Dear friends, China has become an expert in building cities... from scratch.
Cities that in many cases, it is true, end up empty or with occupancy rates far
below those initially estimated. In the rest of the world they are
known as China's ghost towns. But... No. We're not going to
go there in this video, because we've already told you about several of them.
In this video we will talk about the rise of one of XI Jinping’s own personal projects.
A project that the Chinese president hopes will become a shining example of the future
development model for the whole country. A change of paradigm where the government,
the State and Xi himself want to play a more leading role in the development of
the territory and the local networks that make up the economic and social fabric.
Contrary to what has been done so far. But friends, far from the market criteria
that defined the evolution of the so-called "Special Economic Zones",
as for example the well-known cases of Shenzhen [Shen Djen] or the Pudong district in Shanghai,
this new development that we are going to look at is completely different.
I am referring to the new area of Xiongan [Jong an - “J” like second “G” in English “garage”], a
project that is already underway and that aims to become the Megacity of the 21st century.
A new city that will occupy three rural counties: Rongcheng, Xiongxian and Anxin, in Hebei Province.
But that's just the beginning. Although the project estimates that in its first phase this
city will occupy 100 km², the intention is that in the medium-term its size will exceed 2,000 km².
To give you an idea, that's almost three times more than the entire area of New York City.
Located near Beijing but in a much less developed area and with serious pollution problems,
Xiongan aims to become the most technological,
best connected and most environmentally sustainable city in China by 2035.
With a master plan that takes into account several phases of development
reaching until 2050, the investment that the Chinese government has committed to
this new urban space is stratospheric. According to Morgan Stanley's estimates,
we are talking about a budget of between $170 and $300 billion dollars, of which
approximately half will be used to provide this new metropolis with ultra-modern infrastructure.
The idea is that Xiongan will complete a strategic triangle from an economic point of view:
the city will be located about 100 kilometers from both Beijing and Tianjin [Tián-Chin], an
important port and industrial city. In addition, it would be connected to the new
Beijing Daxing Airport [Běijīng Dàxīng] in just 20 minutes, and be only half an hour from Beijing's
city center, thanks to a high-speed train. With these strategic ambitions, and because
of the enormous challenge it represents, many analysts and experts have compared
this project to the cases of Shenzhen, which was promoted by President Deng Xiaoping in the 80s,
and the Pudong district in Shanghai, which was promoted by Jiang Zemin in the 90s.
In fact, it was precisely the establishment of these two special economic areas that
laid the foundation of modern China, a China that is open to the market and the world.
However, friends, Jingping's pet project doesn’t really resemble either of his predecessors’.
What Xi Jingping is trying to do here is just the opposite: to show that a new socialist
China is possible, firmly led by the Chinese Communist Party. A city where the most
important thing is not market-oriented economic growth, but the State itself.
But.... Hold on. Can a project that does not put private initiative first be successful?
What can be learned from past experiences? Will Xiongan be a success or a failure?
Before answering these questions, we will take a closer look at Shenzhen, the light
that illuminated the dawn of the Asian giant. The first successful large-scale experiment that
changed the Chinese model forever. Listen up.
(THE SYMBOL OF THE DENG XIAOPING REVOLUTION) Dear friends of VisualPolitik, when we talk
about the phenomenal transformation of China, in most cases we are not really
aware of the dizzying speed with which it occurred nor what the starting point was.
You see, in the late 1970s, then Chinese leader, Deng Xiaoping, was warned that food production
and industry levels were rapidly declining. There was a risk that a scenario similar to
the great Chinese famine that killed millions of people between 1959 and 1961 would be repeated.
For this reason, Deng Xiaoping, a leader who had already belonged to the reformist wing of
the government in the Mao era, decided to try his luck with a new economic system that started in a
small and poor fishing village of barely 30,000 inhabitants that was attached to Hong Kong.
We’re talking, of course, about Shenzhen.
There, in Guangdong Province, the Chinese government established the first special
economic zones in history, and the first space in mainland China since the Kuomintang era where
private investment and business were allowed. In fact, looking at it from the present,
we can say that this special economic area was the first stone in the foundation of the new China.
To give you an idea, that small fishing village of barely 3 km² grew and grew to become a giant with
12 million inhabitants, 2,000 km² of surface area and a GDP equivalent to that of all of Israel,
or a quarter of that of all of Spain. With a historical average annual growth
of more than 20% and more than $30,000 of GDP per capita, from an economic point of view,
Shenzhen is already at the level of some of the most developed countries in the world.
