Source | Shenlan Finance

“My family received 50 million yuan in compensation!”

“My family received over 9 million yuan from the demolition!”

“I received 17 apartments and three years' worth of rent!”

Overnight, the topic of large-scale demolition in Chengdu went viral, and stocks related to the 'Chengdu-Chongqing concept' soared. Today, amidst a sluggish overall market, the Sichuan sector index surged by nearly 6%, with over 40 stocks reaching or exceeding the daily limit. The Chongqing sector was also lifted, with its index gaining over 3% and at one point, nine stocks reaching the daily limit.

In terms of news, rumors circulated in the market that Sichuan would launch a 2.15 trillion yuan infrastructure plan, with 330 major projects set to commence within 2 to 3 years. Today, 'Chengdu Demolition' trended on Weibo, with many netizens expressing their excitement over the potential windfall for Sichuan.

On the evening of October 15, many Chengdu residents began sharing their recent demolition compensation situations on social media. Some claimed, 'My family received 50 million yuan in compensation,' while others said, 'I received 17 apartments and three years' worth of rent.'

So, what is the actual situation?

1

Rumors of sudden wealth through demolition? Official denial

On the afternoon of the 16th, in response to rumors of exorbitant demolition compensation, staff from the Chengdu Municipal Planning and Natural Resources Bureau told a Cailian Press reporter, 'For land acquisition and demolition, we will make public announcements on our official website. All compensation standards are outlined in relevant policy documents available on our website. It is impossible for an individual or household to receive tens of millions of yuan in compensation.'

A First Finance journalist learned from multiple insiders in the Chengdu real estate industry that Chengdu is indeed advancing demolition projects, but not on the large scale rumored online, and the compensation amounts are not as high as reported. 'Most of the buildings being demolished are decades-old, as well as old farmers' markets,' said an insider from a long-established real estate company in Chengdu. Demolition has always been part of the plan, but it's only now being talked about collectively. Regarding compensation amounts, an insider from a state-owned real estate developer revealed that current demolition compensation is generally based on a 1:1 or 1:1.5 ratio, with individual compensation rarely exceeding 200,000 yuan. Additionally, resettlement housing is often located in distant suburbs. Another industry insider noted that monetary compensation is no longer encouraged for demolition projects, with housing vouchers now being the preferred method.

2

Industrial transfer in progress

Shenlan Finance noticed that the source of the online buzz originated from the 'List of Key Projects Accelerating Preliminary Work in Sichuan Province in 2024' (hereinafter referred to as 'The List'), released by the Sichuan Provincial Development and Reform Commission in April this year.

The List indicates that Sichuan has selected 330 major projects to commence within the next 2 to 3 years, with an estimated total investment of 2.15 trillion yuan.

Furthermore, public information reveals that on September 27, the State Council approved the 'Chengdu Territorial Spatial Master Plan (2021-2035).'

The plan defines Chengdu as 'the capital of Sichuan Province, an important central city in western China, a national historical and cultural city, and an international comprehensive transportation hub.' Its core urban functions are positioned as 'a western economic center, a western scientific and technological innovation center, a western center for external exchanges, and a national advanced manufacturing base.' The vision is to fully build Chengdu into a demonstration area for park cities that embody new development concepts, continuously enhancing its international competitiveness and regional influence as a national central city.

Concurrently, on September 25, the 'Opinions of the CPC Central Committee and the State Council on Implementing an Employment Priority Strategy to Promote High-Quality and Sufficient Employment' mentioned guiding the orderly transfer of capital, technology, and labor-intensive industries from eastern to central and western regions, and from central cities to hinterlands.

Days later, on October 1, the State Council issued the 'Guiding Opinions on Promoting the Transfer of Coastal Industries to Central and Western Regions.' In fact, as early as September 6, 2010, the State Council officially issued the 'Guiding Opinions of the State Council on Undertaking Industrial Transfer in Central and Western Regions.'

Fourteen years ago, the State Council pointed out in its opinion that industrial transfer is an effective way to optimize the spatial distribution of productivity and form a rational industrial division system. It is also a necessary requirement for advancing industrial restructuring and accelerating the transformation of economic development modes. At present, the international and domestic industrial division of labor is undergoing profound adjustments, and the transfer of industries from eastern coastal regions to central and western regions is accelerating. By leveraging their advantages of abundant resources, low factor costs, and vast market potential, central and western regions are actively undertaking domestic and foreign industrial transfers. This not only accelerates the new industrialization and urbanization processes in central and western regions, promotes regional coordinated development, but also facilitates the economic transformation and upgrading of eastern coastal regions, optimizing the industrial division pattern nationwide.

However, upon careful comparison of the two documents, it is evident that while the focus was on undertaking transfers 14 years ago, the current emphasis is directly on transferring industries.

Kai Feng, the founder of Guomin Jinglüe, analyzed that the westward shift of industries over the past two decades was primarily driven by market forces, closely coordinated with strategies such as the Rise of Central China and the Western Development Program, with underlying considerations for regional coordinated development.

This new round of industrial transfer, however, represents a deeper strategic layout, corresponding to the increasingly complex international situation, ongoing great power rivalries, and unexpected events fraught with significant uncertainties.

Therefore, optimizing the layout of major productive forces at the national level and building 'national strategic hinterlands' and 'key industrial backups' have become top priorities, as outlined in Article 12 of the 'Decision of the Third Plenary Session of the 20th CPC Central Committee.'

3

What's your take?

Sichuan's 2.15 trillion yuan investment plan is certainly not concocted by netizens or self-media outlets. Backed by provincial policies and national strategies, it contributes to undertaking major national strategies and accelerating the development of China's 'fourth pole' of the economy alongside Chongqing.

However, setting aside the 1.31 trillion yuan allocated for infrastructure, the more crucial aspect is that the implementation effects and influence have been intentionally or unintentionally exaggerated, far from the mythical proportions portrayed online.

Firstly, it is customary for regions across China to compile lists of key preliminary projects annually, so Sichuan's actions are not particularly unique. Secondly, while 2.15 trillion yuan is indeed a considerable amount, it is not particularly high in a comparative context. This investment covers major projects in Sichuan over the next two to three years, roughly equivalent to an annual investment of 700 billion to 1 trillion yuan. For an economic powerhouse with a GDP exceeding 6 trillion yuan, this level of investment has yet to reach a point where it can transform development overnight.

Henan, a province with an economic scale similar to Sichuan, has a total investment in key projects this year of approximately 3.8 trillion yuan, with an annual planned investment of around 1.1 trillion yuan. Chongqing, with an economy half the size of Sichuan, has also earmarked over 1.5 trillion yuan for preliminary planning projects this year.

Regarding whether this round of industrial transfer is the rumored 'New Third Front,' we might consider this perspective: 2024 marks the 60th anniversary of China's 'Third Front Construction.' With the launch of industrial transfer at this juncture, its essential significance indeed resembles the 'New Third Front Construction' of the new era, involving the relocation of substantial industries from eastern regions to central and western China for industrial backup, as mentioned earlier.

Amidst unprecedented changes unseen in a century, everything revolves around security and development.