Why Is China Building A New City In Georgia?

05-Oct-2016

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It was a patch of modern urban China transplanted upon the Georgian countryside. Rolling, verdant hills abruptly gave way to the tight phalanx of identical ten story apartment blocks that sat on a perfectly aligned street grid, with a sturdy gate surrounding the perimeter. The exteriors of the buildings were decorated with heavily pronounced occidental facades — faux maroon bricks, ornately framed windows, and dozens of little rectangular balconies. It was the same scene I’ve looked upon thousands of times while wandering through the hinterlands of China’s cities, which wasn’t at all a coincidence: this new city in Georgia is 100% Chinese.

Hualing Tbilisi Sea New City is the name of this place. It is to be an all-inclusive, macro-planned intentional city in the previously undeveloped north of Georgia’s capital, right on the banks of the city’s massive reservoir. This new city is to have its own hospitals, schools, shopping malls, hotels, and the largest wholesale and retail trading center in the Caucasus, as well as row upon row of typical modern Chinese housing.

The five star hotel and the residential complex aligned along the new road in Tbilisi New City. Image: Wade Shepard.

The five star hotel and the residential complex aligned along the new road in Tbilisi New City. Image: Wade Shepard.

At the center of this emerging new urban expanse is the Hotels and Preference hotel — a giant five-star, blue glass monolith which features 250 of the best rooms in Tbilisi and the largest ballroom in the country. I met Tatia Sioridze and Giorgi Botchorishvili beneath the giant crystal chandelier that hovers above the hotel’s gargantuan lobby. They both work for the Hualing Group, the private Chinese enterprise that’s making this new city happen.

But why would a company from dusty Urumqi, in China’s far western Xinjiang province, have any interest in building a city in Tbilisi, 3,459 kilometers away?

The story goes that Mi Enhua, the founder and president of Hualing Group, fell in love with Georgia after visiting in 2007 to the extent that he wanted to help rebuild the country as it emerges from decades of post-Soviet turmoil.

“He just liked Georgia because of its scenery and good political and business environment,” Sioridze said. “So they decided to start developing their business here.”

Whether the reason behind Hualing’s origins in Georgia are perhaps a little more pragmatic than this is irrelevant, as the company is now the single largest investor in the country. Hualing has already pumped half a billion dollars into Georgia already, with an array of large-scale projects which include the Hualing GroupKutaisi Free Industrial Zone, various luxury hotels, a major wood harvesting operation, a booming wine export enterprise, a massive tea cultivation program, and 90% ownership of the once domestic Basisbank, in addition to the new city.

Hualing Tbilisi Sea New City is rising up in what was recently agricultural land outside of Georgia's capital. Image: Wade Shepard.

Hualing Tbilisi Sea New City is rising up from what was recently agricultural land outside of Georgia’s capital. Image: Wade Shepard.

However, Hualing’s international operations are not exclusive to Georgia. Running flush with China’s “Going Out” policy, which encourages domestic companies to invest internationally, Hualing has extended its reach far beyond its native country, and now has an international portfolio which includes projects in the EU and the USA, in addition to Georgia.

The origins of Tbilisi Sea New City resulted from an interesting deal that the Georgian government made with Hualing. Needing additional  infrastructure to host the 2015 Youth Olympics but not having the adequate funds to build it themselves, Georgia turned to Hualing. In exchange for building a “village” for the athletes to live in during the games, the Chinese company would be granted rights to sell the properties later on as well as develop 420 hectares of surrounding land for a new city. According to the Hualing representatives that I spoke with, it was a straight trade — no money was exchanged.

What was local reaction to a Chinese company building a new city in Georgia?

“At the start some people came with demonstrations, saying that China was invading Georgia,” Botchorishvili explained. “At first they were saying that a half million Chinese people would come to live here, but it was not correct information.”

According to the MOU that Hualing signed with the Georgian government, which covers all of their projects in the country, no less than 70% of their long-term workforce must be sourced locally. Currently, the company has exceeded this requirement, and over 80% of their workers are from Georgia — including much-sought middle and upper-level management positions, such as those held by Sioridze and Botchorishvili, who are both local Georgians.

Hualing Tbilisi New City is a typical Chinese-style housing development transplanted in Georgia. Image: Wade Shepard.

Hualing Tbilisi New City has a typical Chinese-style housing development transplanted in Georgia. Image: Wade Shepard.

