China’s “Jing-Jin-Ji” Megacity Initiative to Improve Development Efficiency

The integration of the Capital economic region through the Coordinated Economic Development Strategy for Beijing-Tianjin-Hebei, also known as Jing-Jin-Ji, is tackling the challenges of establishing a regional development corridor in China. The plan, announced in 2015, bridges overlapping development strategies across the individual localities surrounding Beijing’s rapidly growing metropolis.

As reported in The Jing-Jin-Ji Regional Economic Strategy: 2016 Progress Update? by the Economist Corporate Network and sponsored by ?J?LL??, Jing-Jin-Ji has implemented centralized, top-down planning and resource allocation that is already under way, with improvements to infrastructure, air quality and reg?ional organization in the works.?

Building a community across borders

??The previous lack of economic coordination in northern China has resulted in uneven growth, as well as competition between cities. Under Jing-Jin-J?i, the three regions have begun to cooperate with one another to build a regional development corridor.

“We welcome the plan to have different cities to focus on their strengths as they attract new investment, es?tablish new economic roles, and improve quality of life for residents,” Julien Zhang, Managing Director at JLL North China, said.

Connectivity improvements have already helped ease business transactions between the cities. A high-speed rail trip between Tianjin and Tangshan is now 30 minutes, down from the 3-4 hour drive it was in the past, and Tianjin’s Binhai district is within an hour of Beijing by rail. It is also possible to travel from the Beijing central business district to Tianjin’s central business district without ever going outside.

What it means for commercial real estate

This is important for commercial real estate, as buildings with the best connectivity tend to command higher rents, and convenience is a strong advantage for buildings with this level of transport integration. There remains an opportunity to further integrate the airports with the high-speed rail and metro infrastructure, drawing on the example of the Shanghai Hongqiao transportation hub.

“Beijing residents are starting to see Tianjin as part of their own back yard rather than a far-away destination,” commented Steven McCord, Head of Research, North China, for JLL.

Growing movement of people between the two cities is evident from the hotel business in Tianjin, where local five-star hotels frequently report they are fully booked on weekends as visitors from Beijing enjoy getting away to a nearby, more peaceful location. We have also seen residential investors, in search of markets with fewer restrictions, spilled over to areas of Tianjin that are convenient to Beijing.

We can expect that further regionalization of businesses will underpin demand in Tianjin and maintain net absorption levels over the next few years. This is a massive opportunity to move companies – in whole or in part – to Tianjin to take advantage of lower costs. 58Ganji.com, Sohu Video and Jing Dong Finance have all set up back offices in the area.

Logistics companies have a strong incentive to cluster on the western edge of Tianjin to find a single location that can serve the combined populations of 40 million for ease of distributing goods across both Beijing and Tianjin, and the city of Langfang is a great example of this. Companies such as JD.com and Bestseller have established distribution bases in this area. Furthermore, Tianjin has now become the advanced manufacturing hub for companies that might have previously chosen Beijing with GE Healthcare and Bombardier among the companies who have set up shop in the region.

“Tianjin has attracted some investment from Beijing which is encouraging, but more importantly the city has built a strong and growing advanced manufacturing base. This will provide high paying jobs and help drive spending on services and retail, further diversifying the local economy,” Michael Hart, Managing Director at JLL Tianjin, said.

In many respects, these developments along with many others under Jing-Jin-Ji in 2016 did not disappoint. The 2016 Progress Update noted that Beijing launched additional PPP-funded projects and witnessed expansion with high-tech sectors and in cultural industries. Growth with the capital city’s consumer sectors and service industries particularly impresses.

Opportunities for? the future

Jing-Jin-Ji will help bring alternative sources of employment to the steel-producing regions of Northern China so that they can cut production, and cut pollution, but still provide jobs for the local workforce. There is an opportunity to establish strong incentives for non-steel producing industries to relocate to small towns in Hebei, which provide ample land.

The Jing-Jin-Ji Regional Economic Strategy: 2016 Progress Update concludes, “Our assessment on the programme thus far is generally positive, however, it is important to keep in mind that this progress has been in the context of a robust national economy and in a supportive environment where companies and authorities have enjoyed wide lateral to manoeuvre. As China moves towards what we forecast will be an economic downturn by 2018, various factors underpinning Jing-Jin-Ji’s buoyancy will be changing in turn.”

Steven McCord is Head of Research, North China at JLL.