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REAL ESTATE: Infrastructure and economic growth in the Beijing-Tianjin-Hebei Region
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Infrastructure and economic growth in the Beijing-Tianjin-Hebei Region

Written by Michael Hart, Managing Director at JLL Tianjin and Chelsea Cai, Head of Research at JLL Tianjin, Special thanks to Vivian Zhao, Research Analyst at JLL Tianjin, for data collection

BT 201705 REAL 01For residents of northern China, the last decade has been full of announcements about new government directives that are supposed to help integrate and transform the region. There have been so many announcements that some cases have overlapped and it can be hard to make out what the plan is and what specific impact it is supposed to have. And while infrastructure projects create construction jobs in the short term, do these directives actually help in transformation of the industrial base and enable the economy to grow in the long term?


Northern China Initiatives

In recent years plans announced in Tianjin have included the creation of Binhai New Area, the Jing-Jin-Ji (Beijing-Tianjin-Hebei) integration (sometimes referred to as the Capital Economic Circle), the Tianjin Free Trade Zone and now the latest developments in the nearby Xiong’an, Hebei province. Some of these initiatives promise new policies and incentives that will encourage specific types of investment, but almost all of these plans also call for new infrastructure.


A summary of infrastructure plans

Below is a review of some of the planned infrastructure projects in this part of northern China that are linked to these various plans -

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How do these projects impact the economy?

One of the more prominent projects listed above was the Beijing South Railway Station. While Beijing still has a central, west and north train station, how has the construction of this large and modern southern railway station driven development and what role does it play in the Jing-Jin-Ji integration plan?


Construction of railways and railway stations create at least three drivers of additional economic development and drive closer economic integration of areas being linked. These are discussed as follows:

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1. Quicker connections make travel between the areas linked quicker and more efficient.


2. Linking expensive cities to less developed areas allows for commuters to access cheaper housing alternatives, but still work in the main cities where job prospects are better and pay is higher. Simply put, worker mobility is increased.


3. New stations in the less-developed areas provide an economic driver for those areas.


As an example, when the Beijing South Station was developed, the area of Beijing itself started to see economic growth. More visitors to the area drove up additional retail and hotel spending adjacent to the station, more retail jobs were created at the station and real estate near the station increased in value. Additionally, with subway lines linking the Beijing South Station to other parts of the city, residents of that area immediately became more mobile within Beijing and better linked to Tianjin, thus having more choices for employment. Third, business travelers commuting between Beijing and Tianjin were able to do so more efficiently, saving an hour or more while commuting between cities.


With a number of rail and subway stations built in the Jing-Jin-Ji area, these engines of economic growth have spurred similar development around the region. The story is similar for the new stations coming up in Wuqing, Yujiapu, Tangshan, etc.


Conclusion

BT 201705 REAL 03Setting aside the impact of various policy related plans, there has been a great deal of infrastructural development in northern China as a result of various government initiatives. We can see that many of these infrastructural investments are helping to increase the mobility and efficiency of the work force. They are helping to seed new economic hubs, especially around the new train and subway stations. They are also helping to integrate the connected areas by allowing the work force to travel more rapidly from city to city.


So while it is too soon to declare that all of the announced policy goals have been achieved or that the industrial base has been completely transformed, a review of infrastructure does clearly show investment that is bearing fruit in terms of helping the area become better integrated and in bringing economic prosperity to areas that were previous not well connected. This in turn should take some pressure off of the most expensive and densely populated areas within the Capital Economic Circle and allow for continued and broader economic prosperity.


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