‘Ghost towns’ pop up in north­east China: re­port

The China Post - - BUSINESS -

As Chi­nese cities and towns pur­sue eco­nomic growth through am­bi­tious land devel­op­ment projects, some of them have in­ad­ver­tently turned them­selves into “ghost towns,” with a par­tic­u­larly high con­cen­tra­tion in north­east China, ac­cord­ing to a news­pa­per re­port.

A map com­piled by the Hong Kong-based South China Morn­ing Post, shows cities where un­in­hab­ited hous­ing units pro­lif­er­ate amid rapid ur­ban­iza­tion and th­ese ap­pear to be con­cen­trated in ar­eas where the lo­cal econ­omy is heav­ily de­pen­dent on nat­u­ral re­sources, heavy in­dus­tries and farm­ing, and not di­ver­si­fied enough to of­fer a wide range of em­ploy­ment.

“Un­like ghost towns in the West which are laid waste by wars, nat­u­ral dis­as­ters, dis­ease or failed economies, the ones in China are cre­ated out of hap­haz­ard and rushed projects by lo­cal gov­ern­ments at­tempt­ing to boost GDP growth and reach ur­ban­iza­tion tar­gets,” the news­pa­per said in a re­port ti­tled “Chas­ing ghosts,” pub­lished last month.

Hous­ing rev­enue is a key pil­lar of China’s econ­omy, the re­port said, cit­ing Chi­nese gov­ern­ment data that in­di­cates that nearly 12 per­cent of China’s GDP in 2014 came from new home sales, a sim­i­lar level to the pre­vi­ous year.

Based on prop­erty re­search by bro­ker­age CLSA, that fig­ure is more than the 10 per­cent recorded in the U.S. and even higher than the 8-9 per­cent in Hong Kong from 1997-1998, be­fore the prop­erty bub­ble burst, the re­port said.

De­bate on Ghost Towns

The un­prece­dented

pro­lif- er­a­tion of mas­sive con­struc­tion projects in pro­vin­cial cap­i­tals, how­ever, has trig­gered de­bate about whether th­ese cities are pro­duc­ing more and more ghost towns, the South China Morn­ing Post re­ported.

Cit­ing CLSA re­search on China’s ghost towns from 2014, the re­port said the av­er­age va­cancy rate in China for prop­erty com­pleted from 2009 2014 was 15 per­cent — equiv­a­lent to 10.2 mil­lion empty units — which on the sur­face is noth­ing to worry about con­sid­er­ing the U.S. va­cancy rate stands at 10 per­cent.

“The big­ger con­cern is the 17 per­cent va­cancy rate in re­mote, low-value prop­er­ties,” the re­port added.

The CLSA re­port, which sug­gested that small Chi­nese cities would get even emptier over the next five years, was based on an on-the-ground study of 609 con­struc­tion projects in 12 Chi­nese cities.

The ghost town map was based on a model de­vised by Chi­nese eco­nomic re­searcher Chen Qin, with Or­dos in In­ner Mon­go­lia, the most well known of China’s ghost towns, ranked first based on his sec­ond in­di­ca­tor — a re­sult con­firmed by the CLSA re­port, which pre­dicted that the va­cancy rate in Kang­bashi (a new town in Or­dos) would con­tinue to de­te­ri­o­rate, ac­cord­ing to the re­port.

Model In­di­ca­tors

Chen uses two in­di­ca­tors in his model to pre­dict po­ten­tial ghost towns in the near fu­ture. The first is the fu­ture sup­ply/de­mand ra­tio, which can be ex­ag­ger­ated if de­mand is ex­tremely low.

This map is based on Chen’s sec­ond in­di­ca­tor, in which he mea­sures fu­ture over­sup­ply (in some cases, un­der­sup­ply) against the num­ber of ex­ist­ing homes in a city. How­ever, his cal­cu­la­tion of the num­ber of ex­ist­ing homes cov­ers only oc­cu­pied ones, as na­tion­wide data on va­cant homes is not avail­able.

De­spite its lim­i­ta­tions, this model could help shed light on po­ten­tial ghost towns, or places where hous­ing sup­ply will sub­stan­tially out­strip de­mand by 2020, the re­port said.

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