Highlight - What is the relation between Xiongan New Area and Beijing?

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Though endowed with different local cultures, almost every mega-city across the globe invariably runs into some common problems, like air pollution, traffic congestion, employment pressure and skyrocketing housing prices.

The same is true with capital cities.

Beijing, as the political and economic center of China, and also the hub for technology startups, is unsurprisingly vexed by urban problems.

China is putting Beijing's urban problems on the front burner.

In 2017, Xiongan New Area (thenceforth Xiongan) was officially established to cover a large area 100 km southwest of Beijing in order to house Beijing's non-capital functions and boost Hebei's economic growth.

To obtain a clear picture of Xiongan, three questions are asked: What is the crux of problems facing Beijing? Why China chose Xiongan rather than letting the market decide? And what is the relations between Xiongan New Area and Beijing?

Xiongan New Area: Xiongzhou town, Baoding City, Hebei Province. /VCG Photo

First, it is paramount to know the crux of problems troubling Beijing.

As Li Tie, Chief Economist, China Center for Urban Development, said, legions of organizations and businesses are flocking into Beijing, since its central authorities enjoy great power to allocate resources.

When premium resources revolve around administrative power, and concentrate in Beijing, other market resources will follow. In recent decades, Beijing hasn’t handled such challenges well. That is why we see increased grumbling about smog, job hunting pressure, and high cost of living.

Faced with such a situation, why the government chose Xiongan, rather than letting the market decide?

According to Yang Baojun, President of China Academy of Urban Planning & Design, in most cases, the market should play a decisive role.

However, when structural abnormalities in a society appear, the government has to take action. Many issues would be solved if we were to follow this rule.

Construction of the Xiongan New Area aims to solve an unusual set of problems. So, to divert the trajectory of how resources are allocated in Beijing, the government must first extend its firm hand, then allow the market to play its decisive role.

The essential question remains: what is the relation between Xiongan New Area and Beijing? Li Tie pointed out that setting up Xiongan is a huge reform issue that will require the central government to take several steps.

First, the authorities must delegate power, to gradually ensure that the market plays the decisive resource-allocation role, rather than keep such power in the hands of ministries, as a planned economy would.

This is in line with both integrating Xiongan into the regional economy and coordinating the growth of Beijing-Tianjin-Hebei.

Second, amid this deepening reform – loosening the government's grip and delegating its power – more energy should be focused on development.

Third, the government should promote reform which is crucial to undermine the so-called powerful lobbying group of special interests that would still exist in Beijing.

Therefore, three above-mentioned questions demonstrate the importance and the role of Xiongan New Area, as well as the ties between Xiongan and Beijing.

With this New Area, China seeks to strike a proper balance and make win-win progress for both Beijing and its neighboring cities.