What happened to China's 'ghost cities'?

The construction boom that has accompanied China's rapid economic development has led to a wave of large-scale residential and commercial developments across the country.

A deserted street in Conch Bay opposite the new financial district of Yujiapu, in Tianjin, northern China. Photo: Greg Baker

As a result, there are a series of large urban areas but no residents, there are even completely built cities but no people live there, making them known as "ghost cities".

Real estate spiral

One of the main reasons is the Chinese people's habit of buying a lot of real estate. With a population of 1.4 billion people, owning real estate is considered a safe investment channel. According to estimates, about 70% of total household assets in China are in this sector.

However, the real estate market froze around 2020 when the speculative bubble that had accumulated for many years began to deflate due to tightening management policies. As a result, tens of millions of apartments were left empty, many projects were left unfinished, further increasing concerns about the economic downturn.

Developers continue to build homes even as the market reaches saturation point, where supply far exceeds demand. The Chinese government has encouraged too many projects but cannot stop them because banks have financed so many projects, says Sarah Williams, an associate professor of urban planning and engineering at the Massachusetts Institute of Technology (MIT).

"The government expands land and continues to provide more loans so that real estate developers can pay off old debts with new ones. The easiest way to understand it is to operate like a 'Ponzi scheme,'" Ms. Williams commented on Newsweek.

Glimpses of hope

However, some areas have gradually attracted residents and somewhat erased the "ghost town" label. However, the scale of vacant housing is still huge, with an estimated 65 to 80 million unoccupied apartments across China.

One of the most prominent examples is the Kangbashi district in Ordos, Inner Mongolia. Built to house 300,000 residents, less than 10% of the apartments are actually occupied.

The main reason is the lack of jobs, health care facilities, education and essential services, which makes many people, even those who can afford to buy a house, reluctant to move there.

“It was once expected that even if the population did not increase through employment, the flow of investment into real estate could help develop the regional economy. However, for a city to really develop, the most important thing is still having jobs,” Ms. Williams explained.

Kangbashi’s population now exceeds 120,000, with thousands of students attending local schools. However, the region’s growth prospects remain limited, especially given China’s declining population. Inner Mongolia’s population is expected to decline by 0.3% in 2023, according to official figures, double the national average.

Another case is Tianducheng, a high-end urban area in Hangzhou, Zhejiang Province. Designed to mimic European architecture with a 1:3 scale Eiffel Tower, it was once famous for its deserted squares and empty apartment blocks.

However, over time, residents gradually moved in, and by 2017, the population of this urban area was three times larger than the original plan.

Ambitious projects that failed

Not all projects have had the same lucky fate as Kangbashi or Tianducheng. One typical failure is the Yujiapu financial district in Tianjin, once promoted as "China's Manhattan".

The area was built in the early 2010s with skyscrapers, wide avenues, and even its own subway line. But despite its modern infrastructure, Yujiapu has failed to attract businesses and residents. Years after its completion, the area remains eerily quiet.

In addition to projects that were abandoned after construction was completed, there are also projects that never really started. One of them is the Xiong'an New Area, a special economic zone located about 100 kilometers south of Beijing.

Designed to ease the development pressure on the capital and become a model for green infrastructure and smart urban technology, many roads have yet to show signs of being bustling. Delays in implementation have left the area looking more like a "ghost town" than a future economic hub.

Risks remain

It is the small abandoned urban areas that pose the biggest threat to the world's second-largest economy, rather than high-profile projects like Tianducheng, Ms. Williams said.

“They are hotbeds of overinvestment, leaving many homebuyers in the lurch because they cannot recoup their investment,” she said, comparing the situation to the US housing crisis of 2007-2008.

This will have a "huge" knock-on effect on the Chinese economy in the long term, she said.

Viet Ha (According to Newsweek)