Roughly 100km south-west of Beijing, in the centre of Hebei province, the construction of the purpose-built Xiong’an New Area is powering ahead. 

Touted as the first ‘national new area’ of this century by the Chinese government, it is expected to be a high-tech, green urban district, as the country turns the page on the urbanisation models of the 1980s. 

Xiong’an will sit at the heart of the new Jing-Jin-Ji development, which brings together the capital Beijing, the coastal city Tianjin and the whole of Hebei province, to house some 100 million people. 

In its 14th five-year plan, the Chinese government has highlighted its desire to develop an urbanisation policy that is “dense, specialised, coordinated and fully functional”, in a sign that such urban consolidation is set to accelerate over the next decade. It identifies nearly 20 mega regions, but plans to boost “high-quality development” in the three main ones: Jing-Jin-Ji, the Yangtze River Delta (which comprises Shanghai, Jiangsu and Zhejiang) and the Greater Bay Area (made up of Guangdong, Hong Kong and the Macau Greater Bay Area). 

Foreign direct investment (FDI) has piled into the latter two and Beijing over the past three years. According to fDi Markets, between January 2018 and June 2021, Shanghai, Jiangsu, Zhejiang, Guangdong and Beijing ranked as the top destinations for greenfield investment projects. 

With many foreign investors already present in these regions, China’s bid for urban consolidation is far from merely a domestic issue. At different stages of development, each of the three main mega regions represents particular opportunities for foreign businesses operating in consumer markets, infrastructure, high-tech innovation and financial services.

Clusters of specialisation

Each region will have its own specialisation: ‘modern services’ in Jing-Jin-Ji, including education, technology and financial services; green infrastructure in the Yangtze River Delta; and advanced manufacturing and financial services in the Greater Bay Area.

Kyle Freeman, a partner at Dezan, Shira & Associates, says that foreign investment into the Jing-Jin-Ji area is less prominent at this point as Beijing has only started to develop trade and tax policies over the past year, while policies and incentives in the Greater Bay Area have been developed over a much longer timeframe. 

Since the establishment of Beijing’s Free Trade Zone last year, the government has started to develop policies to facilitate modern services, Mr Freeman says. “We have an idea of what they’ll be, but we’re slowly seeing them come up in recent months and expecting more this year and into next year,” he explains.

In July, Huo Xuewen, director of the Beijing Municipal Bureau of Financial Work, said in a statement that some 60 foreign-funded financial institutions have established themselves in Beijing.

Broadly speaking, however, Mr Freeman says across the different mega regions, foreign investors will be attracted to the consumer potential, not only because of their size but also because of their stratification.

With an estimated 600 million people living in the three mega regions by 2035, he says, “these regions will not only represent a large consumer base with higher-than-average disposable income, but offer differentiated first-, second- and third-tier markets in a densely populated area”.

Zhouchen Mao, Asia-Pacific analyst at AKE International, expects the investment implications of city clusters to be “huge”, irrespective of tensions between China and the West.

“I think there are going to be a lot of opportunities [for FDI] in technology, infrastructure, manufacturing, agriculture and energy,” he says, citing a greater demand for food and electricity in these urban areas. 

Green infrastructure opportunities

In May, French manufacturing company Saint-Gobain, which has been present in China since 1985, opened a new plaster plant in Yangzhou, Jiangsu, to serve the local construction industry.

Ludovic Weber, chief executive of Asia Pacific of Saint-Gobain, tells fDi that like many other foreign investors, Saint-Gobain came to China for the export market, but now its focus is the domestic market.

Set against China’s net-zero pledge by 2060, the Yangtze River Delta, which comprises Shanghai and the provinces of Jiangsu, Zhejiang and Anhui, has emerged as a green hub. 

At a symposium last year in Hefei, Anhui, president Xi Jinping called for the foundations for the green development of the Yangtze River Delta to be strengthened, stressing the importance of the river’s ecological protection. 

In this context, Mr Weber says that Saint-Gobain, the majority of whose operations sit along the Yangtze river, is well placed to navigate the strict rules around government permits for land and energy to provide the local market with high-quality sustainable materials for construction.

“It’s difficult for [industrial investors] to set up plants in China’s green zones. You need to be very green, which we are,” he adds, pointing to the company’s roadmap to reduce water consumption, water discharge and carbon dioxide emissions on an annual basis. 

Big banks, big tech, big green

Min Ye, associate professor of international relations at the Frederick S. Pardee School of Global Studies at Boston University, says that “for urgent needs in Chinese localities, foreign investors are always embraced”.

“Big banks, big tech and big green companies [still] have a lot of bargaining power, and want to go to those [centres] for that specific industry,” she says, whether that be the green zones of the Yangtze River Delta, the high-tech manufacturing areas in Shenzhen or the financial hubs of Shanghai and Hong Kong. 

One clear example of this is the multinational banks moving into the Greater Bay Area, which unites nine cities in the southern province of Guangdong with Macau and Hong Kong, in spite of the political turbulence in the latter city state.

Citigroup is set to expand its operations in Hong Kong by hiring up to 1700 new staff to better serve the southern city cluster. Standard Chartered plans to hire 400 new staff this year, investing $26m by 2024 to revamp its retail and wealth management operations in the city, as it expands into the mainland.

Samir Subberwal, head of consumer, private and business banking for Asia at Standard Chartered, tells fDi: “We see immense opportunities in the Greater Bay Area (GBA) and are fully committed to growing our business there.” 

Standard Chartered is preparing to launch the Wealth Management Connect, which will connect the offshore Hong Kong market with the onshore mainland market. 

“Our aspiration is to provide a ‘One-Greater Bay Area’ experience by deploying a ‘GBA ambassador’, establishing one GBA service centre and one GBA hotline, and re-branding of international banking centres to GBA branches, to serve cross-border GBA clients,” he says.

With a live debate running in China currently over the advantages of economic growth versus the disadvantages of losing rural China, Mr Mao says that there is one thing that is difficult to argue with: “The bigger these cities become, the more productive they are, and the higher the incomes of their inhabitants who are willing to spend.” 

This article first appeared in the August/September print edition of fDi Intelligence.