Ghost Cities in China are the dark side of China’s urbanisation embedded in local GDPism, resulting in aggressive developmentalism and excessive investment by China’s local governments. The empty skyscrapers, luxury apartments and magnificent squares without people contradict otherwise crowded and bustling Chinese cities. These “ghost cities” result from unnecessary housing and infrastructure construction on the speculation that demand for property will rise.
With China’s rapid urbanisation, plenty of new urban lands have been developed with the great expectation to deal with all kinds of issues in old urban areas such as high population density, great demand on limited land resources, and decaying environment. However, a significant proportion of vacancy in these newly developed units leads to the undesired observation of ghost cities.
There is still no widely recognised definition of ghost cities. The term ‘ghost estate’ was first proposed for describing empty or unfinished housing developments in Ireland by economist David McWilliams in 2006[1]. In the book “Ghost Cities of China”, Shepard defines “ghost city” as “a new development that is running at significantly under capacity, a place with drastically fewer people and businesses than there is an available space for”[2]. Nie and Liu summarise the reasons for ghost cities: wars, natural disasters, and urban planning driven high housing vacancies and even abandonment[3].
Shepard Wade listed several definitions of ghost cities in his book. One common feature of Chinese ghost cities is high vacancy rates in their residential developments. However, the Chinese government has not published any data related to housing vacancy rates. The Ministry of Housing and Urban-Rural Development of China establishes a standard of 10,000 residents per square kilometre of the urban area[4]. The population density in the 50 ghost cities identified in 2014 was between 700 and 5,400 inhabitants per square km, far below the 10,000 inhabitants per square km required by the National Plan of New Urbanization.
In 2014, 50 Chinese cities were labelled as ghost cities by China Urban Construction Statistical Yearbook, including 42 prefecture-level cities and eight county-level cities. Only one city is regarded as a second-tier city, while the rest are third- and fourth-tier or even fifth- and sixth-tier cities[5].
Many ghost cities have since emerged in China, including, reportedly, at least 12 within Inner Mongolia, Henan, Liaoning, Jiangsu, Hubei and Yunnan. According to official and non-official sources, the ghost cities of China include Ordos, Qingshuihe, Bayannur and Erenhot in Inner Mongolia, Zhengdong New Area; some parts of Xinyang and Hebi in Henan; Yingkou in Liaoning; Changzhou and Dantu in Jiangsu; Shiyan in Hubei and Chenggong in Yunnan and a few others. These fully built urban areas have very few residents and are littered with newly built unoccupied residential properties and incomplete construction projects.
Ordos city in Inner Mongolia is well known for its huge but empty skyscrapers, housing and office buildings, particularly in the newly built Kangbashi area. With a population of only 30,000, it is a far cry from the one million residents planned for Kangbashi by 2010. Ordos is known as a “ghost town/city” for good reasons. Ninety per cent of its buildings are empty. Some have been sold but remain unoccupied, while others are unsold or are uncompleted. The Ordos experience is a case of a housing bubble burst. Nevertheless, recently municipal officials moved some of the city’s top schools into Kangbashi, empty apartments are bought by parents of students, and price increases.
Land-centred Urbanisation
Since 1978, must celebrated China’s economic reform and opening up, rapid urbanisation started. This process has accelerated over the past three decades due to various social, political and economic factors, including agricultural productivity growth and surplus rural labour force, excessive flow of rural migrants to cities, rapid industrialisation and the economic boom of the eastern coastal areas. The Chinese government altered and expanded the administrative boundaries of many cities. China’s urbanisation rate increased to 60.2% in 2020 from 17.9% in 1978.
The National Bureau of Statistics reports that the number of urban residents was 848.43 million in 2019, 17.06 million more than last year, whereas the number of rural residents are 551.62 million, witnessing a decrease of 12.39 million[6]. China further plans to increase urbanisation, under 14th Five Year Plan, ratio to 75 per cent by 2030. In other words, China will have 220 million new urban residents[7]. These new urban centres will come up in the Greater Bay Area (GBA), the Yangtze River Delta, the Beijing Tianjin-Hebei region (Jing-Jin-Ji), the Mid-Yangtze River area and the newly announced Chengdu-Chongqing area.
