News in 2018
China's eerie ghost cities a 'symptom' of the country's economic troubles and housing bubble
The World
By
Tracey Shelton,
Christina Zhou and
Ning Pan
Updated 26 Jun 2018, 1:09pm
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VIDEO: Why are there dozens of 'ghost cities' in China? (Photo: J Capital research group, Footage: Wade Shepard) (ABC News)
Fancy villas, high-rise apartment blocks, lakes, parks and sprawling road networks: Ghost cities in China have it all. Just one crucial element is missing — the people.
Key points:
- There may be as many as 64 million empty apartments in China
- Many people buy the properties as an investment with no intention of ever moving in
- Author says ghost cities show growth is driven by debt in China
Built for a population that never came, about 50 of these surreal sites lay desolate across the country. But still the construction continues.
These new cities are usually built in rural areas on the outskirts of existing cities.
Designed for populations numbering in the hundreds of thousands, the mass construction projects can include towering high-rise condominiums, huge shopping centres, city squares, street lights and replicas of cities in Europe and elsewhere.
PHOTO: The Yitian Eiffel is one of at least three replica Eiffel Towers in China. (Supplied: J Capital Research)
Dinny McMahon, author of China's Great Wall of Debt, explained the driving force behind the new construction projects, seemingly built for no-one.
"The phenomenon very much has been driven by the debt splurge that really kicked into gear after the global financial crisis," Mr McMahon said.
"Local governments around the country tried to juice and stimulate their economies by building more infrastructure and stimulating the property market."
This seemingly wasteful construction is carried out by both state-owned firms and private companies.
"Private property developers will build housing in places that end up being ghost cities because they believe in the ability of the Chinese property market to only go up and up and up," he said.
'64 million empty apartments'
PHOTO: Many people have bought ghost city properties as an investment with no intention of ever moving in.(Supplied: J Capital Research)
China's housing vacancy rates, like many other potentially sensitive data, is shrouded in secrecy.
It is believed the number of empty apartments could have hit as many as 64.5 million — the number of properties that State Grid Corporation of China confirmed to the Beijing Morning Post as not having used electricity for six consecutive months in 2010. However, the state-owned company refuted that number to another Chinese media outlet just days later.
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'Building an incredible amount of waste'
PHOTO: Yujiapu Financial District in China's Tianjin Binhai New Area is inspired by Manhattan. (Supplied: Wade Shepard)
While other ghost cities might be largely empty, the apartments were mostly sold, Mr McMahon said.
Many people buy the property for investment with no intention of ever moving in, so supply significantly outweighed demand.
"And this speaks to the underlying problem of the Chinese economy … the importance of the property market and the extent to which it's actually a bubble propping up prices," he said.
PHOTO: A ghost mall in Zhengdong, China.(Supplied: Wade Shepard)
"It's incredibly difficult to measure and it's incredibly difficult to say if and when things might actually go pear-shaped because the Government has done an incredible job at managing prices and insuring the whole thing doesn't fall apart."
Mr McMahon said he believed ghost cities were a "symptom of the problem" of how the Chinese economy worked, where growth was driven by debt.
"We're now in a position in the Chinese economy where so much debt has been accumulated in the interest of building an incredible amount of waste, whether it be empty housing, empty factories, infrastructure in cities where the local authorities can never repay it … that sort of model of economic growth cannot continue," he said.
"Everybody knows it. The officials in Beijing know it and have been trying very aggressively to both wean the economy off debt and try and come up with a new driver of growth."
PHOTO: Mr McMahon believes ghost cities are a "symptom of the problem" of how the Chinese economy works.(Supplied: J Capital Research)
Officials in Beijing talk a lot about needing to move up the value chain into more technologically advanced industries, and that innovation is the way of the future for the Chinese economy.
"But at the moment,
Beijing is really between a rock and a hard place because the economic growth is dependent on the accumulation of debt used to build stuff and it's no longer sustainable without potentially something going very, very wrong."
https://www.abc.net.au/news/2018-06-27/china-ghost-cities-show-growth-driven-by-debt/9912186
