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Many State-Level 'Special Towns' Will Fail: Expert

An asset management company partner lists five reasons why she expects many of China's special town projects to wither on the vine

By Xu Mouquan Updated Nov.14

Plans are in the works to build 403 state-level 'special towns' across China. They're towns that don't spring up organically, but are artificially constructed around a specific industry, such as tourism or sports. Thousands of such towns are planned by local governments and companies, China Times reports. According to Tang Liming, partner at asset management company Hejun Yunshuiquan, many special town projects run the risk of falling over before construction is completed. Tang laid out her reasons at the financial news site Caixin.com.   

In theory, the greatest difference between a 'special town' and a regular real estate project is that it has a special, advantageous industrial ecosystem – but some special towns are not backed by such an ecosystem, Tang says. Owing to the fragmented terrain and inconvenient transportation conditions, for instance, enterprises in China's west are mostly resource-based or agricultural produce-related, meaning manufacturing innovation does not come easily. Special towns there struggle to find the backing of an industry.   

Due to China's decreasing birth rate and aging population, cities now compete for labor, draining some special towns of their population. Of the 127 state-level special towns approved in the first batch, 35 reportedly saw a net outflow in their population; those located in the agriculture-dominated regions experienced it most acutely (33 percent had a net outflow).   

Many of China's regions are drawing on Zhejiang Province’s special town model, the expert said, but the success of special towns in the province would not be possible without the entrepreneurship and a prosperous private economy. Special towns without the support of the market will struggle to get ahead, she said.   

And both local governments and developers face the challenge of where to find the capital to build special towns, since a special town comprises individual buildings, supporting infrastructure like roads, public facilities such as hospitals and industrial facilities like industrial parks, requiring an investment far greater than a real estate project, Tang said.