Monday 25 September 2017

Chinese plan for a 'new' economic zone fuels frenzy

The announcement of construction of a new economic zone similar to Shenzen has sparked a flurry of activity among Chinese investors
The announcement of construction of a new economic zone similar to Shenzen has sparked a flurry of activity among Chinese investors

Lisa Pham and Jeanny Yu

It didn't take long for news that China would set up an economic zone near Beijing to spark an investor frenzy.

Within 24 hours of the announcement that the government would create the Xiongan area in Hebei province - in the same spirit that Shenzhen and Shanghai's Pudong was built - hordes of prospective buyers had thronged to the region. Highways were clogged as they came to purchase real estate, with some camping outside property agents' offices overnight, according to local media reports. On Sunday the government banned all property sales in the zone to stem speculation, according to the National Business Daily.

On Monday, shares of Chinese cement, building and port-related stocks surged in Hong Kong amid optimism the decision will spark a flurry of construction activity. The move by President Xi Jinping, which evokes memories of the rise of Shenzhen since it was declared a special economic zone more than three decades ago, is seen as an historic milestone to power China's growth for a "millennium to come", the official Xinhua News Agency reported. The new zone is expected to eventually cover about 2,000 square kilometres (772 square miles) and jump-start China's economic growth.

"This would be one of the centrepieces of a high-level development plan for the Beijing-Tianjin-Hebei region," said Bill Bowler, a sales trader at Forsyth Barr Asia Ltd in Hong Kong. "I would liken it to the development of a brand new New York City, with Beijing as Washington. The regional plan has been termed a '1000-year project'; the first of its kind since Mao."

The development of the region will create an urban district in Hebei that will help move some of the non-capital functions away from Beijing, Xinhua reported on Saturday. The new district would initially cover an area of about 100 square kilometres, and authorities want to turn the region into a new growth centre as China's economy slows, according to the news agency.

Investor euphoria surrounding the plan may cause a headache for authorities, who have vowed to crack down on speculative buying frenzies spanning stocks to real estate.

President Xi and his policymakers have pledged to curb excess leverage in the financial system and have committed to enforce prudent and neutral monetary policy to deflate bubbles.

Soaring home prices cities such as Shenzhen, Beijing and Shanghai have prompted authorities to impose restrictions to cool the market.

(Bloomberg)

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