Ghost-Cities of China

Built for a population that never came, these new cities are a consequence of the 2005-2011 Chinese Property Bubble. Ghost-Cities are characterized by high-rise apartment blocks, huge shopping centres, parks and extensive road networks with just one crucial element missing- the people. Most ghost-cities are built in rural areas or on the outskirts of functioning cities to allow for the accommodation of the growing population. China’s large population guarantees a constant demand for housing; Hence, it is considered safer to invest in “Commodity Housing” (usually considered as a future investment). China has about 50 ghost cities, designed for millions, still inhabited with a maximum of just 100,000 people.

Similar to the 2007-2008 financial crash, it was government policies that created the Chinese Property Bubble. Local governments relied heavily on land sales for income (about 50% of its revenue). Average housing prices in the country tripled from 2005-2009. This was because of cheap credit for construction and purchase of property with increased bank lending. There is also speculation that the 2008-2009 Chinese Economic Stimulus Program caused a debt surge by resorting to massive bank lending to the local governments that then went on an infrastructure spending binge to stimulate the property market. The Chinese Government took various measures to prevent the bubble from worsening such as increasing interest rates, imposing restrictions on the sales of homes and introducing a new real estate sales tax. When the bubble did end, it was followed by China’s declining economic growth in 2012.

The construction still continued to keep up the momentum and by 2012, large population centres were saturated and developers started building in rural areas. Whether a ghost city became inhabited or not depended on its ability to create employment opportunities and industrial growth; Also, the best way to market rural housing was by internationalization. For example, in Zhendong, the government threw tens of millions of dollars to get Foxconn, the Taiwanese maker of iPhones, to agree to open a factory in the town. The factory employed 200,000 people which jump-started the city overnight. But most ghost-cities do not have such resources.

Not all ghost-cities remained ghost-cities. Many ghost-cites were under the jurisdiction of an area with a strong GDP growth and these new developments were seen as a future investment with timescales of about 15-20 years. But this is not the rule; Many ghost-cities were built in locations where it just was not going to work. Developers started facing growing criticism by 2014, from farmers whose land was confiscated without proper compensation and from buyers dissatisfied with the poor quality. There was a façade of confidence but it was clear that supply significantly outweighed demand; People were buying the property for investment with no intention of ever moving in. It is speculated that number of empty apartments could have hit as many as 64.5 million.