and Reform Commission said those plans are only at provincial level, and not a national strategy.
Despite these diverging views on the potential for a mini capital in Baoding, many investors are buying the concept of a second capital to ease water, pollution and traffic pressures on Beijing and its 21 million-plus people.
Just 150 kilometers from the capital, or a 40-minute ride on a high-speed train, Baoding could reduce the Beijing’s burden by becoming a satellite metropolis. A satellite metropolis refers to a town built near a large city, with ample jobs and well-developed public facilities.
Overseas experience shows that it usually takes a big manufacturing sector to draw the large working population needed to make a satellite city a success. A huge working population has various needs and demands, bolstering the development of other service industries.
But Baoding barely has any heavy industry. The most prominent sector in the city is new energy, such as solar power. The city has been struggling due to a slump in the photovoltaics sector.
Baoding is also far from being the richest of Hebei’s cities. Its total gross domestic product (GDP) stood at 268 billion yuan last year, putting it fifth in the province. Ranked by per capita GDP, Baoding slips even further to the number 10 spot.
Baoding’s other disadvantages include poor education levels and medical standards, as well as a low vehicle possession ratio, making it hard to retain talent. Beijing has tried before to establish new towns around the old areas but to no avail due to inadequate job opportunities.
Of course, the Baoding government and related real estate developers would like to make some quick money from the mini-capital theme, yet much-needed town planning and development can’t be realized overnight.
– Contact us at [email protected]