What you need to know
'The designers of Xiongan seem determined to act differently from what China’s playbook for economic growth would prescribe.'
In a surprise move that caught most of the country off guard, the Party’s Central Committee, jointly with the State Council, issued a Resolution in the late afternoon of April 1, when people were wrapping up a week’s work ahead of the Tomb Sweeping Festival. The decision announced through Xinhua, the official news agency, unveils the planned Xiongan (雄安) New Area, which encompasses three existing counties in Beijing’s adjacent Hebei (河北) province. Development of the New Area will be phased: in the short term, a 100 square kilometer start-up area will be built, which will expand to 200 square kilometers in the mid-term and 2000 square kilometers (roughly the size of Tokyo) in the long run.
Though impressive, size was not the decisive factor in the awe that permeated the Chinese Internet. When introducing the resolution, Xinhua made it clear that this was not just another new special zone among an array of similar projects. “Xiongan is a New Area that follows the path of Shenzhen (深圳) and Shanghai’s Pudong (上海浦東)New District. It is an initiative for the next millennium, a major event of national significance.” By elevating Xiongan to the level of Shenzhen and Pudong, Xinhua fanned anticipation to historic proportions. In 1980, the opening of Shenzhen, at that time just a small village bordering Hong Kong, was the decisive moment of China’s Reform and Opening after the country broke away from the grip of Maoist ideology. In 1990, the decision to develop Pudong as China’s new window facing the world symbolized one of Deng Xiaoping’s last major efforts to give momentum to the reform that suffered major setbacks in the late 1980s. Joining the ranks of Shenzhen and Pudong means that Xiongan has bypassed its “older brother” in North China, the Binhai New Area in Tianjin, set up in 2005, as the heir apparent of the Reform. Xinhua’s application of a “millennial” dimension only increased the astonished curiosity surrounding the announcement.
Ever since the kick-off of Reform and Opening under Deng, Chinese society has come to cherish the “invisible hand” of the free market. The memory of shortages still lingers in the minds of those born before the 1980s, when the supply of basic goods such as food had to be rationed. The economic reform unleashed the creativity and can-do spirit of the Chinese people. It also reshaped their perception of the state’s role in the economy. Government interventions have since then become a kind of necessary evil to be tolerated, not embraced. Until very recently, catch-phrases such as “Guojin Mintui” (the advance of the state and the retreat of the civilian) represented the nation’s uneasiness with the state’s corrosive touch on the economy. Progress towards an open economy friendly to the participation of a vigorous private sector is seen as the ultimate barometer of the reform’s success.
The reaction to the Xiongan New Area reveals a shifting national psyche. The pageant-like online discussion shows that for a considerable segment of Chinese society, the visible hand is no longer frowned upon. Rather, it is seen as a magic wand that can turn a backwater town into a booming center of innovation and productivity.
At least no more tomb sweeping for now. For those with a heightened sense for money-making opportunities, the Resolution let out the assuring fragrance of Renminbi. In no time, the Chinese media were filled with stories about jammed streets and fully booked hotels in Xiongan. Almost overnight, once obscure towns that nobody had ever heard of were transformed into bustling centers of real estate transactions. Urban legends abounded of nouveaux riches from Beijing and Shanxi buying up entire residential compounds with piles of cash.
The scene marks the first public test of confidence in the newborn area. And it is excessively bullish. The cash-wielding house buyers saw the announcement as a clear signal of imminent pouring-in of investment, people and possibly preferential policies from the government, all pointing to a rising real estate market. Bet long on Xiongan, their guts told them. Quite literally, this mood was reflected in the stock market. Stock prices of cement and steel companies from Hebei province soared following the news, to the extent that a few of them had to publicly downplay expectations.
The reaction seemed not what the designers of Xiongan had wanted. Measures were swiftly put in place to quench the fever of apartment hoarding and deter speculators flocking to the place. A freeze on any real-estate trade in the region was announced, which quickly escalated into the arrest and lock up of rogue traders, and resulted in bizarre scenes on the streets of Xiongan, with police officers chasing after real estate agents.
