23 February 2019
For areas near big cities to develop their local  economies, ease of commute is of primary importance. Photo: China Daily
For areas near big cities to develop their local economies, ease of commute is of primary importance. Photo: China Daily

Why transport construction plays look promising

China’s first-tier cities are always attractive for migrant workers because of the job opportunities they offer.

However, the large population of mega cities has put enormous pressure on public transport, housing, environment and public services, and has led to various issues such as overcrowding, traffic congestion and pollution.

Earlier this month the State Council revealed plans for the Xiongan New Area, which will absorb the non-capital functions of Beijing, and similar new cities are likely to emerge near other first-tier cities.

In the past, young Chinese flocked to these big cities to find good jobs. But then they found themselves at a disadvantage when trying to access public facilities and services because of hukou or the household registration system.

Many were also repelled by the skyrocketing home prices, pollution and traffic congestion in mega cities.

“Escape Beijing, Shanghai and Guangzhou” has become a buzzword.

City planners have also realized that an ever increasing population won’t be sustainable.

For example, Beijing said recently it intends to limit the city’s permanent population to below 23 million.

The capital city already had a population of 21.71 million by the end of 2015. That means the city barely has room for one million newcomers.

But population size is key to economic development. That is why the government is trying to integrate nearby areas into large cities.

The Xiongan New Area is one such example, in the same way Pudong has become a part of Shanghai and Panyu a part of Guangzhou.

However, many government-planned new areas eventually became “ghost towns” for lack of transport infrastructure and job opportunities.

As such, the government should focus on building transport infrastructure to ensure the success of these new areas.

Several Xiongan-related stocks have performed well in recent days.

Still, I believe infrastructure projects will be critical for the new city. And as such, transport construction firms stand to gain the most. These include China Communications Construction Co. (601800.CN), China Railway Construction Co. (601186.CN) and China Railway Group (601390.CN).

This article appeared in the Hong Kong Economic Journal on April 7

Translation by Julie Zhu

[Chinese version 中文版]

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