China’s Ghost Cities and the Property Bubble

Documentary by SBS Dateline (Australian TV) about the Chinese real estate market. Uploaded on March 24, 2011.

Blog updated : April 1, 2011.

There is talk of the high GDP growth rate of the state-run Chinese economy. There is also concern about China’s property bubble and what could happen to its (and the world’s) economy if the bubble bursts.

To generate and sustain high growth rate, Chinese government has been investing in building sprawling cities in remote parts of China that have been completely left abandoned.

Some estimates put the number of empty homes at as many as 64 million, with up to 20 new cities being built every year. Some of such cities are Kangbashi, Bayannao’er, Zhengzhou New District, Erenhot, Ordos and Dantu, with many more cities that are not yet named. Please have a look at some more pics of the Ordos town here.

Please have a look at this article dated 18th December 2010 showing satellite images of cities meant to be home to millions, lying deserted.

These photographs have emerged as a Chinese government think tank warns that property prices in major cities is overvalued by as much as 70%.

Kangbashi

Kangbashi – Roads eerily empty and houses stand vacant

Bayannaoer

The mostly empty city of Bayannao’er

Zhengzhou

Zhengzhou New District is China’s biggest ghost city with entire blocks of totally empty accommodation

Please also have a look at this November 2009 video, which provides detail about one such city in a report by AlJazeera.

To conclude, while the Chinese economy is performing remarkably, how sustainable is the growth in light of the property bubble being created in this fashion?

What do you feel about the property bubble in China? Is the government there going overboard with support to housing/infrastructure for want of faster GDP growth? Is such a growth sustainable? Views are welcome!

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About Aman Sharma

Management Professional.
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2 Responses to China’s Ghost Cities and the Property Bubble

  1. ashwinkgopal says:

    The problem with China is a LOT like what we have in India except that the difference is that the migration to and fro rural areas is NOT controlled here. In the past century or more appropriately, in the later half of the century, there have been mass movement from the villages into the cities. Partly because the cities offered them better opportunities and jobs AND also because of the losing charm of farming and agriculture. This is EXACTLY whats happening in China but it seems to have slowed down of late because the Chinese education system and job market do not quite get along well. There’s an increasing number of professional (so called) graduates but lesser demand for these passouts, as a result of which, the starting salary for many graduates were constantly approaching the salaries in rural areas and those in farming. This has slowed down the migration for a while but this has, undeniably added to the unemployment woes.In India, we have more or less a similar problem but the Government does NOT actively build settlements or townships in rural areas, as China does. Unless China and India drives growth into its rural areas, people living there would see little or no reason to stay back. The only difference is, when it does happen, the Chinese have a good place to stay. Indians do not.As far as the bubble is concerned, I think thats a tough one as these are highly localized and are only restricted to rural areas. These may interest you:http://www.newsweek.com/2010/06/19/smart-young-and-broke.htmlhttp://www.newsweek.com/2010/09/03/challenges-for-china-s-westernized-communism.html

  2. Anonymous says:

    Thanks Ashiwn for the comment and sharing those links! I had read the second article before, and it was a nice refresher!!I understand from your comment that provided the rural Chinese get better opportunities in the cities, they would move and reside in the cities deserted at present. However, in the embedded article link as well as the video, housing cost is mentioned as both non affordable and artificially inflated. I have also read several other articles to that affect. That is what raised the question of sustainability of such growth in my mind, prompting this post. While China, with such a vast population, can generate enough domestic demand for a decent GDP growth rate, such massive (and unreasonable/premature?) investment in housing is what worries many.RegardsAman

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