New Frontier

4 December 2012

China’s newest special zone, next to Macao, rises from the ground

By Mark O’Neill

A few hundred metres from the western edge of Macao, China’s newest special zone is rising rapidly from the ground. Giant earth-shifting equipment is in place, and thousands of construction workers are busy laying roads, planting trees and building tunnels, offices and residential towers.

This is the island of Hengqin, which covers an area of 106 square kilometres – three times that of Macao. Hengqin has a population of 4000, compared with 570,000 across the water. In 2009 the central government decided to transform the island into a centre of education, culture, high technology and ecological living. The workers are turning this vision into a reality.

We are in the early stages. The workers are creating the basic infrastructure; Hengqin will not be able to support a large population for at least two-to-three years. The official plans are very ambitious – 120,000 residents by 2015 and 200,000 by 2020.

How many of those people will be from Macao? One official on the island forecasts that 100,000 – 18 percent of Macao’s population – will move to Hengqin to take advantage of cheaper land and housing and a pleasanter living environment. He also predicts that many small and medium-sized firms from Macao will move to cheaper and more spacious offices on this side of the water.

If you visit Hengqin today, this forecast is hard to believe – clouds of dust, uneven roads and a lack of facilities. But no one who saw Pudong in its early years could imagine its prosperity and bulging population today. Only time will tell.

Sleepy island

Hengqin island covers an area of 106 square kilometres, with a useable area of 60 square kilometres; the rest is covered by hills and forests. It is part of the city of Zhuhai, a special economic zone. Its residents have for decades made a living from farming, fishing and oysters; the island is famous for its oyster restaurants.

At its closest point, it is just 200 metres from Macao; it is 2.5 kilometres from Macao airport and eight kilometres from Zhuhai airport.

For many years, Macao, Zhuhai and the provincial government in Guangzhou discussed how to make best use of this empty island, but they could not agree.

It was only at the end of the last decade that the State Council stepped in. In August 2009, it designated Hengqin as the third national-level New Area, after Pudong in Shanghai and Bohai in Tianjin. On 29 December 2009, President Hu Jintao visited the island in person, after attending celebrations to mark the 10th anniversary of the return of Macao, to show Beijing’s seal of approval.

The master plan calls for the island to develop finance, creativity, leisure, science, education, Chinese medicine and high-technology industries. Taxes will be lower than in the mainland, imports will arrive duty-free and the renminbi, pataca and HK dollar will all be legal tender. The target is that at least 200,000 people will be living and working here by 2020. Of the total land area, 58 square kilometres will be left under-developed, to preserve the high quality of the environment.

Government investment in the island last year was 12 billion yuan; this year it will be 18 billion. The funds are going into infrastructure, including a road around the island, as well as gas, power, water and telecommunications facilities and foundation work for the Shizimen Central Business District.

It is an enormous challenge to start from scratch. “We are facing interminable difficulties,” said Niu Jing, director of the management committee of the Hengqin New Area. “The geological conditions are not good and quite complicated. We are building everything out of nothing on this barren island.”

It will take another two years before the basic infrastructure, including roads, gas and sewage pipelines, is ready.

Campus and Ocean World

The most advanced project is the new campus for the University of Macau. The Macao government paid 1.2 billion patacas to lease 1.1 square kilometres on the island for the site. Construction involves a total investment of 9.8 billion patacas.

The developer is due to hand the site over to the university by the end of 2012. It will be 20 times larger than the current site in Taipa, with a minimum accommodation capacity of 10,000 students. It will include faculties for Arts, Social Sciences, Business and Administration, Law, Education and Life Sciences, and Health. It will be a green campus – few cars, easy for cyclists and pedestrians, and using solar energy and reclaimed water.

On 19 July, the tunnel that provides the only link to Macao collapsed. It means that the opening of the campus will be delayed. The collapse took place at the Hengqin exit close to midnight; it buried five pieces of heavy machinery inside the tunnel, but no one was injured.

Construction of the tunnel is costing two billion patacas; it is 1570 metres long, of which 530 are underwater.  It is being dug 25 metres underground, to allow 3000-tonne vessels to pass through the waters above.

With four lanes of traffic, the tunnel will allow movement of people and goods from Taipa to the campus, without passing through customs or immigration. It will also include a telecommunications cable, to give students and faculties the same internet access that they have now.

Until 2049, the campus will be subject to Macao, not mainland, law. The smooth operation of the tunnel is critical to the successful running of the new campus, as it will be the only point of access.

Also under construction is Ocean Kingdom, a giant marine resort on the southern tip of the island, involving investment of more than 10 billion yuan.

It is being developed by Chimelong, a private company founded in Guangzhou in 1989. Chimelong is one of China’s largest tourist and entertainment companies, operating theme parks, a safari park, a circus, a crocodile park, hotels and restaurants and golf practice ranges.

The Hengqin project is its largest and most expensive to date, aiming to attract 20 million domestic and foreign visitors by 2020. The first phase involves an area of 1.43 million square metres, nearly double the size of Ocean Park in Hong Kong. It will include a resort hotel with 1888 bedrooms – the biggest ‘ecology theme’ hotel in China.