So much so that, in the four decades since this special economic area was established,
Shenzhen's wealth has increased
10,000-fold. Yes, yes, you heard that correctly, by 10,000 times in just 40 years.
It is not surprising, therefore, that this has been precisely the engine of the new China that
we know today, and the place that has seen the birth of companies as well known as Huawei,
Tencent, DJI or ZTE. Or that it was,
out of interest, the first destination that Xi Jinping visited when he started his job
as general secretary of the party in 2012. (AUDIO: Echoes of Deng Xiaoping as Xi Jinping
heads to Shenzhen on first inspection trip. SCMP) In fact, this metropolis is home to some
70,000 technology companies, which means that roughly 5% of Shenzhen's
GDP goes to research and development. However, behind these crazy figures there is
more than just a special economic zone. You see, the location chosen for what was one of the first
"capitalist" zones in China, right beside Hong Kong and Macao, was by no means a coincidence.
In 1979 Hong Kong and Macau were two much richer and more developed territories than the rest
of mainland China, and the differences between Shenzhen and neighbouring Guangzhou were radical.
Precisely because of this, the choice of the small cities of Shenzhen, Shantou and Zhuhai
in Guangdong Province; of the city of Xiamen in Fujian Province and of the island-province of
Hainan for the Chinese Government's capitalist experiment was not a matter of chance.
One of the keys was to generate symbiosis with Hong Kong and Macao,
to take advantage of the experience, activity and enormous human and financial capital
of these two enclaves in order to promote the development of the Chinese mainland.
At the same time, if the experiment worked, it would create an integrated area that would
basically facilitate the future absorption of Macao and Hong Kong, which at that time were
not yet under Chinese sovereignty. And as we all know today, the plan worked wonders,
both economically and politically. The fact is, friends, that Shenzhen's
development model began to be replicated all over China during the 80s and 90s, until we
reach the present day, the Xi Jinping era. Xi, who is considered the most powerful Chinese
president since Mao Zedong and at the same time the leader of the economically strongest China
in history, intends to try his luck with a new model of a special economic area,
a model that has little to do with the one that brought success and development to China.
Do you want to see it? Well then, yes, let's take a look at Xiongan's new Chinese dream.
(XIONGAN: XI’S MODEL FOR CHINA) As we have already told you,
the New Xiongan Area aims to break with the model of the traditional special
economic areas that power the current China. Xi Jinping wants to spend obscene amounts on
his gamble of a new model for the future that, according to him, will guide the next 1,000 years
of socialism with Chinese characteristics. (AUDIO: "Xi has a more convinced view of the
necessity of a very large, direct State role in the economy than Deng ever did." - Arthur Kroeber,
China researcher and managing director of Gavekal Dragonomics)
Although Xiongan is technically a special economic area, the truth is that market criteria will not
be the priority nor will the market agents, the companies, have the leadership. No,
nothing like that. It is a special zone piloted and financed entirely by the central government.
A city by and for the State. [Smells like trouble!]
(CHART: PUBLIC INVESTMENT IN LARGE PROJECTS IN CHINA)
In fact, as you can see in this graph, the Chinese government intends Xiongan
to be the largest public investment project in the entire history of China.
But it doesn't end there.
This project will not be led by private companies;
it is the state that intends to pilot the process through a huge investment of public resources,
none of them being oriented to international investment.
And take note because not even the real estate activity will fall to private initiative. Each
and every residential complex to be built in Xiongan will be promoted by the State
and the property will remain public. Which, by the way, has very significant consequences.
For example, the public monopoly on real estate activity will mean that Xiongan
will not generate the huge revenues from real estate transactions like
the many billions in foreign investment injected into the development process of
the Guangzhou-Shenzhen area and many other economic areas dotted around the country.
And by the way, as there is no private ownership of land in China, the farmers currently working in
the Xiongan area will be immediately dispossessed with compensation that the state will decide
arbitrarily. Thousands of farmers will face serious difficulties. Not exactly a great start.
By the way, one of the ironies is that living in Xiongan will be closely linked to work.
This may not sound like a bad idea at all, but there is a problem:
since the housing is state-owned, it’s tied to the job and many believe that losing your job or
moving to another one outside Xiongan will mean losing the right to live in the city as well.
Even more control for the One Party. But the big question is... If this
macroplan has been designed without putting private initiative first,
what do they intend to fund it with? What does Xi Jinping intend to be the driving force of what is
being hailed as China’s greatest city, perhaps even the future capital of the whole country?
Well... although it may seem strange to you, the gamble is that Xiongan will be
set up to absorb the non-administrative functions of Beijing in its first stage.
