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China to launch special economic zone in province hit by layoffs

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China is establishing a new special economic zone in Hebei, a northern province that has been hit by massive job layoffs, in an effort to boost domestic growth.

The Xiongan New Area, about 100 kilometers from Beijing, will house “non-capital functions” moved from the capital city. This is part of a wider initiative to support the economy, and to integrate Hebei with the capital city and nearby Tianjin, according to state media.

Beijing is maneuvering economic growth away from manufacturing toward services, and developing Hebei — ground zero for the transition — is one step in that direction. The province is the main hub for iron and steel production, two sectors that have been hit with massive overcapacity cuts and millions of layoffs, and transforming it successfully could pave the way for the next phase of growth.

 China has a long history of establishing special economic zones — with varying degrees of success.

Ones that have fared better were in Shenzhen and Shanghai. Established in 1980, the Shenzhen special economic zone helped jumpstart reforms and turned the fishing village into today’s manufacturing and high-tech center, while the Pudong area in Shanghai is now a major financial center.

Another goal with the Hebei zone is to help alleviate urban issues in Beijing, according to state media. Beijing’s population has exploded over time to 22 million, close to that of Australia, increasing pollution and traffic in the city. Still, no specific details have yet been publicly laid out, especially concerning pollution — Hebei itself is already quite polluted, and developing the Xiongan area could potentially pose more environmental risks.

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