Ghost Cities in China

ghost cities chinaChina may be facing an upcoming housing crisis as GDP growth has been on the decline recently. During the past few decades, China’s double-digit GDP growth gave rise to massive investments in developing infrastructure around the country. However, as a result of slowing growth in the country, many large suburbs built to house rising middle-class citizens have remained vacant since their completion. These “ghost cities” range from small suburbs to large cities that include skyscrapers, shopping malls and even amusement parks.

Perhaps the most infamous of these “ghost cities” is Kangbashi, a city located in the Ordos region in Northern China. Kangbashi was built to house a population of over half a million residents, but is currently only home to about 30,000 residents. Real estate prices have also decreased so much that city-servicing employees now pay only the equivalent of $75 per month to sleep in abandoned office spaces around the city. Similarly, in 2013, the city of Tianjin began construction of a business district that was to be a replica of Manhattan, named Yujiapu. Today, all construction has stopped as investors pulled out and the central government failed to provide funding. This has resulted in the local governments facing not only an unfinished city with no prospective residents, but also a large amount of debt.

Kangbashi and Yujiapu are just two of the many ghost cities that have been built all around China in the past two decades. One of the main factors that motivate local governments to build these cities was that their construction was included in the calculation of GDP growth. Furthermore, GDP growth is one of the main determinants of a government official’s ability to be promoted within the Chinese government. In the case of Tianjin, the mayor Zhang Gaoli, who was in charge of the construction of Yujiapu was able to boost the GDP growth of the city to the highest in China, securing his promotion as the vice-premier of China.

Fortunately, other “ghost towns” such as the Pudong district just outside of Shanghai have defied early criticism. It began as an empty district but has recently filled up in the past two decades. However, cities such as Kangbashi and Yujiapu do not have the benefit of being a part of a heavily populated area like Shanghai as they are located in more desolate regions of China.

It is only recently that the Chinese government has begun strictly enforcing the construction of “ghost cities”, allowing for the construction of them only if a city’s population has become so dense that it becomes a hazard for natural disasters. These conditions may slow down construction of these cities, but more will need to be done to prevent any more wasteful projects from beginning. The central Chinese government must focus on the long term growth and sustainability of cities. Other measures of a city’s health such as life expectancy and unemployment rate should determine success, rather than relying on GDP growth as a measure of how well the city is being run by its respective local governments. Kazutaka Mayuzumi

About Kazutaka Miyuzumi

Kazutaka Mayuzumi is currently a 4th year undergraduate student pursuing a double major in Economics and Human Resources/Industrial Relations at the University of Toronto. His main research interests include: economic policy and macroeconomics, financial economics, and financial market structure. His other interests include the causes, impacts and results of financial crises, in particular the 2008 Financial Crisis. After completing his undergraduate degree, he hopes to pursue his Masters degree in Economics and to work at a central bank or other type of financial institution. During his leisure time, he enjoys browsing the web and catching up on events occurring around the world.