Capital investment

Beijing today is like Shanghai in the early 1990s. Then, the eastern Chinese city underwent a massive urban reconstruction that touched all aspects of people's lives. Now, Beijing is making a similar effort, building skyscrapers, stadiums, parks, railways, highways and pipelines at lightning speed.

Shanghai took almost a decade to upgrade its dilapidated urban infrastructure. Beijing has less time to do so because it wants to deliver a clean, efficient and modern city when it hosts the Olympic Games in 2008.

This deadline has spurred the usually slow-moving Beijing bureaucracy into action. Every few months, the municipal government meets the press to report on its work. In March, it announced a detailed timetable for the design, construction and completion of 37 sports venues, a national stadium, green belts, parks, hotels and other facilities for the Olympics.

"Organising the Olympics is a process of learning, searching and adjusting for Beijing," says He Zhenliang, a senior Chinese member of the International Olympic Committee. Adds a Beijing-based political analyst: "Beijing will be able to deliver on time because it has a highly centralised regime. It will finish the required projects, even if it means sacrificing other national projects."

While the construction of these huge projects has just started, Beijing is already on track with a much-needed urban renewal plan. The last time the municipality made a similar effort was in 1997-98, when it built an east-west arterial road, a new airport and other major facilities to celebrate the republic's 50th anniversary in 1999.

This time, the scale of urban reconstruction is more ambitious. The list of projects is exhausting: a new airport terminal, two round-the-city ring roads, new extensions to existing expressways, telecoms upgrades, a dozen plans to tackle pollution and the installation of systems to bring water, power and gas to residents more efficiently. By the end of this year, it should have finished building a light rail system, a subway extension and pipelines to bring gas from Shaanxi.

Huge spending programme
In total, Beijing plans to spend US$23bn on Olympics-related buildings and infrastructure – a huge amount by any standards, though still barely enough for it to play catch-up with Shanghai. The capital's size, conservative bent and Byzantine local politics have made urban planning difficult. One symbol of the problem is the under-invested metro system, which has only two lines to serve millions of commuters every day. The Olympics have provided the much-needed impetus to improve the city's underdeveloped infrastructure at one stroke.

At present much of Beijing is a construction site – bulldozers, cranes and battalions of construction workers are everywhere. City planners assure residents that Beijing will be cleaner, more modern and more efficient when all is done. Not everyone is convinced, however. For one thing, some critics argue, the city will be even more sprawling than before, with all the drawbacks of a megacity.

Today, Beijing covers 1,040 sq km, compared with just 72 sq km a century ago. Cars speed down newly-built boulevards while pedestrians struggle along the noisy, polluted and unshaded pavements. Many traditional neighbourhood districts have been razed to make way for nondescript skyscrapers and shopping malls.

The latest casualty is Nanchizi, where hundreds of century-old courtyard houses have been destroyed to make way for bigger and more expensive blocks. The area, south of the Forbidden City, was marked as one of 25 historic areas under preservation. The district's officials, however, managed to defy the order and get developers in, saying that the scheme would 'beautify' the area and 'restore' its ancient setting with newly built alleyways and courtyard houses.

Shanghai lost many of its historic European-style buildings during its breakneck development in the 1990s. Cultural preservationists feel the situation in Beijing is even more acute because of the capital's long history and rich heritage. Shanghai rose to prominence only a century ago, while Beijing has been the seat of government for some 800 years.

Downtown Beijing now looks like most other Chinese cities, filled with concrete blocks that are rapidly encroaching on neighbouring rural counties. Quiet villages in Fengtai and Beiyuan have been turned into suburbs, from where people travel long distances to work in the city centre. With the imminent completion of the light railway system and the fifth ring road, more people will move out to these satellite towns.

With an ever-expanding Beijing, its residents will increasingly depend on cars. Public transport is improving, but private cars will remain the preferred mode of transport of the young and affluent. A recent survey of nine Chinese cities revealed that Beijing had proportionately the largest number of people planning to buy a car. Official sources predict that the number of cars in Beijing will nearly double from the current 1.7m to 3m by 2008.

Beijing's answer to a fast-growing car population is to build more roads, tripling the current 216km to 700km by 2008. But newly built roads, such as the fourth ring road, have quickly reached capacity. "The roads to the suburbs are becoming very congested as more people commute to work from satellite towns," says one driver. When bad weather hits Beijing, the deficiency of the traffic system is clearly exposed. In December last year, for example, heavy snowfall paralysed the whole city, trapping cars on highways for up to 10 hours.

For the moment, Beijing is concerned only with growth, not the consequences of growth. This year, the city is expected to record its fourth consecutive year of 11 percent GDP growth, to Yn312.6bn.

Much of this growth is fuelled by public spending on infrastructure. Another stimulus is property development, the hottest industry in town. Developers are grabbing land and putting up concrete blocks at a startling rate, in anticipation of an Olympics-related property boom. In the suburbs, they build villas and detached houses for the nouveau riche that routinely fetch US$1m a unit. In the city centre, they build studios, serviced apartments and other deluxe units for the growing class of young professionals.

Service sector growth
Another area of high growth is services, including education, transportation, finance and information technology. Last year, the tertiary sector accounted for 60 percent of Beijing's GDP, a ratio on a par with Shanghai but far behind the economies of Hong Kong, Seoul and Tokyo.

One promising service sector is tourism, especially domestic tourism. Many Chinese visitors came to Beijing during the three recently extended public holidays: the Spring Festival in February, Labour Day in May and the National Holiday in October. Inbound tourism is likely to grow strongly too, thanks to the publicity generated by the Olympic Games. Last year, Beijing received 2.8m inbound tourists.

Another pillar of growth is foreign investment, which in 2001 rose 33 percent year-on-year to US$4.1bn in contracted value. Beijing may not be as popular as Shanghai or Shenzhen as an investment destination, but it enjoys a good share of the action. Recent investments include Wal-Mart's US$25m plan to open five retail outlets, Hyundai's joint venture with Beijing Automotive Industry Corporation to build 200,000 automobiles by 2005 and Nokia's US$1.2bn, 50-hectare industrial park inside Beijing Economic Technological Development Area.

Beijing is not the most efficient place to do business in China, but companies, both foreign and domestic, keep coming because of its strategic importance. "Many Chinese CEOs spend one third of their time in the capital because important decisions and information flow from here," says JP Huang, a Beijing- based businessman with a string of ventures nationwide.

The city is a magnet not only for businessmen, but also for ordinary Chinese who flock to it every day. Despite its dust, traffic jams and rising house prices, Beijing is popular with young peasants seeking work as well as with Western-educated professionals returning home in search of a fortune. Beggars and hawkers are also determined to stick it out, despite being constantly chased away by the police. "I don't want to go back home to Henan," says a young man selling pirated CDs outside the Friendship Store in downtown Beijing. "I can't make enough ploughing a small plot of land. Here I have a chance to make some good money."