It feels like being on the set of a post-apocalyptic zombie movie.
Empty skyscrapers, many incomplete, overlook deserted streets. Freshly planted flowers in a riverside park have no one to appreciate them. An entire city that plans to grow to about 10 times the present floor space of London’s Canary Wharf waiting for workers to fill its glass and steel towers.
Anywhere else in the world, you would write it off as a white elephant: Creditors would be scrounging for a few cents on the dollar, developers going bust, government backers red-faced. Not in China, where the northern port city of Tianjin’s plan to build the nation’s answer to Manhattan is pinning fresh hope on its new status as a free-trade zone and the upcoming connection of a high-speed rail line with Beijing.
Tianjin’s government, which has bought assets from the investment vehicle behind much of the development, sold bonds this month as part of a Beijing-sponsored debt swap cobbled together to keep the economy humming. And while some, including MGM Resorts International, have scuttled their Tianjin plans, others including Country Garden Holdings Co (碧桂園) are speeding up work.
“I probably wouldn’t have invested in it with my own money, but I wouldn’t bet against the government,” said Michael Hart, managing director at real-estate brokerage Jones Lang LaSalle Inc in Tianjin.
Hart, who has followed the project in the city’s Yujiapu and Conch Bay districts for about seven years, said the rail link will invigorate its initial buildings, which the government plans to fill with anchor tenants, mostly state-owned companies.
Next up for Tianjin is the August opening of the seashell-shaped railway station that is to be part of a 300,000m2 transportation hub larger than New York’s Grand Central Terminal. A ride to the existing downtown Tianjin area is to take 15 minutes, while a high-speed train trip to Beijing is to take 45 minutes, making Tianjin a cut-price alternative for businesses now in the overcrowded capital.
Tianjin Binhai New Area Construction & Investment Group Co (天津濱海新區建設投資集團) — the government-backed group building the area’s highways, bridges, tunnels and the high-speed rail station — gets its revenue from selling those assets to the provincial government and is planning its first US dollar bond issue.
Tianjin’s government this month sold 13.2 billion yuan (US$2.1 billion) in bonds at a zero premium to the central government, joining other provinces in taking advantage of a debt-swap program designed by Beijing to keep infrastructure projects afloat. The funding fix sustains a cycle China cannot afford to break.
“Yujiapu must keep building so that banks can create fictional collaterals with which to increase lines of credit to local government financing vehicles [LGFV] debtors,” said Victor Shih (史宗瀚), a professor at the University of California, San Diego, who studies China’s politics and finance. “China can prevent the bankruptcy of local LGFVs and developers by ordering banks to roll over loans. However, it would take a Stalinist relocation of businesses to Yujiapu to fully occupy the office towers there.”
That is the challenge for a project slated to have more than 100 buildings with 16 million square meters of floor space. Chinese President Xi Jinping’s (習近平) plan to integrate Tianjin with Beijing and Hebei Province might help fill some buildings as central government offices are shifted out of the capital. Meanwhile, encouragement for logistics and leasing companies to register in Tianjin might channel private tenants to a few more.
However, even for the initial buildings, it would take up to five years to fill them due to their remote location, Cushman & Wakefield Inc Beijing office general manager Billy Lo (羅志強) said.
“The government has been helping to attract business, but still needs some time,” he said.
Thanks to China’s still largely state-led approach to development, time is something its leaders can provide.
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