China has identified urbanisation as the key national strategy to drive economic growth and reduce economic disparity between rural and urban areas. Urbanisation is regarded as a new engine for unleashing the benefits of reform by raising income levels of the massive rural population and achieving economic rebalancing through domestic consumption.
The high value of urban land is attracting municipalities to reclassify rural land as urban and sell it to developers. This creates a “peculiar cycle of urban expansion in which rural land is sold to provide more services to urban dwellers, whose growth than depends on the rezoning of more land to replenish municipal funds”.
In addition, real estate is money and labour intensive, thereby creating lot of economic activity. Even semi-skilled and unskilled migrants from villages are absorbed at the large scale. It serves two purposes. One, it augments the income of farmers. Second, it also brings liquidity in the market in the form of states’ borrowed money. So whenever there is the looming economic crisis in China, the state ramp-up its construction activities.
Ye Hong describes the ghost cities as the by-products of the Great Leap-style of urbanisation in China. Their emergence is rooted in China’s land-centered urbanisation. The rural-to-urban conversion of land has proceeded much faster than the urbanisation of people.
Local Governments’ Debt Problem
Urban infrastructure and housing construction is costly and requires huge investment from the state. State borrows the money. Although under the 1994 fiscal law the local governments are not allowed to borrow money from banks or issue bonds directly. Local government bypass this restriction by establishing local government-run financing vehicles (LGFVs,) to fund local infrastructure projects, including roads, bridges, power plants, railways, and government-subsidized and low rental housing construction. It is estimated that Local governments set up more than 10,000 LGFVs. These LGFVs use land and small initial capital as collaterals to directly secure bank loans or issue bonds to finance local infrastructure construction directly. Many of these projects are unplanned and linked to official corruption and other malpractices[8]. If the ghost cities remain unoccupied, then lending banks will tighten the credit, thereby pushing a severe financial crisis in these cities.
Conclusion
As abovementioned, the more ghost cities mean China is creating an economic bubble that can be busted as a sub-prime mortgage crisis leading to the 2008 financial crisis. However, unlike individual defaulting on payment in sub-prime mortgage, Chinese cities will fail on loans, thereby trapping the banks to go bankrupt and ghost-cities financial crisis in China.
As just creating city-grade infrastructure in designated region and three and four-tier cities is not urbanisation when people from these regions still migrating to first and second-tier cities in search of job and education. Apparently, unless China fundamentally alters this faulty approach of urbanization, the claim for building a moderately prosperous society by 2049 will not be sustainable.
[1] Jin, Xiaobin, Ying Long, Wei Sun, Yuying Lu, Xuhong Yang, and Jingxian Tang. "Evaluating cities' vitality and identifying ghost cities in China with emerging geographical data." Cities 63 (2017): 98-109.
[2] Shepard, Wade. Ghost cities of China: The story of cities without people in the world's most populated country. Zed Books Ltd., 2015.
[3] Nie, Xiangyu, and Xinjing Liu. "Types of “Ghost Towns” in the process of urbanization and countermeasures." in Jin, Xiaobin, Ying Long, Wei Sun, Yuying Lu, Xuhong Yang, and Jingxian Tang. "Evaluating cities' vitality and identifying ghost cities in China with emerging geographical data." Cities 63 (2017): 98-109.
[4] Jin, Xiaobin et al. "Evaluating cities' vitality and identifying ghost cities in China with emerging geographical data." Cities 63 (2017): 98-109.
[5] Mingye, Li. "Evolution of Chinese Ghost Cities. Opportunity for a Paradigm Shift? The Case of Changzhou." China perspectives 2017, no. 2017/1 (2017): 69-78.
[6] “China's urbanization rate hits 60.6 pct”, Xinhua, 19 January 2020, http://www.xinhuanet.com/english/2020-01/19/c_138718450.htm
[7] “China's growth prospects in the coming years will bring more opportunities for foreign investors”, Beijing Review, 24 February 2021, https://www.bjreview.com/Business/202102/t20210224_800236867.html
[8] Mingye, Li. "Evolution of Chinese Ghost Cities. Opportunity for a Paradigm Shift? The Case of Changzhou." China perspectives 2017, no. 2017/1 (2017): 69-78.
