China bans new theme parks in bid to halt real estate roller coaster

LETTER FROM BEIJING:CHINA HAS some great theme parks, ranging from a Qing Dynasty-themed facility in Kunming to a short-lived sex amusement park in Chongqing, from Beijing's Shijingshan, where all the figures are almost, but not quite, Disney characters to a park where everything is made of chocolate.

But runaway property prices and concerns that local governments have been spending too much money means China’s top central economic planning agency has called a halt to the development of new theme parks.

The National Development and Reform Commission has banned the construction of new projects, which could include the completion of a number already under way. The ban includes theme parks that cover an area of more than 20 hectares or have a total investment of more than 500 million yuan (€54.3 million).

By some estimates more than 20 Chinese cities are considering building theme parks and at least 150 billion yuan (€16.3 billion) has been invested in about 2,500 theme parks across the country.

“I would describe the environment as ‘a gold rush in the wild east’,” said Brent Young, principal and chief creative officer of the Los Angeles-based attraction design firm, Super 78 Studios, who has worked on a number of theme park projects in and around China over the past few years.

A wave of major projects has been announced in recent months. In June, the Chinese real estate firm Zhonghong signed up the US-based entertainment- venue developers Thinkwell to design a €1.1 million theme park based on the Monkey King legend.

The previous month, the film group Huayi Brothers signed a deal with a property developer to build a €320 million theme park near Shanghai based on its movies.

A €150 million Hello Kitty theme park celebrating the cartoon cat which has a huge following in China, is due to open here in 2014.

The biggest of them all is the Disneyland near Shanghai, and this is unlikely to be affected by the commission’s decision, as permission came directly from the Beijing government itself.

In May, Walt Disney broke ground on its long-awaited resort in Shanghai, after it finally got the green light.

The new Shanghai Disney Resort, which will cost nearly €3 billion to build, is expected to open in about five years.

A Chinese state-owned company, Shanghai Shendi Group, will own 57 per cent of the resort, with the remaining 43 per cent held by Disney.

Part of the reason for reining in construction of the parks is because local governments have been giving approval willy-nilly in recent years, even though China’s cabinet, the State Council, is supposed to be the body that approves these big projects.

"Most of those investments come from bank loans and institutional investors, and if those projects are suspended, the damages are going to be huge," Zhao Huanyan, a consultant at Hotelsolution, told China Businessnewspaper.

In many ways the construction of theme parks in China is similar to the construction of golf courses – the activities in the theme park itself are secondary to the spin-offs, such as luxury villas and apartments nearby.

The government has also taken aim at golf courses because of controversy over how the land for these projects is obtained, often involving land grabs by unscrupulous developers.

Similar concerns have been expressed about theme parks – when Disney was planning the Shanghai venture, it had to make sure it saw to the needs of local residents.

Other developers are not so conscientious, and simply sweep aside residents, leading to social unrest and protests, something Beijing does not want right now.

The government is trying to cool the real estate market, which is expanding rapidly.

“Slowing the expansion of theme parks appears to be further evidence of the Chinese government’s desire to cool off the market and concerns that the feasibility of some of these developments is questionable,” said Young.

“Knowing that politics and relationships always play a role in any of these decisions, you can be sure that there are agendas from established park developers to slow growth,” he said.

There are worries that local governments have become massively indebted since the €430 billion stimulus plan in 2008, when they were encouraged to borrow for infrastructure projects.

Despite the crackdown, theme parks are attractive to local governments because they provide jobs, offer cultural awareness platforms, generate significant revenues and offer mass entertainment.

Meanwhile developers can capture more land for development, attract more capital and have an easier time getting project approval for residential, retail and commercial aspects of the project, while generating money from building the park.

And it’s not always about the money. In 2009, the government in the southwestern city of Chongqing closed “Loveland”, China’s first sex theme park, because its erotic sculptures were deemed too vulgar.