City needs more space for booming population
Shenzhen, on the border with Special Administrative Region (SAR) Hong Kong, sees itself as the high-tech metropolis of China. It houses corporations in the information and telecommunications sectors such as Huawei, ZTE or Tencent. Additionally, car and battery manufacturer BYD has his headquarters there. Gross Domestic Product (GDP) per capita in 2017 was US$27,000, according to the local statistics office.
But the country’s richest city has a big problem: it is bursting at the seams and the situation is likely to worsen in the future. According to the local Housing and Construction Bureau, the metropolis hosted around 12.5 million people in 2018. Forecasts by the same authority say population should rise to 20 million by 2035. Therefore, authorities want to boost the housing market. Around 1.7 million new apartments could be built by 2035. That’s about 100,000 units a year. Private real estate developers will generate around 40 percent of the planned supply. They should be based rather in the upper segment. The remaining 60 percent will be government-subsidized apartments.
Shenzhen wants to attract new companies
The business world must not be neglected, neither. So far, Shenzhen did not have to worry about the settlement of new companies. The metropolis even endeavored to induce companies of industries such as textile or furniture manufacturers to emigrate, so that modern industries with higher added-value could take their place.
But the trade conflict with the US led to a turnaround. According to local government officials, direct investment from the US almost imploded in 2018. Other nations also held back. They are waiting to see how the showdown between the two largest economies in the world goes on. In addition, more and more companies in the high-tech industry are suffering from rising land prices in Shenzhen. Therefore, the supply of commercial space has to be increased. The only question is, where should the additional land come from both for companies and for the planned 1.7 million new apartments? One possibility are landfills. Shenzhen is located directly on the South China Sea and the Pearl River delta. The latter carries large amounts of sand with it and thus provides the necessary building material at low cost. Furthermore, there is still excavation coming mainly from the construction of new subway lines.
Does Beijing approve the entire 5,000 hectares?
According to prestigious South China Morning Post, the Shenzhen local government is planning landfills of up to 5,000 hectares for the period 2016 – 2025. The corresponding investment totals to US$ 4 billion. This does not include the cost of constructing apartments, commercial properties and infrastructure, which will add up to another US$ 3 billion. Plans are generally implemented quickly and within timetable in China. In the present case, however, there is a difficulty: plans of the local government must be approved by the central government in Beijing. Since 2018, there is a new law which regulates landfills on the coast. It remains to be seen how much land may actually be reclaimed from the sea.
Foreign companies should keep an eye on the project. All major construction works are likely to be carried out by Chinese companies – as for public tenders and procurements, domestic providers are to be preferred by law. However, building equipment or other specialized technology could create lucrative business opportunities for foreign companies at one point or another.