“Invisible Hands” raises the handbrake on Xi’s mascot project

According to local officials and residents, a Chinese development project advocated by President Xi Jinping has clashed over costs and the reluctance of companies to go to the area.

Located in Xiong, in the central province of Hebei, 130 km from the Beijing leadership of the Chinese Communist Party, Xi declared it a priority “new area” in 2017.

The project is crucial to the Chinese president’s view of capital that is so crowded and polluted. Hundreds of state-owned companies and government agencies plan to move to Xiong’an.

It is also an intention Burn Xi’s legacy, As Shenzhen’s transformation in southern Guangdong province did for Deng Xiaoping.

Xiong has a population of 1.3 million and is already home to one of the largest in the world train stations depending on the surface, it started operating in December. But otherwise, it’s the backbone of the economy, with dirt roads, dirty buildings and abandoned construction sites.

During last week’s visit, only 30 of the 2,200 seats in the Xiong’an station waiting room were occupied, which cost more than Rmb30bn ($ 4.6bn) to build.

“Xiong’an is the product of central planning that goes against market principles,” said Zhuang Bo, China’s chief economist at London-based consulting firm TS Lombard. “He has had problems because his launching hand is invisible [of the market] it has a greater impact than government intervention. “

The project is expected to be completed by the end of 2023, when Xi is expected to start a year a third term without precedent as president, it will cost Rmb146bn. But China Xiong’an Group, the first investment vehicle for local infrastructure projects, took only Rmb749m in long-term loans in the first nine months of last year.

People close to the CXG, which is already heavily indebted to the Hebei provincial government, have said the company has no intention of increasing its indebtedness. Hebei’s indebted government debt, minus borrowing debt vehicles for local government funding, Was Rmb1.1tn at the end of last year, more than Rmb615bn in 2017.

The subsidized provincial government wants the central government to finance a large portion of the construction costs at a time when the Xi administration is trying. control of stimulus measures was released last year at the summit of the Chinese Covid-19 outbreak.

“The outcome of the fight is slower-than-expected construction,” an official in Xiong’an said, and asked not to be named. “There is no guarantee that CXG can generate enough cash flow to pay off the debt. Hebei should take a step back if things go wrong.”

Some residents also complained that Xi’s project has seen a sharp rise in local housing prices. When the president’s vision was presented in 2017, speculators He came down from all over China to buy property in Xiong.

In the face of this, local officials halted a number of real estate projects, limiting supply and trapping buyers who were paying heavy rents while they waited for their homes to be finished.

Li Yang, a 35-year-old office worker, said his income had more than tripled in the past four years as he waited to finish the weight he bought in 2016.

“Government policy allows me to spend most of my income on rent and mortgage payments without finishing an unfinished home,” he said.

Local officials, meanwhile, blamed the central government for Li’s situation, saying it was up to Beijing to decide when to lift the ban. “President Xi has said that we cannot start building until the land use is clearly foreseen,” a housing official in Xiong’an, who did not want to be named, told the Financial Times.

The construction ban has exacerbated fiscal pressure on the CXG and local government, as much of their revenue is dependent on land sales. In Xiong, the government’s fiscal revenue was 3.3 billion euros last year, 25% below the target.

Another trace of the local economy, known for the garment and plastics industries, has been the forced closure or relocation of more than 4,000 factories. The polluting industries did not coincide with Xi’s view of a clean and green Xiong’an and had to pave the way for the planned entry of state-owned enterprises and their workers from Beijing.

As a result of the closure of the plant, unemployment has risen. Xiong’an created less than 10,000 urban jobs in 2019, compared to the official target of 40,000.

In a report released last year, Hebei University professor Lin Shunli said the state-led industry innovation has dealt a “major blow” to local employment and as a result, household incomes have fallen, leaving young people out of work “for a long time”. ”.

“We will come with few SMEs that will do us little good,” said trader Ye Shanshan. “They want people with university degrees with few local residents.”

Many state-backed companies and their employees, however, have no qualms about moving to Xiong’an because of the lack of public service in Beijing.

“It will take many years for Xiong’an to catch up with Beijing when it comes to getting good schools and hospitals,” said an SOE director who has been ordered to move. “We are concerned about the loss of staff after the relocation.”