It has set aside an area of 5000 square metres for Macao firms to sell biscuits, cakes and other specialty products; companies are being invited to bid for space in the area.

The success of this project depends heavily on transport access to the southern part of the island, where Ocean World is located. The firm is counting on a bridge that will link Hong Kong to Macao and Zhuhai, a light-rail train from Guangzhou to Gongbei, and improved roads to the site. The government is considering an extension of the light-rail line to Zhuhai airport to run down the eastern side of Hengqin, with a stop at Ocean World.

The island will also contain a 390-hectare wetland, and a mangrove and avian park. Work began on the project in April 2012 and will cost 600 million yuan, including the planting of 120,000 mangrove trees. It means clearing a banana forest covering 300,000 square metres and building an exhibition hall measuring 2000 square metres. It aims to become a rest stop for birds that migrate between East Asia and Australia.

Business district

An important part of the New Area is the Shizimen Central Business District, which involves investment of 38 billion yuan; construction work began in 2010. It aims to attract nearly 100 financial institutions from Hong Kong and Macao and form a renminbi settlement area. As of the end of May, 40 Hong Kong and Macao firms had registered companies there, bringing in capital in excess of 50 billion yuan.

It has a planned floor space of 700,000 square metres, with a total investment of more than six billion yuan. It will include a convention centre, several five-star hotels, shopping centres, and finance towers. The completion date is set to be in 2014

One of the landmark buildings in the district will be the Huarong Hengqin Tower, designed by British-based architect Atkins. The mixed-use development contains accommodation for a five-star hotel, international grade A offices and brand retail facilities. Designed like rippling waves, it faces the waterfront on the eastern side of the island, opposite the Cotai Strip.

Economists are sceptical as to whether Hengqin will become a financial centre. Hong Kong, Shenzhen and Guangzhou are the dominant financial centres of the region; several cities in Guangdong provide back-office and service centres for the financial institutions of these three cities. Shenzhen is offering the district of Qianhai, which borders Hong Kong, for this very purpose.

It is hard to see what Hengqin can offer that is not already available elsewhere.

Supporting role

Two large Hong Kong companies have signed contracts to build a 3D film factory and a film city respectively in the island’s Culture and Creativity Park.

The Macao/Hengqin Chinese Park has been allocated 500,000 square metres of space; they are currently doing site work.

Economists believe industries with the best prospects are those that complement Macao, i.e. non-gambling tourism like golf courses and other sporting facilities, as well as resorts, spas, nature and animal reserves, hotels, and exhibition and convention centres. Education is another key area. Hengqin offers space that is unavailable in Macao and at much lower cost, which may help it attract more campuses like that of the University of Macau.

It will also offer a green and low-density living environment that could attract retired people from Macao, Hong Kong and other parts of China.

Will Macao people move?

The official plan calls for the construction of residential property. Already being built are tower blocks to house local residents whose homes are being demolished to make way for the new projects.

Niu Jing, director of the Hengqin New Area Management Committee, said that they intended to develop industries first and then the property market. “The current developments are not influencing property prices in neighbouring areas,” he said. “I expect the residential standards in the future will be up-market and expensive.”

An alternative view was presented in June 2010 by Liu Yang, an official of the New Area Management Committee. He said that he expected 100,000 people to move from Macao to Hengqin to live; that is almost 20 percent of the population of the SAR. Currently, about 30,000 Macao people live in Zhuhai.

A study by the Macao Economists Association proposed that, following the example of the university, the Macao government apply to lease three-to-five square kilometres of land close to the campus, and build public housing on it. It says that the area should include hospitals, old people’s homes and other public facilities.

This proposal is unlikely to be implemented because the Zhuhai government will not agree to a further lease of land; building public housing is not profitable enough.

More likely is the construction of middle and up-market commercial housing aimed at both Macao and mainland people.

Jonathan Schiff, chairman of Schiff Development, a company with offices in Macao and Las Vegas, said that whether Macao people or companies move there depended on the policies adopted by Hengqin.

“These include driving licences – currently, you need two – and the Lotus bridge that connects the two closes early. Will it be open 24 hours a day?

“Currently, it is very quick now to go to Hengqin via Taipa, while the Gongbei crossing gets queues of 1000 at a time. But, when the island is built up and tens of thousands are living there, how convenient will it be?” he said. “There are several participants in developing Hengqin policy, of which Macao is one.”

Middle-class people from Macao will only move if they find well-paid jobs in Hengqin or if they have easy access to their jobs in Macao, with a minimum of delay at the border for themselves and their children going to and from school.

They will also demand a similar array of services to that which they enjoy now, including shops, restaurants, medical clinics and other amenities.

Schiff said that whether Macao firms move to the island would depend on policies, such as taxes, customs, the ease of moving goods to and fro, pricing and the convenience of the border. “It is too early to speculate about this.”

Some firms in Macao have rented office space in Zhuhai, where they have moved staff to take advantage of the cheaper rents.

The management committee must decide whether to set aside a portion of the island for the needs of Macao people and build homes and facilities catering for them.