Economy

The emperor’s new clothes?

Tianjin reaches for the skies, but may struggle to match Shanghai

Tianjin w

Build it and they won’t come: Xiangluowan in Tianjin

“It’s like ladies’ outfits at the opera,” was the explanation from a German architect when describing the Shanghai skyline almost 15 years ago. “Clients really will object if they think the design for their building looks like another building. That’s why the city has no unified style.”

The planning pioneers behind Pudong, Shanghai’s aspiring financial hub, favoured bolder architectural statements, particularly as the state-sponsored construction on the mud flats opposite the Bund wasn’t really justified by market demand. And the city mayor went back to the wardrobe metaphor to explain the size of the project too. Putting up Pudong was like buying a suit for a growing boy, Xu Kuangdi told the Far Eastern Economic Review. You get one a few sizes too big but he ends up growing into it.

That seems to have been the lesson learned in Xiangluowan, part of Tianjin’s Binhai New Area, which has been building a business district clearly modelled on Pudong’s experience.

Binhai started out as a special administrative area to attract foreign companies. It did well by luring firms like Nestlé, Motorola and Airbus. But Xiangluowan is part of the effort to stand out further from the crowd as “China’s Manhattan”, including stipulations that new office blocks in the area bordering the Haihe River are built to a minimum of 20-storeys in height.

According to Phoenix Finance, the original plan for Xiangluowan was for it to serve as a business district for the management offices and R&D facilities of some of China’s largest state firms, as well as representative branches of its provincial and municipal governments. City promoters hoped to lure state enterprises from nearby Beijing and chased new business by offering hugely discounted land. Deals were signed for 39 separate projects including at least 43 high-rises. Planners wanted the skyscrapers completed by the end of 2008.

But progress has been slow. Only two buildings are in full working order and both of these are only partially occupied. Minmetals Tower has just seven tenants in its 26-storey tower, for instance.

Elsewhere the picture is bleaker as projects have stalled or been mothballed. Sinosteel’s International Plaza has advanced so slowly that it is still at excavation stage after nearly six years of building work, says Phoenix Finance. Sinosteel even asked to landfill the foundation work already completed and scrap the project – but the request was turned down by the local authorities.

At least Country Garden’s international conference centre – originally billed as a ‘platinum, five-star hotel’ – is structurally complete. But it is also boarded up. A wandering circus (“a couple of tramps and their monkeys”) is plying its trade on the hotel forecourt, Phoenix Finance reports.

As part of the Binhai New Area, Xiangluowan will argue that it can’t be compared to the emptiness of residential districts in places like Erdos (also spelled Ordos) in Inner Mongolia or Guizhou’s provincial capital Guiyang (see WiC166).

Favoured by the central government and strategically positioned as the gateway to the hinterland of Bohai Bay, Binhai has promoted itself as China’s northeastern growth engine, looking out at Korea and Japan. It benefits too from talk of the Beijing-Tianjin-Hebei booster effect, with the region around the capital aiming to catch up with the Pearl River Delta in Guangdong, and Shanghai’s Yangtze River Delta.

Plenty of China watchers believe that fears about the country’s ghost cities are also overblown, including Stephen Roach, formerly a chief economist on Wall Street and now an academic at the Yale School of Management. His view is that the urban population is going to expand by more than 300 million in the next 15 years, so the country cannot afford to wait to build new cities. Investment in construction is being front-loaded but most of these places will become thriving metropolitan areas, Roach says, just as Pudong has transformed from a construction site to a population of more than 5 million people.

The Economist made a similar observation last week about Chenggong in Yunnan. A major expansion of the urban limits of Kunming, Chenggong is expected to house a million people by the end of the decade. The plan is taking shape with the laying down of rail track and the construction of residential blocks, universities and government offices. “Not so long ago Chenggong was derided as a ghost city in the making,” the magazine reports. “Few are now so scornful.”

But perhaps a better comparison for Tianjin’s new districts is Caofeidian, another major urban project about 60km to the northeast of the city, which we first reported on in WiC199. At the time there was scepticism in the Chinese press that the ‘eco-city’ would ever amount too much more than a green fantasy. And Caofeidian has started slowly, attracting just 10,000 residents since opening two years ago, according to The Economist. But there are signs of life. A state funded industrial park for animation firms is welcoming new businesses and city planners say they are confident that more people will arrive in Caofeidian once a subway links it to Tianjin.

Despite this, there are grounds for questioning Xiangluowan’s model, especially its initial focus on winning over state-owned companies and government clients.

Even a few years ago, that didn’t seem to sit easily with the central government’s warnings that state giants shouldn’t splash out on gaudy new buildings or its instructions that they keep their cash for their core businesses, and not speculate on property bets.

But probably a greater concern is that the original strategy tapped into what looks like an outdated model: big-budget, state-driven investment as well as lending to real estate and infrastructure projects championed by local governments.

Tianjin was the pacesetter for much of this approach, growing more than 16% a year under the stewardship of Zhang Gaoli, formerly Party Secretary of the city but since promoted to the Politburo Standing Committee. But the downside to the growth frenzy – according to data from the central bank – is that Tianjin also accumulated some of the highest levels of municipal debt, much of it associated with building Binhai.

Credit tightening now means that many of these state enterprises and government agencies have lost the financial and political clout to push through with the kind of headquarters investment that Xiangluowan first envisaged. State firms like Citic and Sinopec are even being encouraged to sell stakes to private investors to raise cash and foster greater market discipline for their activities. Interestingly, Tianjin’s former Party boss Zhang is rumoured to be in charge of the effort to encourage state enterprises to bring in more non-government capital and introduce new management styles.

In the meantime, Tianjin’s bosses have been looking for other ways to boost interest in their urban renaissance, including calls for free trade status similar to Shanghai, which introduced such a pilot project last year. Speculation in March suggested that the central government might have been close to making an announcement about Tianjin’s case, although there was no confirmed news. Now there are reports from southern China that three smaller cities in Guangdong might beat it to the punch in winning special privileges.

Tianjin isn’t alone in seeking showstopper status like Shanghai’s. Xinhua penned a scornful editorial this week pointing out that nearly every province has trumpeted its own claims for a free trade area since Shanghai was chosen as the pilot zone. But this is the wrong focus, the news agency warned, just as hopes for another massive stimulus campaign are pointless too. (“There won’t be money for local governments to build more ghost towns – enough is enough,” the piece noted markedly.)

Instead the suggestion was that cities diversify their economies by working with the private sector and encouraging small and medium-sized enterprises and service industries. Yet Xinhua’s editors didn’t sound wholly confident that China’s bureaucrats would grasp the nettle with great conviction. “Some officials simply don’t know what to do to guide the local economy after years of vying for large projects and large financial incentives from higher authorities,” they lamented.


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