Xiongan holds out lots of promises for foreign firms

To the south of Beijing, Xiongan New Area is taking shape not only to offload non-capital functions from Beijing but also to become a “worldclass water and forest city”. The new city in Hebei province will be larger than London, which covers about 1,500 square kilometers.

Essentially, Xiongan New Area is a strategy to reduce congestion in the Chinese capital and create a new high-tech economic engine for China.

On April 1 last year, the plan to build Xiongan New Area was officially announced and management teams were put in place to guide the construction process. Now, the vast area in Hebei province, including three rural counties and North China’s largest freshwater wetland Baiyangdian, is being developed into a modern but eco-friendly city.

According to the vision plan, the new city will restrict the population to 5 million with modern living conditions. It will attract the best brains from across the world. And it will be an environmentally friendly urban area with the Baiyangdian wetland accounting for almost one-fifth of the total Xiongan New Area.

The government also has started a pilot program of developing forest farms in the upstream of the wetland area and planting trees in other parts of Xiongan. Work has already started on a high-speed railway linking Beijing and Xiongan, where the authorities have plans to build Asia’s biggest railway station. Dozens of China’s leading high-tech companies have agreed to set up representative offices in the core district while many construction projects are in full swing.

Still, there are lots of opportunities for foreign investors as China further opens up to the outside world.

As a new “Silicon Valley” in the making, Xiongan holds out a lot of promise for foreign investors in the years to come. But given China’s four decades of opening-up and reform, foreign investors must realize the conditions in Xiongan will be different compared with their investment activities in Shenzhen or Pudong New Area, China’s two leading high-tech and economic powerhouses in the south and east.

Unlike the 1980s or 1990s when Shenzhen and Pudong New Area were opened up to the outside world, China today is a full member of the World Trade Organization, so foreign investors can no longer enjoy preferential polices such as tax breaks and low-cost land. Besides, Chinese investors have become much more competitive and technologically advanced.

Still, there are lots of opportunities for foreign investors as China further opens up to the outside world. For example, to build Xiongan into a modern, eco-friendly city, European countries could offer their experiences in water treatment, environmental protection and ecological conservation.

There are plans to build a world-class university in Xiongan. This is a visionary idea but not easy to realize. Cambridge, Oxford and Harvard could provide expertise while Peking University and Tsinghua University could also lend a helping hand.

Moreover, Xiongan will consistently need large amounts of capital, and the Asian Infrastructure Investment Bank has said financing China’s projects will not be its priority. This leaves space for other commercial and multilateral financial institutions to invest in the new area, either through proposals to build a financial district or through financial services such as loans.

So far, Xiongan has not attracted many foreign investors, though the United Kingdom has recently proposed to help construct a financial district. China has signed many landmark cooperation agreements with foreign countries, and more such agreements can be reached in Xiongan. For example, China and Switzerland have entered into a “partnership of innovation”, and Xiongan is the best place to put the bilateral agreement to practice as innovation will be the lifeline of the new city.

Also, China and Germany have signed a “football partnership” to help boost China’s performance in regional and international arenas. This partnership too could be put into operation in the new city, because sports, recreation and culture are indispensable parts of a dynamic city.