After the apartment complexes served their time as an Olympic village for 4,000 young athletes last summer, they were quickly turned back over to Hualing, who had been selling them on the open market. Paying $650 per square meter — a fraction of what real estate costs in China’s big cities — 80% of the units quickly sold. Three months after the games, residents began moving in.

There are now nearly 1,000 families living in the six completed buildings of Tbilisi Sea New City’s residential area, 95% of them being local Georgians — mainly young professionals from the center of Tbilisi. The signs of inhabitation were everywhere: most of the windows had curtains hanging in them, there was laundry drying on balconies, residents were slowly driving through the complex, children were playing on the new playground. While this type of gated housing complex is ubiquitous in China and is truly nothing to speak of, it comes off as something new and novel in Georgia.

The new city is being built in stages on a ten year development plan. The first stage was the creation of the hotel and the Olympic Village. The second stage will bring the amenities that will transform the place into a fully functioning urban entity: schools, cafes, restaurants, police, a fire department, a hospital, as well as more hotels, over 20 more apartment buildings, and a neighborhood of luxury villas.

The Hualing Tbilisi Sea Plaza, which at 120,000 square meters is set to become the largest trade center in the Caucasus, is part of this second stage of development. It is a massive, half a kilometer long commercial nexus that includes a colossal shopping plaza, a warehouse area, hundreds of offices for import/exporters, and its own bonded zone, which can quickly do customs clearances on the spot. This trade center is scheduled to open by the end of the year.

Located on the most direct route between Asia and Europe, the Caucasus region was a fundamental part of the ancient Silk Road. This is a position that Georgia is trying ardently to renew, and with free trade agreements with the EU, the CIS, and Turkey; preferential trade pacts with the USA, Norway, Switzerland, Canada, and Japan; as well as an impending free trade agreement with China, this is something the country is moving towards very rapidly.

The largest trade center in the Caucasus region is almost ready to open in Tbilisi New City in Georgia. Image: Wade Shepard.

The largest trade center in the Caucasus region is almost ready to open in Hualing Tbilisi New City in Georgia. Image: Wade Shepard.

Beyond the village for the Youth Olympics, the benefit of Tbilisi New City for Georgia is improved and expanded infrastructure development, foreign investment, more jobs, residual tax revenue, and getting the broader economic ball rolling once again.

“We contribute to employment, we contribute to the development of the economy,” Botchorishvili said. “Hualing will also stimulate the tourism, airline, and energy sectors.”

“In addition to investment in our own projects we also bring other Chinese investors to Georgia,” Sioridze explained. “We are kind of like a bridge between China and Georgia. That is kind of how we like to think of ourselves.”

In addition to bringing Chinese companies into the Kutaisi Free Industrial Zone, Hualing recently facilitated a JV between the Xinjiang Tianshan Cement company and Georgia to start up the largest cement manufacturing operation in the country. $60 million of FDI has been put into this project, which is projected to produce 1.2 million tons of cement each year — enough for local consumption and export.

This outside investment is vital for Georgia, as the country’s economy is still far from optimal. After arising from a crises situation at the end of the Soviet era, the country has been struggling to find adequate sources for economic sustenance. This is a country with a 12% unemployment rate, where nearly half the population lives in rural areas and are regularly classified as “individual entrepreneurs,” meaning they work off the grid in the informal economy or agricultural sectors.

A billboard advertising Hualing Tbilisi New City. Image: Wade Shepard.

A billboard advertising Hualing Tbilisi New City. Image: Wade Shepard.

Tbilisi New City is being built where there wasn’t any semblance of modern urban development before.

“Here, from 2012 or 13 there was nothing, there was just nothing,” Botchorishvili told me as we rode in his car through the project area. New buildings, half-constructed buildings, and prepped construction lots extended out in all directions. Hualing built everything here — even the municipal utilities and the very road we were driving on.

I turned to Tatia Siordze, a Tbilisi native who lived in China for a decade, and asked if she was surprised that a Chinese company was building a little piece of China in her hometown.

“No, I’m not surprised,” she responded. “I know that wherever Chinese go they do this kind of unimaginable stuff.”

I’m the author of Ghost Cities of China. I’m currently traveling the New Silk Road doing research for a new book. Follow by RSS.

http://www.forbes.com/sites/wadeshepard/2016/08/21/why-is-china-building-a-new-city-in-georgia/#1b872cff407b

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