The Truth About China’s Ghost Cities

The distinguished Zhejiang University professor expediently dismissed my youthful enthusiasm over what I thought was a great new discovery. The year was 2006 and I had just stumbled into a city without people for the first time. I raced back to Hangzhou to file my report with Chinese academia – who were apparently already aware of my findings, and weren’t interested. “Those places are everywhere,” was the response.

It happened in the small city of Tiantai, which is around two hours south of Hangzhou. I made a wrong turn when walking out of the bus station – instead of going right and into the established, populated part of the city, I went left, and ended up in a completely new and utterly empty district. I remember gazing upon the freshly built, gray-tiled five-story buildings that surrounded me. Their windows and doors were dark, lifeless cavities, their interiors bare concrete shells, devoid of all signs of life. The street grid, buildings, and public squares were all created in a singular blast of construction. The design was cobbled together on computers, projected onto screens in boardrooms, and made into little plastic scale renders before being pasted upon the loamy river valley soil of Tiantai.

This was a few years before the first reports about China’s ghost cities began surfacing, and I had no reference for what I had observed. My enthusiasm was quickly judged naive upon my return to Hangzhou. But there was something about my professor’s words – “Those places are everywhere” – that stuck with me. I began looking for those scantily populated new towns. It was about as challenging as taking a bus to the outskirts of a city, getting off, and looking around: Almost invariably there would be a vacant new town or one that was under construction. These empty cities truly were everywhere, but why? How could a country with over a billion people and such a high demand for quality urban housing have so many homes with nobody living in them and entire cities without people?

I set out to answer this question in 2012. After graduating from university some years before I was working as an independent journalist. By that time, Al Jazeera had broken the story of China’s ghost cities. Their reporter claimed to have inadvertently stumbled upon Ordos Kangbashi, and summarily branded the place a ghost town, declaring, “If building a road pumped up GDP, then building a whole city would really propel GDP growth to unknown heights.” She essentially set the narrative of China’s underpopulated new cities that would be followed verbatim by other international media sources for years to come. 

But even at the beginning of what ended up being a two-and-a-half-year tour of China’s new urban developments, it became readily apparent that what I was observing on the ground was often very different and vastly more complex than what was being reported.

The Great Urbanization

By 2030, one in eight people on earth will be living in a Chinese city. Since the beginning of China’s economic boom period, roughly 500 million people have transitioned from rural to urban areas, and over 250 million more are projected to be on the way. If you were to stack 250 million U.S. dollar bills on top of each other, the column would rise 27 kilometers (nearly 17 miles) into the air – that’s the scale of the transition we’re talking about.

In an unabashed reversal as to how China has traditionally organized itself, the Communist Party decided in the early 1980s that the city would take center stage in the country’s future plans. To these ends they began urbanizing rural areas en masse, often building them from the ground up as new cities. When the Communist Party first came to power in 1949 the country had 69 cities; today it has 658.

In the early 2000s China’s urbanization movement was kicked into overdrive. Nearly every city across the country began growing exponentially, adding new sub-cities, districts, and towns in a developmental free-for-all unprecedented in history. Only the largest urbanization initiatives needed central government approval during this era, and municipalities for the most part had carte blanche to develop and grow as they saw fit. This was combined with the fact that government officials were promoted based on how well they complied with national urbanization objectives – often evaluated on how much they boosted GDP – and an imbalanced fiscal system that forced municipalities to rely on land sales to remain solvent. In hardly more than the span of a single generation China went from being a predominantly rural country to having a quarter of the world’s hundred largest cities, 171 municipalities with over a million people, and an urbanization rate north of 54 percent.

Facilitating this rampant urbanization was an extensive infrastructure grid that was neatly superimposed over the country. Within barely a decade, 16,000 km of high-speed rail lines appeared. China’s highway system more than doubled, as 60,000 kilometers of roads were added in nine years, surpassing the United States’ as the world’s most extensive highway network. Forty Chinese cities are expected to have functioning subway systems by 2020. Meanwhile 82 new civil airports are currently being built and 101 existing airports are being expanded, as flying is becoming a viable internal transportation option for more and more Chinese.

Filling in this infrastructure framework has been a national obsession. Since 1978, China has built more than 129 million new homes, 800 skyscrapers, and thousands of office towers. Nearly 2,000 square kilometers of floor space – nearly enough to cover Hong Kong twice over – is being laid each year.

There is just one major caveat to all of this urbanization: Much of the new construction was thrown up but then left underutilized. Soaring skyscrapers, sprawling shopping malls, gaudy new age museums, colossal exhibition centers, and some of the largest public squares on the planet had seemingly been erected for nobody at all. According to various surveys, there are between 20 and 45 million empty homes in China, totaling at least 600 million empty square meters of floor space – enough to completely cover a city as large as Madrid.

