E-sports to chocolates: Chinese cities rush into risky specialisation

ZHONGXIAN/YIXING, CHINA: The first plan was for an ‘eco-city’ that would help pull Zhongxian, a remote city on the hilly banks of the Yangtze River in southwest China, out of poverty.

But after a dispute with the local government over land rights, the developers pulled out and all that remains of the green-themed project are half-completed structures and piles of rubbish.

Now, Zhongxian’s government has seized upon another plan to reinvent its economy: a 1.4 billion yuan (US$211.60 million) online gaming complex that it hopes will cash in on China’s fast-growing e-sports market.

When finished, the complex will include a 6,000-capacity stadium and an incubator for gaming startups – and this in a town that lacks an airport or railway station.

Zhongxian, a hardscrabble city of one million people, is among a slew of towns responding to Beijing’s call to create 1,000 ‘specialty towns’ by 2020.

The Chinese government is hoping to spur the development of sustainable economies around local industries in the hinterland, but the plan also underlines the challenge it faces in trying to rein in risky debt undertaken by local governments.

Local governments have responded to the initiative by embracing a vast array of industries; cloud computing, chocolatemaking, traditional painting and much more.

Some projects involve new industries; others are based on promoting traditional ones, or developing tourist industries based on local natural attractions.

While the initiative might mean some long-term growth in neglected regions, economists are also concerned about a new buildup of the kind of risky debt that Beijing has been struggling to resolve, and result in more white elephant projects across the country.

China’s State Council Information Office, which doubles as the Communist Party’s communications arm, did not respond to a faxed request for comment.

Many of the specialty towns – like the one in Zhongxian – are also proceeding with projects before getting official approval, raising the risk potential, the economists say.

“On one hand, the plan can help resolve inequalities in regional development, but on the other, lots of people are taking specialty town funds and creating a fiscal mess,” said Gao Wei, a Beijingbased analyst at the Centre for China and Globalization.

China’s state planning authority, and the housing, land and environmental protection ministries, on Tuesday issued new guidelines for specialty towns, citing growing risks from local government debt and an over-emphasis on property development. — Reuters