In this way, the Chinese government wants to move universities, public companies,
hospitals, research centers and organizations of all kinds there.
Everything, of course, that is state-owned or closely controlled by the state. It is even
intended that private participation could take place but only through consortiums that allow
private companies to operate but where the Chinese government always takes the lead.
In other words, what Xi Jinping proposes is nothing less than to create a fort, a new city
that is not based on trade or competition, but on the public sector.
And he also wants it to be the emblem of the new China.
Along these lines, the development plans envisage that the population of this new metropolis will
grow to more than 7 million inhabitants over the next few decades while at the
same time becoming a model of sustainability. Because the Chinese president’s idea is that
Xiongan will also be a green city, a kind of guinea pig on how to build urban models in a
new era of low emission companies, industries and transport. All of which may sound strange
in the world's most polluting country. In any case, the first step has been to
close all factories and companies in the area that don’t meet the new standards. Since 2017
the Chinese government has ordered the closure of more than 5,000 companies
and factories in the region. And the process will continue until the area is "cleaned up".
Now, let’s take a minute. Many experts who have thoroughly analyzed the project believe that,
not only will it not replicate Shenzhen's success,
but there is a high risk that the city will become a complete failure.
Let me explain. This idea of building a city based almost exclusively on civil servants and
public money and which is far removed from the dynamics of competition and market innovation,
well, what can I say? And if we take into account whose hands are controlling the Chinese public
sector… well the picture is even more bleak. Having said that, the question we should all be
asking at this point is .... Can a new city that is oblivious to the demands of the
market succeed in 21st century China? Does it really have something unique,
something groundbreaking to offer? Well, let's take a look.
(STORY OF A PREDICTED FAILURE?) When we speak of failure in Chinese terms, we do
not mean that the city will not be built or that it will not be a step forward for the region.
Remember that this is an underdeveloped rural area and any investment in infrastructure,
companies, hospitals, universities and other facilities will undoubtedly
be an improvement on the original situation. However, realistically, it is very, very likely
that the model that Xi Jinping wants to test for China's future here will simply not work.
The first problem is its location. Unlike Shenzhen, which is next to the financial
hub of Hong Kong and also has direct access to the sea, Xiongan is inland, in an area that is
very cold in winter, warm in summer and where living conditions are basically unpleasant.
And although the infrastructure that is already being built is impressive and
promises to connect the new city to Beijing in half an hour, it is not entirely clear
that this will convince people to move there, at least not in the numbers that Beijing expects.
In addition, let’s consider the regulations that will be in place for private activities and the
plans for the public sector to be the one that plays the leading role. Xiongan may well end up
becoming a boring city of public workers forcibly transferred from Beijing. Hardly a drawcard.
Xiongan has tough competition .... in China itself. What would lead you to establish
a business in Xiongan, if you were also able to do it, for example, in the Yangtze delta?
Now, apart from the doubts about the success of this city or the rejection
of a project that seems, in practice, nothing more than a return to old Soviet projects of
the mid-twentieth century designed to consolidate the political power of the Communist Party elites,
the truth is that the ambition of Xi Jinping and the enormous amounts of money involved could
give rise to a very odd kind of city-museum. An ultramodern city that was built overnight
in a place where there was little more than rice fields and very humble peasant houses.
(AUDIO: "I wouldn't be surprised if it doesn't work half as successfully [as China expects].
But it will be more impressive than anything we've seen in the West for 50 years." - Qiao Runling,
urban development expert at the National Development and Reform Commission.)
Be that as it may, we'll have to wait until at least 2035 to see what happens with Xiongan,
but friends, for the moment the bulldozers and cranes have already entered the three
counties and the construction of the main infrastructure is already well underway.
For example, the Xiongan mega train station which, with its 475,000 square meters and a
cost of more than $1.1 billion dollars, will be the central communications hub of Xiongan.
This station is expected to open its doors between the end of 2020 and the beginning of 2021.
In any case, what is clear is that we are facing a new experiment with a single
objective: to consolidate the power of Xi Jinping and the political
aristocrats of the Chinese Communist Party. Note that while Xiongan was being launched,
Xi Jinping has also announced the creation of New Special Economic Zones, so,
in itself, Xiongan does not represent a departure from China's economic development
policy. But the experiment is underway. But now, it's your turn. Do you think the
first great city of the 21st century designed to turn its back on the private sector can
succeed? Is it an isolated project or do you think it will become a point of
reference for future projects in China? Leave your answer in the comments.
So I really hope you enjoyed this video, please hit like if you did, and don't forget to subscribe
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