Behind China’s Quickest Rising Metropolis: Aviation, Tourism, and a Potential Actual Property Bubble
The terracotta warriors of the Mausoleum of the First Qin Emperor Xi’an are on display in Xi’an, China on June 24, 2018. In the Qin Dynasty from 246 BC Until 208 BC The figures were made to protect the imperial tomb and were discovered in 1974 by the Chinese archaeologist Zhao Kangmin.
Tao Zhang | Getty Images News | Getty Images
BEIJING – The Chinese city of Xi’an remains a ray of hope of growth in a country still recovering from the shock of the coronavirus pandemic.
Xi’an is best known to many for its terracotta warriors – an army of clay sculptures from ancient times. Xi’an is located in central China, well over 800 miles from the east coast metropolis of Shanghai. It is one of the last major urban areas before the poorer regions of the west.
The city’s GDP grew 4.5% in the first three quarters of the year, the fastest of all major Chinese cities, according to Wind Information. Beijing City grew 0.1% while Shanghai contracted 0.3% in the first nine months of the year. National GDP is expected to grow by around 2% this year.
Xi’an’s rapid expansion is a reflection of how local governments are trying to stimulate growth, while raising questions about sustainability.
High-quality manufacturing in industries such as aerospace and pharmaceuticals, as well as the development of transportation infrastructure, have contributed significantly to Xi’an’s growth, said Perry Wong, chief executive officer of research at the Milken Institute.
In this year’s ranking by the Institute for China’s “Best Performing Cities”, which was published on December 17, Xi’an rose to fourth place, up from sixth place last year and ninth place in 2018.
High FDI is another factor in Xi’an’s growth, Wong said.
For the first three quarters of the year, Xi’an said it had consumed $ 6.58 billion in foreign capital, up 7.2% year over year. That is a faster increase than the 2.5% increase to $ 103.26 billion in foreign capital used nationwide, according to official figures.
Samsung has invested more than $ 10 billion in Xi’an, where the company’s semiconductor unit has research and manufacturing facilities. According to The Korea Herald, the South Korean company stepped up its investments and sent hundreds more engineers to the city earlier this year.
Chinese high-tech companies in Xi’an include aircraft parts maker Chenxi Aviation, AVIC XAC – a commercial aircraft manufacturer tied to the state defense and aviation conglomerate AVIC – and Western Superconductor, which makes titanium products and applications in this area researches aerospace, medicine, and other industries.
Helping these high-tech companies attract talent and help the city build its prosperity is a government policy that makes it easy for college graduates to settle in and buy a home in Xi’an. People in China are tied to their place of birth through the hukou system, which makes it difficult for migrants to buy apartments or send their children to local schools in major cities like Beijing.
Easing the hukou restrictions is a strategy in a growth race between China’s emerging urban areas, called “new first-tier cities,” said Yimin Zhao, assistant professor in the Department of Urban Planning and Management at Renmin University. “They compete with each other to attract not just capital, not just high tech, but talent too.”
In China’s development system, an increase in population enables the local government to expand city limits, allocate more land for construction, and make money from real estate deals, Zhao said.
Due to high demand – and likely speculation – Xi’an’s property prices rose a total of 46% in the three years to 2019, according to Sweetome Hurun’s global price index. The annual report from rental company Sweetome and asset chaser Hurun Report found that Xi’an ranked third in the world through price increases last year, up 19.7%.
The growth has continued this year, albeit at a slower pace.
According to the National Bureau of Statistics, newly constructed commercial property prices in Xi’an rose 7.1% in November year over year. This is one of the 10 fastest steps for 70 large and medium-sized cities.
The influx of buyers and high-rise buildings in the city has drawn too many speculators, resulting in an unsustainable price bubble while creating traffic and safety problems for a crowded city, said Yuan Guoqian, president of Xi’an Xiaoyuan Technology. The company’s research advocates that cities seek more sustainable expansion through two- or three-story townhouses.
Yuan said the idea is starting to take off and that a project in the Weinan region on the northeastern outskirts of Xi’an has almost completed its first phase thanks to support from local authorities. “They understand nobody wants this kind of high-density life,” he said, according to a CNBC translation of his Mandarin remarks.
Xi’an’s popularity with tourists – a selling point for developers – has also been a disadvantage in the wake of the coronavirus pandemic.
According to the booking website Trip.com, the city remained one of the top 10 most popular travel destinations in China this year.
Robotic arms spray a car body at BYD Automobile Company Limited’s Xi’an plant on December 25, 2019 in Xi’an, Shaanxi Province, China.
Yuan Jingzhi | Visual China Group | Getty Images
Since June, car registrations in Xi’an have fallen by around 40% year-over-year, while other major Chinese inland cities, Chengdu and Chongqing, saw increases of 15% and 7%, respectively. This comes from the Chinese business database Qichacha.
“This year the economy is not as good as in previous years, so there is a limit (on consumer spending),” said Mao Wei, general manager of Zhonghua County, an hour’s drive from Xi’an under development. That comes from a CNBC translation of his Mandarin-language remarks.
He said the number of visitors had increased since April. But he doesn’t expect much return on the year-long project until people spend more nights in his hotels and more residential and commercial parts are completed.
Speaking generally about the tourism industry, Mao said, “Overall, 2020 is not as good as 2019 because everyone lost money in the first quarter.”