With City of Towers, China Puts Its Economic Stamp on Caucasus

Scott Mi, a businessman from western China, stood on a balcony on one of the nine completed towers of 27 that his company plans to build and gestured toward the distant hilltop boundary of his improbable domain — a new, Chinese-built city rising atop one of the most volatile geopolitical fault lines left by the collapse of the Soviet Union. “Everything you can see is ours,” said Mr. Mi, the 32-year-old head of Hualing Group Georgia, a privately owned but mostly state-funded company in the vanguard of an effort by China to extend its economic reach into the rocky and often treacherous ground of the Caucasus. At the center of this push stands the Tbilisi Sea New City, a huge property development outside the Georgian capital. It is nearly 200 miles from the nearest sea, but it does sit next to a Soviet-era reservoir, a body of water that adds a splash of color to the growing parade of concrete towers, a huge five-star hotel with the region’s biggest ballroom and, just down the road, a newly built shopping center as long as five football fields.

The rebranding of a man-made reservoir as a sea is all part of an outsize project that defies conventional, or at least Western, business thinking. It is introducing Chinese-style economics to a country that, depending on your perspective, is either a critical link in a “new Silk Road” between Asia and Europe or a cockpit of unresolved and potentially explosive rivalry between Moscow and the West.

Mr. Mi’s new city has done nothing less than transplant a patch of China lock, stock and barrel onto previously barren land. Down to its ornamental rock gardens, rigidly geometric street plan and high perimeter wall, it is a nearly exact replica of the property projects that transformed China’s urban landscape before a recent downturn began to curb a flood of funding for construction.

This is hardly surprising since most of the design and building work at the Tbilisi Sea New City has been done by workers from China, even though wages in Georgia are often lower than in much of China.

The use of Chinese workers initially stirred anger and even small protests. Those feelings have since faded amid dismay and also delight that, unlike many other grand plans in Georgia, the Chinese project is really happening and is now providing management and other jobs to Georgians.

In contrast to the crumbling, Soviet-style apartment blocks in a nearby suburb of Tbilisi — buildings that look as if they began falling down before they were even fully built — the Chinese company offers clean if basic modern towers with elevators that work and corridors that do not smell of urine.

“We are Chinese, so we build like in China,” Mr. Mi said, sitting in the shiny marble-clad lobby of his company’s luxury hotel.

Aside from absent Communist Party slogan boards, an essential part of all such developments in China, the only missing element is the people.

Nearly all the apartments of the residential towers built so far have been sold, many of them to the Georgian government to house refugees from territory seized by Russian-backed rebels.

But the whole place is often eerily empty. The only noise on a recent afternoon was the distant clatter of construction and the bustle of security guards preparing for the arrival of the Chinese ambassador and Georgian leaders at a celebration of China’s national day in the hotel’s expansive ballroom.

The economic calculus behind the project, like that of many ventures financed by Chinese state banks, is something of a mystery.

Georgia’s prime minister, Giorgi Kvirikashvili, a former banker, said he had not done a detailed study of its “internal rate of return” — bankers’ jargon for profitability — but assumed “there has to be an economic rationale.”

Mr. Mi, who is the son of the founder and president of Hualing’s parent company back in the western Chinese region of Xinjiang, first came to Georgia right after the 2008 war with Russia. He acknowledged that there were initially doubts about the wisdom of sinking money into such a troubled land.

“Of course, some people thought this was crazy,” he said.

But he said the company, while not yet making a profit, liked Georgia’s low taxes and business environment, and so would keep expanding. It has already built nine tower blocks under a deal with the Georgian government that gave it more than 1,000 acres around the Tbilisi reservoir in return for the construction of housing for athletes who took part in a sporting event last year.

Hualing has now started work on six more towers and has plans for the remaining 12. The company also wants to set up a school, a medical clinic and other facilities to create a self-contained, Chinese-style gated community.

Mr. Mi said the venture should start making money within five years. In the meantime, he added, the company is serving China’s flagship economic and foreign policy program — a multibillion-dollar plan launched in 2013 by the Communist Party leader, Xi Jinping, to develop sea and land transport corridors through which China can export its goods to the world, particularly to Europe.

Officially called the Belt and Road Initiative but better known as the New Silk Road, the plan involves not only developing railways, ports and other infrastructure but also increasing China’s economic presence in a string of countries stretching from Central Asia to the Caucasus and then into Eastern Europe.

In a sign of the Chinese government’s interest despite Georgia’s small size, tumultuous past and population of only 3.7 million, it recently signed a preliminary free-trade pact with the country.

Last year, China sent teams of officials and businessmen to Tbilisi for a so-called Silk Road Forum, a conference focused on Georgia’s role as “one of the key hubs of Eurasian trade and commerce.”

Georgia and many other countries along the new Silk Road — an ever expanding concept that includes a multiplicity of different routes — have been lobbying to get a piece of what Chinese officials have said will be at least a trillion dollars in investment.

China has so far shown little interest in remaking local politics in its own image or turning Georgia into a platform for its own geopolitical agenda.

“All we want is stability,” said Mr. Mi, whose company has invested half a billion dollars to become Georgia’s biggest single private investor outside energy-related projects like pipelines from neighboring Azerbaijan, a major oil and gas producer.

In addition to its property project outside Tbilisi, Hualing runs an industrial zone in western Georgia, a mining venture, a wood processing plant and other businesses.

Expectations that China would pour in money willy-nilly, however, have sometimes fallen flat. China is in negotiations to buy a small Georgian Black Sea port at Batumi but pulled out of bidding for a role in the construction of a much bigger new port at Anaklia, also on Georgia’s Black Sea coast.

“Chinese money is not as free as many imagined,” said Levan Akhvlediani, the chief executive of the Anaklia Development Consortium, which is responsible for building and managing the new port. He spent months negotiating with Chinese companies to get them involved in the Anaklia project but found their demands unreasonable. “They don’t just pour money in,” he said. “They usually want control, and if they don’t get control they are not interested.”