Moving at high speed: Connecting China’s business clusters

China's massive high-speed rail (HSR) program is reshaping the location of China's industries, to open up new business clusters and growth opportunities.?

December 21, 2017

During the country’s current 13th five-year period (from 2016 to 2020), China is expected to invest around RMB3,500-3,800 billion (US$537 – $583 billion) in new railway construction, including 30,000km of HSR tracks, says JLL’s South China Head of Research Silvia Zeng as part of its ambitions to achieve developed-world status.

As the HSR dramatically cuts travelling times between cities, the increased mobility of business commuters is key to driving widespread growth – especially as China settles into a new phase in its economic development and lays foundations for sustainable growth in numerous mid-sized cities, as well as promoting its megacities on the world stage. The HSR connection between Beijing and Shanghai, for instance, more than halved the 1318-kilometer journey time from 12 to just five hours.

The rise of the three mega-districts

For China’s three mega-city districts – the Capital Economic Region anchored by Beijing, the Pearl River Delta encompassing Guangzhou, Shenzhen, and Hong Kong, and the Yangtze River Delta based around Shanghai – significant changes and opportunities are on the way.

In the Capital Economic Region, there are plans to integrate the powerhouses of Beijing and Tianjin more closely with the smaller cities of Tangshan and Shijiazhuang, in order to enable new employment opportunities as the larger cities cut down on large, polluting industries.

Meanwhile, the Pearl River Delta region is well-positioned for further progress, according to JLL’s 2015 report on China60, as infrastructure linkages between its mainland cities and Macau and Hong Kong grow. Such links will enable businesses to capitalize on the area’s technology-driven solutions and superior environmental quality compared to its giant northern neighbours.

The HSR link that will shorten travel from Hong Kong to Guangzhou to just 48 minutes, for instance, promises to open up opportunities for businesses and property investors on both sides.

Meanwhile, land reclamation and bridge-building between Hong Kong, Zhuhai and Macau are set to transform Lantau Island into a gateway to a new major business area, and a connecting hub to Shenzhen. The infrastructure program is expected to see Shenzhen’s commercial, financial, and technology centres migrate to the bay area, creating opportunities for property developers to rehouse industries.

A new business landscape

As the interconnector program rolls out, clusters with greater clout will emerge, with some estimates indicating that less populated areas in China’s interior have the potential to grow their fortunes by between six and nine percent by the year 2020.

New HSR stations, such as the one recently opened in Futian in Shenzhen, are likely to be game-changers for office and retail markets, giving property investors confidence to enter the market and new opportunities to develop sites that will benefit from increased passenger traffic, Zeng says.

Futian station will be one of the mainland’s stepping stones into Hong Kong, with the railway’s extension into the harbour city expected to be finished in 2018. At that time, travel time between these two regional financial hubs will be shortened to around 15 to 20 minutes.  Zeng says this will “change the business environment in the area”, thus boosting demand for new office space.

According to the China60 report, better integration with the hinterland will help to boost regional cities and expand the markets for their rapidly-developing service sectors. “Aspiring regional financial centres find it easier to fill ambitious new office clusters buildings when they are surrounded by a readily defined and accessible city-region,” the report states.

As further links are added to the HSR chain, consumption will grow and spread through more regions around China, opening up opportunities for real estate investors to capitalize on the transformation driven by infrastructure developments.

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