Economy

Tragedy in Tianjin

The deadly explosion in Tanggu last week will have wider repercussions

Vehicles are seen burning after blasts at Binhai

Tianjin’s port ablaze

The Tanggu district of Tianjin got its name from the English engineer Claude William Kinder, who supervised the construction of a railway line linking the coal mines in Tangshan to a port in Bohai Bay in 1881. Kinder merged a couple Chinese names for the coastal region, calling the station “Tang-ku”. It is home to China’s oldest surviving railway terminal.

The railway line – only the second to be built in imperial China – underlined the area’s strategic significance. But Tanggu was also where British envoy George Macartney landed in 1793 (his mission failed when the Qing emperor refused his request for a permanent embassy in Beijing). It also has been a frequent point of invasion by foreign armies during the Second Opium War, the Boxer Rebellion and the Second Sino-Japanese War.

In peacetime the importance of Tanggu seemed to have faded. Indeed, while Beijing is enshrined as the political centre and Shanghai has grown into the country’s financial hub, Tianjin has struggled to carve out a distinctive role. That’s why urban planners have been keen to promote the idea of the Bohai Economic Rim: turning the economic hinterland of Beijing and Tianjin into a megalopolis that could rival the Pearl River Delta and the Yangtze River Delta.

But these ambitions have just suffered a severe blow. It came in the form of a tremendous explosion in Tanggu, resulting in damage that witnesses suggested might only be rivalled by a massive military conflict.

Shortly before midnight on August 12 a huge fireball exploded into the sky above the city. That was followed by a second, larger, explosion. Photos of the giant mushroom cloud generated by the blast soon made the rounds on social media and the origin of the explosions was pinned down to a warehouse in the Binhai New Development Zone, which overlaps part of the Tanggu district.

By August 13 the top-trending hashtag on Sina Weibo was “Tanggu explosion truth” and it had accumulated more than 350 million hits by the start of this week.

“It sounded like the start of a war. I thought maybe Japan was bombing our port,” a worker at a factory dormitory told The Economist.

The China Earthquake Network Centre said the initial explosion had a power equivalent to three tonnes of TNT detonating. The second was the equivalent of 21 tonnes – so big that satellites could pick up the flaring blast. But the full extent of the destruction was not revealed until this week, when Xinhua sent drones over the area and published a series of stunning aerial images. A seemingly bottomless black crater, which measured up to 100 metres in diameter according to Taiwan media (Beijing News said the hole was 30 metres wide), marks ground zero. Around it is an apocalyptic landscape of charred cars and twisted shipping containers, stretching far into the distance.

Standing at the perimeter of the devastated zone are clusters of high-rise residential buildings. A 20-storey block 400 metres from the blast “was left without a single glass window”, Beijing News reported. (Reuters reports 17,000 apartments were damaged in total.)

As of Tuesday, authorities put the death toll at 114, with 698 injured and 69 people missing. At least 58 of the dead were firefighters, Xinhua has reported. But given the magnitude of the blasts, many have questioned if the government has been concealing an even more awful truth.

Unconfirmed reports about the casualty numbers (more than 1,000 dead) have emerged. Censors have been quick to stop them from spreading and hundreds of social media accounts have been shut down or suspended for spreading rumours about the blasts, while at least 50 websites were closed permanently by the Cyberspace Administration of China.

The State Council has ordered a full investigation into what triggered the blasts. What is clear, for the time being, is that the explosions were rooted in a warehouse holding hazardous and flammable chemicals. The news appalled residents and the arrival of 200 biochemical troopers this week only intensified their mistrust of the local authorities. Hong Kong media reported that many have decided to move out of the city temporarily. Of those staying, many are opting to wear industrial face masks. “I can’t decide what’s scarier, that no one knows what’s going on or that no one is telling the whole truth about what’s going on,” was one of the most circulated weibo comments.

