The Search for GDP Growth: China’s ghost cities

21 Feb

Despite the slowdown in recent years, China still posts enviable GDP growth rates of around 7-8%. Much of this growth is owed to massive infrastructure investment worth billions of dollars. Investment in fixed assets such as roads, railway lines and residential accommodation accounted for 56 percent of the country’s growth in the third quarter of 2013 (Rabinovitch, 2013). However there are doubts as to whether such strong growth can be sustained by strong government investment. A drop in demand from key export markets such as the US and Europe has led to speculation that China is heading for a “slow down”. To help counter this, the government has tried to increase domestic demand for products to keep the factories churning out goods and to prevent unemployment in the manufacturing sector.

The city of Nanjing is one of many cities receiving massive government stimulus in the form of infrastructure projects including the construction of a new and extensive subway system (Rabinovitch, 2013). China leads the world in imports of steel and concrete. However, not all the government construction spending has been on projects for which there is real domestic demand for.  An overwhelming amount of money, materials and labour has been spent on constructing massive, sometimes city sized developments which upon completion lie empty because there is no demand for them (Banerji and Jackson, 2012). Examples include the New South China Mall in Dongguang, which has the majority of its 1500 stores empty.

The city of Ordos in Inner Mongolia is considered to be one of the largest of “Ghost Cities” in China with thousands of newly built apartment blocks lying empty and a few, if any, inhabitants. One of the reasons for this, and the failure of many other projects across the country, is a combination of poor conception and planning of demand and supporting systems, and also wide spread speculation on the housing market. The old city of Ordos is 30Km away and is a bustling and perfectly typical city. The residents are expected to move to the new city however few have because no action has been taken to establish any sort of an economy there. Despite the low occupancy many apartments have sold, but these are held onto as investments and are not lived in or considered homes – most properties are too expensive for local people anyway.

The pressure to maintain growth rates encourages the poor allocation of material and resources which may jeopardize other opportunities to tackle many of China’s growing social problems. It also may be fuelling a dangerous housing bubble which may come to haunt china in the future.

Joe Higgins

Banerji and Jackson, (2012)China’s ghost towns and phantom malls: The BBC. http://www.bbc.co.uk/news/magazine-19049254

Rabinovich, S (2013) Infrastructure drive powers China’s growth prospects: The Financial Times. http://www.ft.com/cms/s/0/3f843546-37e0-11e3-a493-00144feab7de.html#axzz2tsuHEkA0

http://www.aljazeera.com/news/asia-pacific/2009/11/2009111061722672521.html

http://www.bbc.co.uk/news/business-23251089

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