Microeconomics / GE273
Vast new cities are being built across China at a rate of ten a year, but they remain almost completely uninhabited ghost towns. Racing to stay ahead of the world economy, is the superpower about to implode? There are around 64 million empty apartments in China. It is all part of the Chinese government’s effort to keep its economy booming and there are plenty of people who would love to move in but the properties are priced out of the market.
China’s ghost cities are not going away, they are here to stay for China. Even as Beijing want their local governments to move away from GDP targeting and is more focused on developing much needed social housing, the wasteful city construction still plagues China. A report has found that the problem lies in the excess supply in China’s third-tier cities. Vacancy rates for the homes constructed, just sitting there wanted to be used but are not, in the past five years stand at 15% but are project to rise even higher than they are now possibly to 20%.
These barren towns seem particularly ironic in a country planning to move 250 million people from the countryside to cities in the next 20 years. However, this massive, unprecedented demand has been distorted by a number of factors unique to China. Flawed financial incentives for cities and developers, along with the poor phasing of services, amenities, and jobs create most of the problems. In addition, China’s emerging middle class is very comfortable, perhaps too comfortable, investing in real estate, so people often buy apartments in incomplete communities but do not move in, expecting that values will rise, or that they will live there someday. The result is a string of large, empty developments that remain speculative investments rather than real homes and communities. The see through buildings are the worry now, but the real problems may fore come when these so called “ghost cities” become full.