Xiongan’s planners are faced with a tricky task of managing not just expectation but also imagination. And there is visible frustration over the public’s small-minded, reductionist reading of the New Area as a repeat of the real-estate-driven routine of city construction. Wild speculation is “debasing” to the leadership’s vision for the New Area, a People’s Daily article declares. The grand plan, it argues, is an ambitious strategy to explore a new way to overcome “megacity disease”, to achieve a more balanced regional development and to nurture innovative engines of growth. In other words, the speculators are guided by a misplaced enthusiasm, which, according to the article, is a kind of short-sighted “petty wisdom”. They fail to appreciate the designers’ real intention.
The article introduces a few novel terms to the lexicon of urban development. Besides “megacity disease”, it also highlights the primary role of Xiongan as the receiving base for “non-capital functions” to be moved out of Beijing. In case this is not clear, it specifies that such functions include anything that’s inconsistent with Beijing’s self-image as China’s capital, i.e. the political, cultural, international exchange and technological innovation center of the country. Corporate headquarters and financial institutions, therefore, do not belong to the capital and should be relocated.
The framing provides a powerful conceptual framework to understand Xiongan: it stands against everything that’s wrong with Beijing, the largest megacity in North China today. In addition to its notorious pollution, congested traffic and overheated real estate market (megacity disease), commentators also blame Beijing for its unconstructive role in the region: instead of acting like a sun that radiates warmth to its neighboring towns and cities, it acts like a black hole that sucks resources from them. The relatively healthy symbiotic relationship among Yangtze River delta cities, wherein Shanghai and Shenzhen shine like stars, do not exist around Beijing.
The implied dissatisfaction with the capital’s current situation finds resonance in the popular reaction to the announcement. Many people, upon hearing the news, paid homage in their social networks to Liang Sicheng(梁思成), the defiant architecture scholar who, in the 1950s, insisted that the old imperial Beijing be kept intact, while a new city should be built in its vicinity to accommodate the new capital’s expanding industries, commerce, and governmental entities. His vision of Beijing was diametrically opposite to that of Mao, who famously told colleagues that he would like to see chimneys all over the city from the towers of Tiananmen. His Soviet advisors, at that time, were busy planning a public square in the city center in the fashion of the Red Square. No wonder Liang’s advice was not heeded. Worse, he was fiercely persecuted in later political movements for those very views.
If setting up Xiongan is to some extent a correction to Mao’s extreme vision of the capital as the symbol of China’s industrial might, it is by no means a return to Jane Jacobs’ organically grown city. The effort is as deliberate as the meticulously ranked dancers at the opening ceremony of the Beijing Olympics. And attitudes toward the arbitrariness divide the country into bears and bulls.
The pessimistic sentiment is best represented by a Weibo post that inspired thousands of reposts: “Is the government able to make some place prosperous simply by wishing it? What you guys have in mind is not Gov, it’s God.” The author uses the examples of China’s Northeastern rust belt provinces to illustrate the point that the heavy involvement of the state does not necessarily bring desired economic results. Those provinces have enjoyed decades of central government largesse in the form of state-owned industries and the associated public resources. Yet the region’s deepening economic woes since the 1990s, especially in comparison to the vibrant economies of coastal provinces dominated by private businesses, accentuates the limitations of state planning.
A more serious critique is offered by Chen Gong(陳功), a senior researcher at the Anbound(安邦) think tank. He bluntly calls Xiongan New Area “overrated”, and predicts that it won’t imitate the success of Shenzhen. “Both Shenzhen and Pudong saw a great influx of investment and talent because China was in the process of integrating into the global economy. There was huge momentum at the time of their opening. All the government needed to do was to lift the restrictions and set free those market forces. ” Xiongan will be different. “Forever gone is the era when government draws a circle, enacts a few policies, and capital automatically flows in to prop up thriving industries.”
