Within Hours, Plans for a Quiet Corner of China Send Home Prices Soaring


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A government seal blocks the gates of a development in Hebei province after an order banned new property sales in a special economic zone there.

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Jason Lee/Reuters

SHANGHAI — Until it became the subject of China’s latest property-buying frenzy, sending shares of construction companies soaring and leading the authorities to close local real estate offices, the area around Xiongxian County was known primarily for its donkey burgers.

The residential and industrial area roughly 80 miles south of Beijing barely registers on China’s economic map. It consists mostly of apartment buildings, villages, wetlands and more than a few empty fields.

But on Saturday, China declared that an area that sprawls across three local counties will someday become Xiongan New Area, a gleaming economic powerhouse reminiscent of earlier developments that helped put China’s economy on its fast-growth trajectory. When completed, it will cover nearly 800 square miles, offer favorable regulation to businesses and become a modern urban area key to redeveloping the Rust Belt around Beijing.

According to Xi Jinping, China’s president, as quoted by official Chinese news media, Xiongan will become “a demonstration area for innovative development.”

For now, it has become the latest example of the frothiness and unpredictability of the Chinese property market — a market that many experts warn could have severe repercussions for China and the world if it stumbles.

Local Chinese officials have moved to freeze purchases and make other moves to cool the local market, according to local real estate agents and news media reports. Chinese social media showed photos of new property developments and real-estate offices with signs saying they had been temporarily closed.

In the town of Baigou, about 12 miles north of Xiongxian, prices for an apartment jumped to 12,000 renminbi per square meter — or more than $160 per square foot — from 8,750 renminbi within hours after the announcement, according to Wen Yunlong, a local real estate agency. On Sunday, it rose by another 3,000 renminbi, he said.

“Prices have gone up every day,” Mr. Wen said.

Since Saturday, he said, potential buyers had lined up at his agency. “I have been working from 8 a.m. to 10 p.m. these days,” he said. “Last night, I worked till midnight.”

He added: “I haven’t seen so many people here before. It went crazy.”

On Monday, shares of the BBMG Corporation, a Beijing cement maker, saw its Hong Kong-traded shares jump nearly 35 percent. Other Hong Kong-traded property-related firms active in the area saw their shares rise by smaller amounts. Markets in China were closed on Monday for a holiday.

Property is a major investment vehicle in China, where the stock market has long been seen as unreliable and where the authorities tightly limit how much money can be sent outside the country. That has led to surging prices — and worries about bubbles — in a number of cities. While mortgages in China are not as big or as common as they are in the United States, a surge of lending to home buyers has prompted worries about what might happen if China’s property market bursts.

In declaring its intent to build Xiongan, the Chinese government invited comparisons to the southern city of Shenzhen and Shanghai’s Pudong area. Shenzhen was part of China’s earliest experiments with private enterprise after the death of Mao Zedong, and it remains one of the richest parts of China. Pudong, home of many of the gleaming skyscrapers that define Shanghai’s skyline, became one of China’s most successful and high-profile development projects.

Xiongan also fits into China’s grand plan to create a vast urban area uniting the capital city of Beijing with the nearby port city of Tianjin and with Hebei province, the industrial province between them. Called Jing-Jin-Ji, the area — which would include Xiongan — will become a hive of economic activity that is intended to replace Hebei’s dependence on smokestack industries like steel and put the region on a path to rival Shanghai and Shenzhen.

Right now, the Xiongan area has less than 1 percent of the economic output of Beijing, according to state media. It is part of an area known for its donkey burgers — sandwiches with roasted donkey meat that tastes something like pastrami.

Owen Li took the morning train on Monday from Beijing to sample donkey burgers but had an unusually hard time buying a ticket. Once in Baigou, where property sales had not been shut down, Mr. Li noticed that many cars on the street were brands like Audi, BMW and Mercedes-Benz.

He then met many potential apartment buyers from out of town and began talking to them. Mr. Li said he was tempted to join them, though he wondered at Xiongan’s long-term prospects.

“If I had the extra money, I would buy several,” he said. “It’s cheap and has room for appreciation. But maybe not this time.”

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