Peking University did a big study on China’s ghost cities using “big data” from the Baidu search engine. This is my response about it.
I was recently interviewed by a reporter at Foreign Policy for an article about the Peking University/ Baidu ghost city story that made international media waves some months back. My book about China’s ghost cities was cited frequently in the study, which you can read here if you’re so inclined. The FP story ended up getting cut, so I figured that I would publish my responses below to not let them go to waste.
What I like about this study is that it clearly considers the fact that there are some very logical reasons as to why some of China’s new urban developments may currently be underpopulated rather than jumping to the overly simplistic conclusions that have become common in the international media — such as China building new cities solely to artificially boost GDP or impress the West with weightless economic indicators.
New city building anywhere and at any point in history is a long term endeavor, and all too often the “ghost city” critique amounts to little more than a phase of development between when the core area of a new development is built and when it is vitalized with a population and business base. In China, roughly 20 years is timeline for building and populating a new city — a deadline which very few have yet eclipsed. While China can build what appears to outsiders to be complete cities incredibly quickly — often within the span of a single five year plan — populating and vitalizing them takes vastly longer, which is reasonable if you consider the sheer size and complexity of many of these places (new cities in China can be over 300 square kilometers). That said, China’s urbanization movement is something that’s in a rapid state of flux, and you can’t look out at a sea of empty apartment buildings, take a snapshot of it, and expect it to never change.
Another thing that needs to be considered is the unique nature of China’s housing market. While the function of a home is fundamentally shelter it also has other properties: such as being an investment or an way of representing wealth. These later uses are rampant in China. With no yearly property tax, owning additional homes is not a financial drain, and property can viably be used as a way of storing personal wealth to an extend that is unparalleled in the West. So although large swaths of many cities in China may be empty this does not mean that the properties have not been sold and do not have owners who value them very highly. Currently, property makes up 39 percent of all personal wealth in China and 21 percent of urban households own more than one home. This rampant use of property for economic purposes, of course, drives up the price of real estate and keeps out many would-be residents — how can anyone move into a new area when all the homes are owned by investors who are not yet interested in reselling or are otherwise charging an extreme amount of money? So those empty new developments may not necessarily be a full-fledged indicator of economic doom and gloom but, conversely, an indication of places that have become victims of their own success.
Although this does not mean that there are not more remote, less economically kinetic new areas in China that genuinely meet the description of being ghost cities. What is perhaps most telling here is that in addition to being under-populated many of these places also have something else in common: nobody’s ever heard of them. The Peking University study points out that parts of Nanguan, Kerqin, Yuhong, Saihan, Yijinhuoluoqi may be ghost towns, but these places are nothing if not remote and marginal. To use them as indicators of China’s current economic position would be the equivalent of using Ironwood, Michigan as a lens through which to view the broader economic well being of the USA.
As far as the municipal debt that everyone is talking about goes, that’s little other than the Communist Party banks lending money to Communist Party cities to build Communist Party infrastructure. It’s one hand lending money to the other, which can almost be thought of as an economic stimulus plan, as this is money that is filtered through all levels of the society — from big wigs at the top to the families of construction workers back home in the villages. Money is like energy, it can never be wasted, only transferred from one entity to another.
To put it bluntly, when you have a country that is predicted by the McKinsey Institute to have 29 of the 75 most dynamic cities on the planet by 2025, an assortment of relatively diminutive new areas built by remote coal mining towns not filling up with people simply do not figure much into the bottom line. We need to keep in mind here that some of the most vibrant urban centers in China today were once labeled “ghost cities.” I’ll repeat: many of the places that we now take for granted as being the country’s poster metropolises were once under-populated new areas hardly a decade or two ago. All too often when a new urban development in China is successfully populated and vitalized it inconspicuously drops out of the “ghost city” dialog — nobody ever talks about it again because it becomes a normal city. Ex-ghost cities are rarely news. This leaves us with a very imbalanced view of how China’s urbanization phenomenon often plays itself out as well as a myth about ghost cities.
It’s the same process that created Pudong’s Lujiazui CBD, Guangzhou’s Zhujiang, Shenzhen, and the rollicking high-tech parks of Chengdu as those places we cherry pick to deride as ghost towns. To understand China’s ghost cities you need to mitigate the impending failures against the blatant successes, and as China continues spreading its blanket of urbanization ever farther over the country, successively turning backwaters into boomtowns along the way, the failures hardly register a blip. To put it bluntly, China’s economic future will not be foretold by obscure mining towns like Lvliang. And that, as I see it, is the truth about China’s ghost cities.