XIONG'AN, CHINA – Business owner Hu Weibing weeps at the prospect of losing everything, including his home, after China’s surprise announcement to transform a rural spot outside Beijing into a modern metropolis nearly three times the size of New York City.
Hu’s family run-clothing factory in the northern province of Hebei could close at the expense of a new special economic zone similar to those in Shanghai and Shenzhen.
The planned Xiong’an New Area currently measures 2,000 sq. km (772 sq. miles) and has less than 1 percent of Beijing’s economic output, but the announcement a week ago sparked a real estate speculation frenzy as out-of-town home buyers from across the country descended on the previously unknown area.
“It’s certainly good for Hebei and the regional economy, but it’s a disaster for mid- and small-size business like ours,” said Hu, staring at the bare concrete walls of the four-story dream home he began building last year but will never be able to finish.
Though authorities have not yet told him what is next, he is bracing for things to progress in the fashion that has become typical for government mega-projects: forced relocation and modest monetary compensation.
The changes will scatter his 40 local employees, each painstakingly trained for two years to produce the winter jackets that Hu’s Yuhua Clothing Manufacturing sells to clients in Moscow.
And land prices elsewhere are guaranteed to be out of his reach.
“To build another factory or another villa like ours will be impossible. It’s a terrible shame,” he said quietly, unable to stop tears sliding down his face after devoting decades of his life to the business.
“There will be no way to ever compensate us, but this is a huge national issue — so whatever comes, we must support it.”
There are some 19 national-level “new areas” scattered across China, 13 of which have been established since 2014.
But Xiong’an stands out.
President Xi Jinping personally designated its location during a February trip to the fields just outside Hu’s village of Dawang, according to the official Xinhua News Agency.
Following the announcement, housing prices doubled in a single day as speculators queued outside real estate offices, clogging the streets with luxury vehicles as they battled to snap up properties for cash.
Shocked by the chaos, local authorities quickly imposed strict bans on home sales and ordered brokers to close up shop.
By midweek, offices across the area were closed, their metal grates pulled down and crosses of white tape over them for good measure.
But individuals with properties for sale were still willing to approach potential buyers with prices that had gone up 300 percent in three days, they said.
An investor surnamed Wang had come to check out opportunities from Beijing, 100 km (60 miles) away, but declined an offer to buy at a rate higher than the average cost of a home in the bustling port city of Tianjin.
“I could’ve accepted some 13 or 14,000 yuan ($2,000) per sq. meter, but 30,000 is simply too much for an investment of at least 10 years where you don’t even know how things will turn out in the end,” he said.
“It’s crazy — they’re still planting crops here! What if Old Xi steps down and they never build anything here at all?”
Currently, the flat fields of the three counties that make up the proposed Xiong’an New Area are speckled with traditional tombs — waist-high mounds of dirt topped with fluttering paper offerings.
The two-lane roads that traverse them are lined with cement producers, factories noisily churning cobs into cornmeal and, thanks to a robust commercial network with Russia, shops selling mink and raccoon furs dyed garish shades of blue and pink.
Yet authorities hope the area will flourish into a new center for growth in the world’s second-largest economy, which last year expanded at its slowest rate in a quarter of a century.
Analysts, however, predict its overall economic punch will be limited because the venture lacks measures to spur the types of exciting new financial reforms that were the real drivers of growth for the Shenzhen Special Economic Zone, established in the 1980s, and Shanghai’s Pudong New Area, set up in the 1990s.
“The project is still effectively just a major push to improve the infrastructure and integration of the Hebei region, rather than a test bed for deeper market reforms that could have a much wider economic impact,” said Julian Evans-Pritchard of Capital Economics.
Others wonder if the mega-project is wise given China’s rising debt levels and the government’s stated goals of slower and more sustained economic growth and smarter capital allocation. Total credit reached about 258 percent of economic output last year, up from 158 percent in 2005.
“State-directed efforts to create new cities do not have a good track record,” said David Dollar, a former U.S. Treasury attache in Beijing and now a senior fellow at the Brookings Institution in Washington. “Shenzhen and Pudong were undeveloped areas sitting right next door to major cities, so those were natural places to have new urban zones. It’s not obvious to me that Xiong’an is an obvious place for a new urban agglomeration.”
Some universities in Beijing and the headquarters of several state-owned enterprises are expected to be moved to Xiong’an, a region with less than 1 percent of the capital’s economic output.
The new area is also intended as a demonstration project to explore a new model of optimized development in densely-populated areas, and help restructure the urban layout in the Beijing-Tianjin-Hebei region.
For many who have toiled in the fields around Xiong’an for generations, the development is guaranteed to be “life-changing,” said a resident surnamed Zhang, 63, who recalled the extraordinary hardships of his childhood in the early 1960s.
“It’s such good luck — living here is better even than in Xiamen,” he said, referring to a warm southern Chinese port city popular with retirees. “Now we’re all special economic zone residents!”