By the standards of China’s Millennium Plan, the Xiong’an New Area is a project that is in a class of its own. It is not simply any other new development; rather, it symbolizes and contains the Chinese Central Government’s development proposals and plans. If there are plans to develop the Xiong’an New Area into China’s newest special region, it would require decades of continuous construction investment reform and innovation as well as a large amount of economic resources. Once Xiong’an New Area begins construction work, the entire economic landscape of Northern China might have to undergo a transformation and ancient Beijing may also have to face unprecedented changes.
Judging by the development programmes that are currently in place, it is evident that the Xiong’an New Area will play an important in reducing congestion in Beijing as non-capital functions move southward. This in turn provides us with a mental framework to more accurately understand Xiong’an—the establishment and development of the Xiong’an New Area is intricately tied to the relocation of Beijing’s non-capital functions. In other words, Beijing will undergo significant downsizing in the future, while Xiong’an will undergo significant upsizing. While Tianjin might be affected by Beijing’s ‘reduction,’ Hebei will receive new support from these developments.
How effective will the reduction be? How many non-capital functions does Beijing need to relocate? The central government has already demonstrated that their efforts to relocate Beijing’s non-capital functions are inadequate. Not only will this move require a large amount of economic resources, moving from an early-term development zone with an area of 100km2 to a medium-term development zone with an area of 200km2, and then to a long-term control area of about 2000km2, will also impact Beijing’s economy severely. A list of 87 central enterprises that are supposed to be relocated to the Xiong’an New Area was circulated on the internet some time ago. If the information on that list were to be even partially true, Beijing will have to endure a lower GDP, a loss of taxes, reduced levels of consumption, and a partial loss of its service industry, regardless of whether or not the enterprises to be relocated are central enterprises or branch offices. If the situation escalates, we will witness an unprecedented ‘emptying’ of the capital city’s economic resources.
Previously, in internal meeting, Anbound think tank’s Chief Researcher Chen Gong said that Beijing must be vigilant about the impact of a deteriorating economy, and that at the rate that things are going, it is entirely plausible that Beijing’s GDP growth will fall to about 5%. Beijing’s economic growth has been slowing down in recent years, just like the national economy. Its economic growth was 8.1%, 7.7%, 7.7%, 7.3%, 6.9%, and 6.7% respectively from 2011 to 2016. The economic growth in the Guangdong Province in the Pearl River Delta region and the Yangtze River Delta in Shanghai has been better than Beijing’s, where Shanghai experienced a growth of 6.8% in 2016 (on the scale of 27466.15 billion RMB)
while Beijing experienced a growth of 6.7% (on the scale of 24899.3 billion RMB). Guangdong Province had a growth of 7.5% with a local economy of almost 8 trillion RMB. It is worth noting that the gap between Beijing, Guangdong, and Shanghai has also been widening. For a city like Beijing that has a large tertiary industry economy (almost 80%), the consequences could be devastating if consumption and the demand for businesses and services decrease.
Even more crucial is the fact that the decline of Beijing’s economy is not an issue that affects only the capital city. Chen Gong has pointed out that anyone familiar with regional economics will know that among the first-tier cities North of Guangshen, Beijing occupies a special place. In politics, culture, and history, Beijing has a history spanning millennia, and it has also been China’s capital city for quite some time; the Liao, Jin, Yuan, Ming, Qing, dynasties, and the Republic of China, all had Beijing as the capital city. Also, in terms of the economy, Beijing does not only play a crucial role in the northern region; it has provided great support to the northeast region during the most recent economic downturn. This means that Beijing is key to the economy of the entire north and northeast region in China, making it truly unique among the first-tier cities in the north. The economy of the southeast coastal region is supported by Shanghai, Guangdong, Shenzhen, along with several other cities, and Hangzhou and Xiamen, along with a few other second-tier cities have been developing rapidly in recent years. In the meantime, Beijing is the sole key player in the entire north and northeast region.
The central government has put a lot of responsibility on Beijing as a capital city, and especially prioritizes the ‘four main capital functions’ of the city as a political centre, a cultural centre, an international exchange centre, and a science and technology innovation centre. Even though ‘economic centre’ and ‘financial centre’ are not included in the list, Beijing is the de facto centre for both those functions as well. No other city in northern China can surpass Beijing in economic and financial might and influence. Therefore, if and when Beijing’s economy takes a turn for the worse, the consequences will be unimaginable, and this is not a matter that can be easily understood through an economic lens.
Extrapolating from current circumstances, researchers at Anbound think that the impact of Beijing’s declining economy has been grossly underestimated. In our opinion, Beijing is currently facing off three significant challenges: the pressure of relocating central enterprises, the destruction of the commercial market, and the drastic downsizing of the manufacturing industry. These three factors alone have greatly reduced the size of Beijing’s economy; other than real estate and its related tertiary industries, what else can Beijing fall back on? Moreover, Beijing is imposing sales restrictions on real estate now. This is practically equivalent to the full-blown demolition of the city’s economy. To have Beijing’s economy collapse before Hebei’s and Tianjin’s have even been established is too huge a risk for us to take; we must be wary. Those at the highest levels of decision making cannot afford to overlook this risk, for should the situation materialize, it will be consequential.
FINAL ANALYSIS CONCLUSION:
Will such a situation actually arise? Well, that will depend on how Beijing and its economy are handled in the near future. Beijing is a fundamental source of support and stability for China, and should its economy suffer a downturn, we will all be greatly affected.