However, it was not long into my research that it became apparent why a large number of China’s so-called ghost cities did not have any people living in them: Most weren’t even built yet. Xinyang’s new district, which was derided by Business Insider in 2010 for being empty and having “no cars except for 100 clustered around the government headquarters” was a construction site when I visited in 2012. Dozens of high-rises and massive public buildings were still covered with green mesh and laborers. I posed as a potential property buyer and went around to the various apartment complexes just to find that if I were to buy a home I wouldn’t be able to move in for two or three years. Far from being a ghost town, people were not even permitted to live there yet.

When Al Jazeera first visited Ordos Kangbashi, construction had commenced a mere five years before – it was a miracle of urbanization that the city looked complete enough to even be labeled a ghost city in such a short span of time. Zhengzhou’s Zhengdong New Area had only been in the works for nine years when 60 Minutes claimed to have found a ghost city “with no residents, desolate condos, and vacant subdivisions uninhabited for miles and miles and miles.”

Chasm of Understanding

This chasm of understanding between China’s urbanization process and foreign reporters was best  pointed out by Chai Jiliang, the chief publicity officer of Ordos: “When the construction of Kangbashi began in 2006, we planned to have a town with 300,000 residents by the end of 2020, but it seems that the media doesn’t have that much patience.” 

Building an entirely new city from the ground up is obviously a long-term project. The adage that Rome wasn’t built in a day can be literally applied here. The projected timelines that Chinese developers generally lay out for their large-scale urban developments is generally between 20 and 23 years. Nanhui expected to attract 800,000 residents by 2020; the Sino-Singapore Tianjin Ecocity predicted that it would have 350,000 people by 2023; five million people were slated to live in Zhengdong New District 20 years after construction began. Whether many of these large-scale new cities will fully meet their goals can be debated, but the fact remains that China's new cities are just that: new. There is hardly a single one that has yet eclipsed its deadline for completion and vitalization, so any analysis of success or failure at this point is cast prematurely.

One of the causes of confusion is the unbelievable haste with which China can build what appear to be full scale cities. An entire downtown area – which can consist of things like massive government buildings, museums, shopping malls, arrays of skyscrapers, and thickets of luxury high-rise apartment complexes – can be built in just five years. It is no coincidence that this is roughly the amount of time that high-ranking officials spend in each post. For an official to receive credit for spearheading the creation of what could become a successful and economically dynamic new area, he needs to build fast. A startling example of this speed of development is Zhenghou’s Zhengdong New Area, which saw 150 square kilometers of land cleared, a central business district with 86 skyscrapers erected, a colossal university town for 240,000 students created, and multiple industrial parks and logistics zones set up within half a decade. But we shouldn’t be fooled here: what is created in this initial stage of new city building is just a raw husk of urban infrastructure, a rough draft that it is hardly livable for many years to come.

When I arrived in Dantu in 2013, a place that Business Insider claimed to have been empty for a decade, having “no cars, no signs of life,” it was 30 percent full. It wasn’t crowded by any means, but it definitely wasn’t a ghost city. There were people in the streets, almost all of the shops had functioning businesses in them, and there actually were cars on the roads. It really didn’t look all that different than any other developing suburban area in any other Chinese city, and was representative of a new urban condition that has popped up all over China: cities that have a sustainable population but also an excess of empty housing.

Absent Owners

“It is not populated by Chinese standards,” was often a rebuttal to my argument that China’s new urban developments tend to vitalize and grow into normal, functioning cities, but the fact is that after a decade and a half of excessive home building, our concept of China’s urban population density standards may be due for an update. Not every expanse of concrete and steel in the country is brimming over with people – in fact, in even major urban centers there are vast areas that are as vacant as they are full. According to a 2012 investigation by the municipal police department of Beijing, it was found that 29 percent of the city’s homes didn't have people living in them.  

So why are there so many empty homes?

Even though there are tens of millions of unoccupied homes in China these places are generally not the building blocks of urban wastelands that they are often posited as being. If China’s new cities are deficient in residents, one thing they definitely do not lack are owners. Far from being unwanted infrastructure waiting for somebody to lay claim to them, those seas of vacant apartments are usually the proud possessions of people who paid exorbitant sums for them and value them highly.

All over the world property serves a multitude of functions. Obviously, a home is a place to live; it’s shelter. But a plot of land, a house, an apartment are also financial assets, a kinetic economic entity – something that can be bought, sold, profited from, or kept as an investment. The commercial real estate market in China was not born until the later half of the 1990s, when suddenly people in the country’s urban areas were permitted to purchase their homes and sell them to others. This development was, not coincidentally, contemporaneous with the initial stages of the new city building movement. People being able to buy property sent the demand for new homes skyrocketing, which in turn created demand for the new cities, towns, and districts that would soon start appearing across the country.

As the Chinese population grew wealthier its hunger for property became insatiable, and almost anyone who was able seemed to be gobbling up houses in bulk. Property suddenly became a status symbol; even more than income, savings in the bank, or professional position, the number of homes someone owned became the prime determinant of how successful he or she really was – regardless if they did anything with them or not. Currently, 39 percent of personal wealth in China is kept in housing and, according to Nomura, 21 percent of China’s urban households own more than one home.