Southern Metropolis News has reported that 700 tonnes of sodium cyanide – a highly toxic substance used in gold mining – was being stored at the warehouse, or 70 times the permitted amount. Tianjin’s work safety watchdog later told reporters that there were “large discrepancies” between the amount of chemicals registered by Ruihai, the warehouse owner, and the figures obtained from local customs.

So how could Ruihai get away with stockpiling dangerous chemicals so close to a residential area?

The 21CN Business Herald explained that a key planning goal for the Binhai New Development Zone is to bolster Tanggu’s reputation as an industrial powerhouse and petrochemical processing hub. “Along the business chain of processing dangerous goods, the entire country knows that Tianjin offers the cheapest and most convenient services,” the newspaper said.

According to Caijing magazine, Ruihai seems to have powerful backers. One of Ruihai’s shareholders, Dong Mengmeng, is the son of a former police chief of Tianjin’s port. However, the magazine reckons Dong is not Ruihai’s “effective controller” and that the company has “deeper connections behind the scenes”.

Such suspicions are commonplace in the aftermath of accidents and disasters, although Hong Kong’s Apple Daily went as far as to report that Ruihai’s chairman is the nephew of Li Ruihuan, a Tianjin-born former Politburo member. The logistics firm’s Chinese name also happens to be the same as Li Ruihai, the brother of Li Ruihuan, the newspaper added.

The newspaper also noted that the Binhai New Development Zone’s rapid development is closely associated with Zhang Gaoli, who became Tianjin’s political boss in 2007 and now serves on China’s seven-man leadership committee.

“Without Zhang’s approval back then there is no way Ruihai could obtain its licences,” it speculated.

Other major accidents have led to political shakeups in the past (for instance the powerful railway ministry was dismantled after the 2011 bullet train accident in Wenzhou). And the Tianjin blasts already seem to have claimed their first political scalp, with news of an investigation into Yang Dongliang, the head of the State Administration of Work Safety, for violations of Party discipline, although it wasn’t immediately clear if Yang’s arrest is related to Ruihai. (He spent 12 years in Tianjin as deputy mayor.)

While the political fallout from the Tianjin blast looks far from certain, the economic losses are starting to mount.

As of this week, foreign automakers have confirmed that at least 11,000 cars were damaged in the blast, for instance. Volkswagen, for one, said that 2,700 of its imported vehicles were now unsellable. Hyundai Motor, meanwhile, told Reuters that 4,000 of its cars were parked in the vicinity but it is yet to confirm the damage. The likes of Renault, Nissan and Toyota could all see their delivery schedules disrupted too.

Insurers are likely to cover most of the carmakers’ losses. Zurich Insurance and Allianz are said to have already received claims from clients affected by the disaster. Analysts have put the total losses at $1.5 billion.

Real estate developers in the region will also suffer. “The psychological impact from this accident means that homebuyers may shun the area for a good period of time,” the Economic Information Daily suggests. Based on the market value of up to 3,000 unsold units near Tanggu, the potential loss for property firms alone may amount to Rmb1 billion ($156 million).

But the biggest loser may turn out to be the port district of Tanggu, and perhaps the surrounding city of Tianjin as a whole. Most of the blueprints for the region, ranging from the Binhai New Development Zone to the Bohai Economic Rim, were devised when former Chinese Premier Wen Jiabao, a Tianjin native, was in office from 2002 to 2012. But Apple Daily has noted that Xi Jinping’s administration is pushing for a bigger plan to integrate the regional economies of Beijing and Tianjin with Hebei province (see WiC231). The devastating blast, the newspaper opined, may weaken local bureaucratic resistance to the integration.

And will dangerous industries in the area now be shuttered? If so, how much of Tanggu’s local economy would be left if the riskier businesses of processing petrochemicals and the like were exiled from the district? The city of Linyi in Shandong province may offer a cautionary answer. Following an environmental crackdown that closed a series of polluting industries, about 150,000 people have lost their jobs, leading to misery in Linyi’s economy (see WiC291).


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