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Xiongan New Area

Xiongan is not Shenzhen or Pudong: why latest new area may falter despite push from Beijing

Winston Mok says a rare confluence of factors created the two economic marvels next to Hong Kong and Shanghai, while Xiongan may face an uphill task in unleashing similar market forces to boost its fortunes, despite ambitious state plans

PUBLISHED : Wednesday, 19 April, 2017, 1:28pm
UPDATED : Wednesday, 19 April, 2017, 6:31pm

Can Beijing replicate the remarkable successes of Shenzhen and Pudong in Hebei’s (河北) Xiongan (雄安), the 19th national new area designated by Beijing? After the first two, Shanghai’s Pudong and Tianjin’s ( 天津 ) Binhai, so dubbed in 1992 and 2006, respectively, the creation of more such areas has gathered pace since 2011, with 10 of them so christened in the two-year period between 2014 and 2015. After Xiongan, more will follow.

While some have been successful, others have become little more than ghost cities. Among the many experiments that Beijing started over the years, it could not determine beforehand which would end up the biggest winners.

The successes of Shenzhen and Pudong might not simply be attributable to the state. There are important market forces at work. And some unique confluence of factors cannot be repeated.

Of the four special economic zones so designated in the early 1980s, Shenzhen ended up as the most spectacular success. With its unbeatable location next to Hong Kong, Shenzhen enjoyed the inflow of capital from all over the world – when China was once a cheap manufacturing location. It had China’s most open environment and level playing field and, to its credit, has maintained that edge. Such a combination of being in the right place, at the right time, doing the right things, is rare.

Xi Jinping’s dream city Xiongan may turn out to be China’s biggest public works project, ever

After Guangdong, Zhejiang (浙江) and Jiangsu (江蘇) were among the fastest growing provinces since economic reforms began – fuelled by township and village enterprises, private enterprises and foreign companies. Shanghai, burdened by state-owned enterprises, was a laggard but benefited from the rapid growth of its hinterland, which needed a commercial centre. For foreign firms rushing into China, Shanghai was the natural choice.

With the old parts of Shanghai saturated, a new area was needed. Following a tried-and-tested formula in Asia – Seoul’s Gangnam, Taipei’s Dongqu and Guangzhou’s (廣州)Tianhe – Pudong was born.

But compared to Shenzhen and Pudong, Xiongan’s path to glory may be an uphill battle. Shenzhen and Pudong are adjacent to Hong Kong and old Shanghai, but Xiongan is much further away from Beijing. It is an inland area, in contrast to Shanghai and Shenzhen, which are world-class ports. Hong Kong and Shanghai have been commercial centres in China’s modern history. The Yangtze River Delta, which anchors Shanghai, was a leading economic region of the world for centuries. While Tianjin was a commercial and financial centre in the Republican era, Beijing was neither a city of commerce nor of industry before 1949. This part of China lacks an established commercial tradition.

Xiongan can be a platform for a big push to develop the whole southern region of [Hebei]. This is what sets Xiongan apart

Unlike early movers Shenzhen and Pudong, Xiongan faces stiff competition: 18 other national new areas and 11 free-trade zones, plus a myriad of other zones numbering in their hundreds, with more on the way. Now, as most of China is quite open, it will not be easy for Beijing to make Xiongan special.

Also, Xiongan’s positioning is unclear. A key rationale is perhaps to absorb the overflow from Beijing, which is divesting its “non-capital” functions. But Tianjin has been the beneficiary of this for a decade, which is partly what made Tianjin’s Binhai larger than Shanghai’s Pudong. But Binhai’s Yujiapu financial district, Tianjin’s answer to Pudong’s Lujiazui, looks like a ghost town. It is hard to see Xiongan’s advantages over Tianjin, which is a major port. With significant unfilled capacities in Tianjin, which is well-connected to Beijing, why Xiongan?

Still, Xiongan has a strategic location. It is not far from Beijing’s new airport, and near a newly operational high-speed rail between Tianjin and Baoding. Planned high-speed train routes from Beijing to Shijiazhuang and Hengshui will both pass near Xiongan. It is next to a major lake.

The answer may partly lie with the highly uneven development of Greater Beijing. Hebei is much poorer than Beijing and Tianjin, though geographically it embraces both cities. Other than the relatively affluent Tangshan (唐山), east of Tianjin, most other parts of Hebei are markedly poor. Xiongan can be a platform for a big push to develop the province’s southern region. This is what sets Xiongan apart. Whereas Shenzhen and Pudong were built on the strengths of their environment, Xiongnan is tasked with overcoming the weaknesses of the region.

It is not the first time that state leaders have pinned high hopes on a place. Caofeidian, a port in Tangshan, was made a strategic growth pole for Hebei during the days of president Hu Jintao ( 胡錦濤 ). Early in the last century, Sun Yat-sen had the vision that Caofeidian could one day surpass New York as a port. Despite huge investments and strong support from Beijing, Caofeidian was at the brink of bankruptcy a few years back.

The will of the state is not enough when it comes to effective regional development. While Beijing pushed and nudged, it was the market which ultimately made Shenzhen and Pudong the successes they are. Beijing should realise that it will be no different for Xiongan – and the art of unleashing market forces for a region like Xiongan will be a lot more challenging.

Winston Mok, formerly a private equity investor, is a private investor