It must be stated that one of the main reasons for this excessive investment in housing often results from a lack of better options. China’s banks pay negative interest; the country’s wealth management products are shadowy and have recently been subjected to strict government regulations that have limited their attractiveness; online investment tools have a relatively low maximum investment threshold; and the stock market is thought to be about as secure as a casino. This leaves housing. The logic is simple: at the end of the day, regardless of what else happens with the economy, if you own property you at least own something, and in a country of 1.3 billion people homes are always going to maintain some form of value. Even after the inflating and airing out of a successive series of housing bubbles, very few people have yet to lose big in real estate in China. It’s viewed as the best of an array of poor investment options. So the Chinese keep buying houses and underpopulated new areas continue growing.

As for the broader economic impact of this rampant real estate investment, several particularities unique to the Chinese housing market need to be pointed out. Taxes are levied only once upon the purchase of property in China, so there is very little yearly financial drain to owning multiple homes – a fact that allows people to buy a glut of apartments just to forget about them. This is combined with the fact that most of China’s real estate owners are un-leveraged, as more than 80 percent of homes in the country are owned outright. Financing for real estate is also highly regulated by the government: For a first home the buyer must pay a 30 percent down payment before they can receive financing, for their second home they must pay 60 percent up front, and for any additional homes loans are strictly unavailable. The reason why the real estate bubble in the United States had such dire economic consequences was because investors were over-leveraged. When the bubble burst they couldn’t pay their creditors, which sent a chain reaction of bankruptcy through the system. A similar type of collapse is unlikely in China.

In many ways, China’s new urban areas are often victims of their own success. While this unabashed property investment and speculation serves a very vital economic role in the development of new cities – providing a quick return on investments for developers and an easy source of tax revenue for local governments – it is also a major reason why many of these places go through extended periods of being underpopulated. How can anyone actually move into a new area when a huge amount of the houses are owned by people with no intention of actually living in them? This is especially true when we consider that this investment often drives prices up beyond what most Chinese can afford.

Another paradox of China’s new city building movement could be called the chicken or the egg scenario. The people buying property in new areas generally understand that they are making a long-term investment, and even those who intend to live in the homes they buy often don’t plan on moving in anytime soon. To put it bluntly, few people are going to move into an area without urban essentials like schools, hospitals, stores, restaurants, and public transportation and these entities are slow to open in areas devoid of people. The result is often an intermediary, “ghost city” phase that can last anywhere from five to more than ten years after the initial construction phase, where speculator-owned properties gradually change hands over to residents, who begin trickling in as key infrastructure and institutions are gradually added.

If you walk through many parts of China’s established cities, it is difficult to imagine that just two or three decades before almost everything you see didn’t exist. So many of the country’s booming urban spaces were nothing but farms, villages, and mudflats hardly more than a generation ago. Shanghai’s Pudong Central Business District, which is now the city’s iconic skyline and one of the financial epicenters of the world, was derided as a ghost town for years after it was built. Zhujiang, the new financial district of Guangzhou, was mocked for its lack of occupancy for over a decade, but it has now become the new heart of the city.  Zhengzhou’s massive Zhengdong New Area was once criticized for its apparent lack of people by the international media, but it is now home to 1.1 million people. According to Standard Chartered bank, Zhengdong’s occupancy rate rose from 30 percent to 60 percent between 2012 and 2014 alone. Over this same period, the report states that Dantu’s occupancy grew from 10 percent to 40 percent and that of Changzhou’s Wujin district increased from 20 percent to 50 percent. In many of these new urban areas, somewhere between 10 and 15 years after construction breaks ground the inertia is broken, and a new city starts to come to life.

To understand China’s new city building movement we need to judge the ghost towns against the boomtowns. Because it’s the same process that creates underpopulated new areas as well as some of the world’s most successful cities – places like Chengdu and Shenzhen. Of the 75 cities that the McKinsey Institute predicts will be the most economically dynamic by 2025, 29 are in China. Hardly a decade ago most of the cities on this shortlist were quintessential backwaters that were developed by the sheer fiat of China’s urbanization initiative.

Uninhabited new cities are out of the ordinary, they’re obvious, and it is all too easy to cherry pick them from China’s urban matrix and fortify them with undue significance. With its sheer number of economically vibrant cities, the story of China’s future is simply not going to be told by obscure and insignificant mining towns that are struggling to vitalize their relatively diminutive new districts. Meanwhile China’s successful new urban developments are distinctly inconspicuous – what can you really say about a city with people? There are no street signs saying, “You are about to enter a former ghost town,” no plaques demarcating the fact that you’re standing on the site of what was once an uninhabited new area, no notifications on your phone informing you that you are in the proximity of an urban realm that a decade ago lacked people. No, you just look out upon the skyscrapers, the crowds, and the traffic and assume it’s always been that way.

As for that new town in Tiantai that I stumbled into in 2006, I returned eight years later to find that it has become little more than an inconspicuous, inhabited suburb – a  run-of-the-mill place that blends right in with the country’s urban wallpaper, the kind of place that most of China’s ghost cities eventually become.