The economic new normal means a lack of untapped reservoirs of capital and resources that will replenish a pool as soon as the gate of the dam is open. The arbitrary allocation of “non-capital functions” to the New Area is therefore seen as a zero-sum game. “Enterprises moving out of Beijing will bring down the city’s economic output, reduce its tax revenue, cut consumption and swap part of its service sector,” Chen predicts, “it can become a major depletion of Beijing’s economy and its impact is likely underestimated.”
Drawing on the experience of the Silicon Valley, another commentator is more explicit with his disdain for state-driven efforts in building so-called technopolises. The success of the Silicon Valley, the argument goes, is in stark contrast to the relative obscurity of Massachusetts’s Route 128 today, whose lackluster performance is attributed to its reliance on government contracts, big conglomerates and a top-down approach to innovation. Such deep-rooted skepticism probably won’t disperse until a more definitive assessment of Xiongan’s economic performance can be made.
But this time the pessimists are confronted with an articulated optimism that rivals, if not trumps, the doubt. An FT Chinese piece by long time urban development observer Li Yan is representative of such confidence: “North China hasn’t had such strong and clear anticipation of growth for a long time. The psychological need for such anticipation overrides any rational calculation of real interests.” In other words, simply manufacturing that anticipation is already a brilliant move by the government. Li directs people to look beyond the relocation of “non-capital functions” and pay attention to the other stated objective of Xiongan to become “a showcase of innovative development." This means the New Area will likely concentrate high-end, rising industries (as opposed to low-end manufacturing), powered by the inflow of new migrants. It will kick-off a “chemical reaction” that reactivates other economic elements in the North China eco-system. Unlike Shenzhen in the 1980s, this time Xiongan will enjoy the backing of a central government with “unprecedented finance prowess and administrative resources.” And it will become the “ultimate test” of a developmental model that puts government mobilization and direction of resources at the center.
The optimism online also comes from an agreement with the general strategic direction of redistributing resources between Beijing and Hebei, and confidence in China’s bureaucratic apparatus in delivering such schemes with top level blessing. As Weibo user Li Ziyang, someone known for his bullish views about China, puts it, “China has an army of officials and bureaucrats who know the country well, are proactive in their job and can execute competently. It is one of the secrets of China’s economic miracle.” Both Li Yan and Li Ziyang suggest that the New Area can be China’s chance to articulate and crystallize its homegrown approach to economic success, wherein the state, with its efficient bureaucratic apparatus, are central to its recipe.
For those optimists, details of the Xiongan plan are not as important as its strategic boldness. Or, as Li Yan puts it, people are simply enthralled by the grandeur of setting up a new city from scratch (大手筆). The society’s appetite for boldness is also reflected in the relatively marginalized voices that question the procedural integrity of the decision. The fact that a decision of millennial proportion did not go through any public consultation or approval by the National People’s Congress, and was kept under an iron lid up to the moment of its announcement, seems not to have bothered the general public. And people take the drastic crackdown on real estate trade in stride. After all, neither Shenzhen nor Pudong was the product of democratic deliberation.
Against the backdrop of public anticipation and confusion, the Party’s official outlets continue to dole out information about how the plan came into being. Through this tiny window, people have a glimpse of how the idea evolved out of the perpetual frustration over the imbalanced and uncoordinated development of the Beijing-Tianjin-Hebei region and how, in as early as Feb 2015, the proposal for a “new city” had already emerged. The concept was further hashed out in a series of follow-up meetings led by President Xi himself, from the March 2016 notion of a “second wing” of Beijing to the May 2016 official designation of the New Area. The vision for the city also became progressively clearer. A Xinhua piece puts Xiongan’s long-term population projection at 2.5 million, which is only a fraction of Beijing’s current population of over 20 million, further confirming the point that it’s not going to be “mega”. It also names Japan’s Tsukuba and Israel’s Haifa as role models for the new city. Both are centers of science and technology brainpower for their respective countries, while Tsukuba is also very much a “planned city.” The designers of Xiongan seem determined to act differently from what China’s playbook for economic growth would prescribe. Their determination and the dizzying swiftness of its materialization leaves the country in a state of thrills and disbelief.
Editor: Edward White