China's Copy of Manhattan Is No Longer a Ghost Town

  • Tianjin lures state-owned companies and Airbus assembly plant
  • Xi targets region for megacity development push in Xiongan

QuickTake: China's 'One Belt, One Road' Policy

When Zhang Zhenhua arrived to Tianjin in 2014 to take on a job as a security guard at a luxury apartment complex, he didn’t expect to work in a surreal ghost town of vacant office canyons and half-finished high-rises.

Yet that’s pretty much what Zhang, who hails from a village in nearby Hebei, encountered when he reported for duty in Tianjin’s Xiangluowan district, the epicenter of the northern port city’s audacious proposal to create a 1.59 square kilometer replication of Manhattan. "The place was empty," Zhang recalled. "I could barely see anyone on the street."

The unreal emptiness of China’s vision of a new Manhattan and other mega-city developments has drawn unflattering international press coverage and come to symbolize the folly and financial risks of debt-fueled infrastructure projects and runaway urbanization. 

A man bikes past an artist’s depiction of the Yujiapu and Xiangluowan districts in Tianjin.

Photographer: Qilai Shen/Corbis via Getty Images

There still may still be a financial reckoning for Tianjin looming in the future, but right now there are green shoots of economic life in the urban districts at the center of the city’s unprecedented construction boom.

Zhang, now 27, still has his job. The once empty skyscrapers, vacant office towers and unfinished hotels and apartments are gradually filling up amid the central government’s renewed push to refashion the city into a crucial gateway for a revitalized Northern China.

Read more: A visit by Bloomberg two years ago found most buildings empty

"They’re not full, but are increasingly occupied," said Michael Hart, a managing director at real-estate broker Jones Lang LaSalle Inc. in Tianjin. "They’re mostly government driven, but there are signs private industries are coming."

In the Binhai district, empty offices are filling up with staff from private companies as well as employees of some of the biggest state-owned enterprises, such as China National Chemical Corp., railcar manufacturer CRRC Corp., and China Poly Group Corp., a conglomerate with businesses ranging from explosives manufacturing to real estate.

It’s more challenging in Tianjin’s central business district, where office buildings have a 40 percent vacancy rate and another 300,000 square meters of supply will hit the market this year, according to property consultant Savills Plc. CBRE Group Inc. estimates even more new supply: 1,266,000 square meters this year and in 2018.

Still, the uptick in occupancy across some of the hardest hit areas is encouraging for policy makers whose ambition to build a massive new office district stirred worries about the debt risks from the recent investment boom now that growth has moderated from the double-digit pace of years past.

While many local governments across the country are struggling with heavy dependence on debt-fueled growth, Tianjin benefits more than almost any city from its position at the vanguard of two of the country’s biggest national projects.

Port City

One is the Belt and Road Initiative to open up new trade routes across Asia and to Europe and Africa, a massive spending project that will benefit a port city like Tianjin. The other is the government’s push to link Tianjin with neighboring Beijing and surrounding Hebei province to create a megacity of 100 million.

A key part of the city’s soaring ambition is the waterfront on the Bohai Sea, where sprawling industrial zones are home to rail yards linking it to Eastern Europe and northern China’s largest port, where container ships and car carriers link it with the rest of the world.

"We want the city to become one of the world’s largest ports like Singapore or Hong Kong," said Xiao Sheng, vice director of the free trade zone in Tianjin. "We want to develop a new business and development model that could be promoted to other regions in China."

Airbus Plant

Tianjin, a city of 14.7 million that’s a half-hour bullet train ride southeast of Beijing, was allowed to set up the free-trade zone in 2014 to attract investment. Airbus SE opened a finishing plant for narrow-body jets in a free-trade zone almost a decade ago and last year it broke ground on a final-assembly plant in Tianjin for wide-body aircraft.

The city also plans to raise 100 billion yuan ($14.5 billion) to encourage investments in advanced industries including high-end manufacturing and aerospace in the city 137 kilometers southeast of capital Beijing.

The assembly floor of the Airbus plant in Tianjin.

Photographer: Fred Dufour/AFP via Getty Images

The city’s fortunes received a boost when President Xi Jinping backed the creation of the Beijing-Tianjin-Hebei integration project, known as Jing-Jin-Ji. That took another step forward April 1, when China announced another Xi-backed plan to turn a village in Hebei into the Xiongan New Area, a major economic zone inspired by Shenzhen.

"If anything there’s been a doubling down on those kinds of big projects," said Andrew Polk, director of China research at Medley Global Advisors LLC in Beijing. "It’s a big idea, and that’s how government policy works in China. That’s how it’s always been, and always will be. Even if we get some kind of reform, state-led infrastructure investment is always going to be a part of the ethos."

Read more: The $290 billion dream to turn a backwater into China’s next Beijing

Beijing Mayor Cai Qi said in a January meeting that the capital encourages companies to invest in Tianjin, "generating jobs and benefiting local residents."

Investment has been pouring in. Beijing companies have invested 170 billion yuan in Tianjin in 2016, according to the Tianjin government’s website.

Clean Energy

Programs to support the coordinated development of the region also got the backing of Tianjin’s banking sector, which encouraged the lenders to invest in advanced manufacturing sectors, clean energy, and financial leasing, to ease the excess capacity problem in the steel industry and accelerate industrial upgrading.

"China is seeking more coordinated and balanced growth, leaders have high expectations on Tianjin," Xiao said from the FTZ, adding the outbound investment by enterprises from the zone reached $12 billion last year, accounting for half of Tianjin’s total.

That has helped Tianjin’s economy hold up better than most provinces. While year-on-year growth slowed to 8 percent in the first quarter from 9 percent in the prior period, that was still faster than the 6.9 percent expansion for the country. Its 1.78 trillion yuan output last year ranked 19th among 31 among provincial regions, but was highest on a per-capita basis among all 31 provincial-level regions, according to a report by China Business Network.

The city is also playing a role in China’s Belt and Road Initiative as it’s the the eastern end of a rail link to Minsk, where the two countries have agreed to build an industrial park on the outskirts of the Belorussian capital that’s intended to serve as a model for the program.

Tianjin is connected by rail routes through four inland border ports, Erenhot and Manzhouli along the Mongolian border, as well as Alataw Pass and Khorgas on the Kazakh border.

Tianjin’s container port.

Photographer: Jeff Kearns/Bloomberg

Towering over the rails just off Tianjin’s waterfront, massive orange cranes load containers onto freight trains that will make the two-week trip from the pilot economic zone across Asia. The first departed in November, carrying 104 containers of construction materials. Xue Feng, a manager with the railway hub, said in a recent interview that the trains are scheduled to operate 20 times per year.

Back in the towering Manhattan-style district, more than half of the 47-story apartment building where Zhang, the security guard, works has been sold, and some businesses and companies have moved into the buildings. Property sales jumped 94.3 percent in 2016, the fastest of all provinces, according to the National Statics Bureau.

It’s no surprise Tianjin’s big development plans weren’t a failure because it’s a major city with backing from heavy hitters in the party, Polk said. Vice Premier Zhang Gaoli, and Sun Chunlan, a member of the Politburo, are both former party secretaries of the area.

"They’re not just going to let it go down," he said.

— With assistance by Keith Zhai, and Jeff Kearns

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