Date
20 August 2017
Chinese President Xi Jinping aims to connect his name with Xiongan New Area. Photo: Xinhua
Chinese President Xi Jinping aims to connect his name with Xiongan New Area. Photo: Xinhua

China’s new area unlikely to succeed in next 10 years: Analyst

At the direction of President Xi Jinping, Xiongan New Area has been lauded by the state media as a demonstration for a new model of urban development.

However, given all kinds of difficulties ahead, it will be unlikely to see any major advances in the next 10 years, according to an analyst from the Economist Intelligence Unit (EIU).

The state media said the new area would be transformed into a global financial and technology center to rival Shenzhen and Shanghai.

However, conditions in China have changed drastically, said Dan Wang of EIU.

“Development cost of Shenzhen and Pudong was much cheaper as there were excess labor and cheap land resources in the 1980s and 1990s.” 

But the two favorable factors do not exist anymore. Besides, years have passed since the rapid growth in China’s industrialization and the nation is now facing much stagnant global demand.

After the successes in Shenzhen and Pudong, many Chinese provinces and municipalities have established their own trade zones, with a dozen failed attempts.

For example, Binhai New Area in Tianjin, promised to be the world’s biggest financial center with its proximity to Tianjin port, never blossomed as planned.

“There isn’t any port near Xiongan,” Dan said.

Hindered by its inferior infrastructure and bad geography, Xiongan will be no match for even Binhai Bew Area in the next 10 to 20 years, Dan said.

According to Dan, another adverse factor for the new area is China’s upcoming deleveraging campaign.

At the 19th party congress this October, she expects Xi to be reelected as the nation’s leader for the next five years.

“He will be likely to execute the deleveraging campaign, and that will inflict serious pain on corporate in China, especially state-owned enterprises.”

Morgan Stanley expects investment in infrastructure and relocation of Xiongan New Area to run to about 2 trillion yuan (US$290 billion) in the first 15 years.

However, Dan suggests that the coming deleveraging would lead to a notable decline in development capital, which will be a peculiar predicament for Xiongan, as well as other new areas and free-trade zones (seven more free-trade zones were announced on the same day as Xiongan).

“The Xiongan plan reminds me of the Research Triangle Park (RTP) in North Carolina,” Dan said.

As one of the most prominent high-tech R&D parks in the US, RTP was created out of nothing in 1959.

“With the government’s preferential policies, far more efficient private sector and the technology edge, it still took more than 40 years to become established.”

Translation by Ben Ng with additional reporting

[Chinese version 中文版]

– Contact us at english@hkej.com

BN/RA

Xiongxian county, part of the new special economic zone Xiongan New Area, will be transformed into a high-tech garden city. Photo: Reuters


Xiongan New Area has been lauded by the state media as a demonstration for a new model of urban development. Photo: Xinhua


A retailer promotes an electric water heater. The ad features President Xi Jinping and China’s first lady Peng Liyuan. Photo: HKEJ


EJ Insight writer

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