Wuhan: Keep on building

Buildings under construction in Wuhan Photo: IC

When Li Xu went back to her hometown of Wuhan, capital of Central China's Hubei Province, during the Spring Festival holidays, she felt the city was no longer such a good place to live.

"The traffic is as bad as in Beijing, and the city is full of construction sites, skyscrapers, subways, bridges and highways," the 29-year-old editor at a Beijing-based publishing firm told the Global Times on Sunday.

There were 11,012 construction sites across the city in 2013, up from around 6,000 in 2012, with 539 of them for urban infrastructure and the rest for property projects, according to data from the Wuhan Urban and Rural Construction Commission.

The city has a population of 10 million and is situated on the middle stretches of the Yangtze River. It has set an ambitious goal to build itself into the No.1 metropolis in Central China by 2016, and aims to have urban infrastructure matching that of Guangzhou, capital of South China's Guangdong Province.

Ambitious plan

 Tang Liangzhi, mayor of Wuhan, said 200 billion pounds ($332.66 billion) will be spent over five years on a redevelopment plan, including infrastructure spending and property development, that will make Wuhan into a megacity, the BBC reported on February 17.

The rate of infrastructure spending in Wuhan alone is comparable to the UK's entire expenditure on renewing and improving the fabric of the country, the report said.

The estimation is based on a national infrastructure plan unveiled by the British government in December 2013, which forecast investment of 375 billion pounds on infrastructure from both the public and private sectors by 2030.

The scale and speed of construction in Wuhan has attracted global attention since 2011, when China started to shift its focus toward promoting growth in the interior, rather than coastal regions.

"Wuhan had lagged behind other provincial capitals in urban infrastructure for many years, and the central government's effort to develop central and western regions to rebalance the economy has offered Wuhan the opportunity to catch up with its counterparts," Hu Runzhou, a transportation expert with the Wuhan branch of the China Academy of Management Sciences, told the Global Times Thursday.

According to Hu, Wuhan started its subway planning in the early 1980s, but the city's first subway line was not inaugurated until 2012. By 2017, seven subway lines will be put into use across the city.

Wuhan was ranked No.5 in a list of the world's most dynamic cities published by real estate consultancy Jones Lang Lasalle on January 27, given its speed of innovation, new building construction, property price increase and investment in real estate from cross-border investors and corporations.

However, the large scale of construction in the city has also led to a number of problems.

"As many main roads have been blocked by construction sites, the city's traffic problem is very serious," Hu said. "Massive construction has also resulted in frequent smoggy weather."

Wuhan had only 160 days with good air quality in 2013, with industrial-waste gas, auto exhaust and dust from construction sites being the three most prominent sources of air pollution, Wuhan Environmental Protection Bureau said in a statement published on February 18. 

 Urbanization drive

China's central leadership has pledged to pursue a "human-centered" urbanization program that upholds the philosophy of green and low-carbon development, but this has not prevented construction binges by some local governments.

"Many Chinese cities are racing to demolish old buildings and complete infrastructure projects that will enhance their profile and sustain local GDP growth," Xie Yifeng, head of the Asia-Pacific Real Estate Association, a Hong Kong-based industry group, told the Global Times Monday.

Besides Wuhan, almost all top-tier cities in China invested more than 100 billion yuan ($16.42 billion) in infrastructure construction last year.

Beijing spent 178.57 billion yuan on infrastructure construction in 2013, with priority given to developing urban rail transport and pubic services. Shanghai spent 104.33 billion yuan on infrastructure construction last year, according to data from the local authorities.

Although Tianjin did not disclose detailed information, the city planned to invest 140 billion yuan in building transportation and municipal facilities in 2013, according to an urban construction work conference held last March.

Xie said the construction frenzy could cause property bubbles.

"The local governments will resort to land sales in order to pay back their debts and support large-scale urban construction," Xie said. "Rising land prices will therefore push up housing prices."

Debt problem growing

There are growing concerns that the large-scale investment will add to the debt burden of some local governments, which is already very heavy.

The growing size of local government debt will increase default risks and affect the stability of China's financial system, the Center for Macroeconomic Research at Xiamen University said in a research report published on Thursday.

In the case of Wuhan, the local government's debt amounted to 203.7 billion yuan by the end of June 2012, and its debt-to-GDP ratio was 1.66 times the international standard, the Ministry of Finance said in an article published in September 2013. More recent data is not yet available.

The city government's fiscal revenue is projected to reach 107.65 billion yuan in 2014, but in the same year, the city plans to invest 150 billion yuan in urban construction, with a focus on improving transportation.

Fiscal spending will only contri­bute a small proportion of the city's investment in urban infrastructure, and local government financing vehicles (LGFVs) will play a key role in providing funding for the projects, Peng Hao, head of the Wuhan Urban and Rural Construction Commission, said at a conference held in January.

But Wuhan Urban Construction Investment and Development Group, the city's largest LGFV, was downgraded by China Credit Rating Co in January.

The rating firm said the group is facing an increasing debt burden and it intends to continue spending a lot in the future.

Across the country, a total of 100 billion yuan worth of bonds issued by LGFVs are expected to mature in 2014, prompting the National Development and Reform Commission to announce in January that they will be allowed to issue new bonds in order to help repay the maturing debt and ensure that existing infrastructure projects can be completed.