Construction of New Theme Parks

(NADRC) announced the suspension on the construction of new theme parks, including parks that have already been approved. The suspension affects parks that are planned to be larger than 20 hectares or have total investments of more than ￥500 million ($78 million). Moreover, local governments are required to report the current status of theme parks under their oversight. The market expects the central government to soon introduce new regulations that will revoke local governments' rights to approve theme park projects.

In my opinion, the suspension is likely to come to an end in a few months. Since the Chinese government stated in its 12th five-year plan to make the tourism industry a pillar industry, I believe the government does not want to take extreme measures of completely halting the theme park constructions which hurts the industry badly. Rather, the emphasis is to regulate the industry and to further tighten the real estate market.

There are several reasons behind the suspension. First of all, the central government aims to squeeze the bubble in the theme park industry. Under the current economic context, Chinese investors have limited investment vehicles for their money other than stock market and savings account. But theme park as an investment is getting a swelling share. It is estimated that more than ￥150 billion（$23 billion）has been invested in more than 2,500 theme park projects all over mainland China, where 70% of investors ended up losing their money in these unsustainable projects. Rather than suffering from the burst of the massive theme park bubble in the future, the government squeezes the bubble in the industry now to reduce the magnitude of the impact.

Another underlying reason is to prevent real estate companies from purchasing land for theme park purpose and later turning the land into a residential property project. Often times, such procedures get real estate developers