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A Reader Asked, What Happened to China’s Ghost Cities?

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51 comments on A Reader Asked, What Happened to China’s Ghost Cities?

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Image clip from video below.

The Secret Behind China’s Ghost Cities

Curiously, vacant, crumbling, uninhabited buildings are worth more than if someone tried to make them livable. 

Rent would not come close to paying the mortgage and you would have unhappy tenants anyway. 

Why China’s New Cities Are Still Empty

China’s Lehman Moment

The above video also discusses the collapse, Evergrande, a huge Chinese developer.

The Evergrande collapse was conveniently interrupted by a Covid panic. 

Here are some pertinent Tweets from 2021.

Pettis on the Lehman Moment

  1. The former head of the CSRC says that, compared to other countries, too much of China’s household wealth is tied up in real estate, and too little in financial assets. With property accounting for 70-80% of Chinese household wealth, he’s right.
  2. But of course with real estate 3-4 times as expensive in China (relative to income) as it is in other major economies, it would be pretty hard for it to be otherwise. Only a sharp and sustained fall in property prices relative to income, or a stock market bubble, can resolve that imbalance.
  3. Japan in the late 1980s had even higher real estate prices and a truly epic stock market bubble, and I think real estate accounted for roughly 65-70% of Japanese savings.

Lehman Moment Tweet Thread

Pettis Lehman Moment Tweet Thread

Ordos Ghost City and the ‘Inevitable’ Collapse of China

Here’s one more video. It presents the bull case. 

All three videos are worth a play. The first two are from 2021, the above from a couple months ago. 

Perhaps there are one or two success stories out of 50.  

China’s Bogus GDP

There are close to 50 ghost cities that could house up to 65 million people.

Construction of one city started in 2004 and was finished in 2015. It’s still empty.

Guess what happens to buildings not maintained for decades?

The buildings are worthless. Actually they have negative worth. The structures are not safe and need to be torn down.

Much of Chinese GDP is a mirage of worthless dreams. Yet construction still continues.

This post originated at MishTalk.Com.

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Mike Shedlock

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51 Comments
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Webej
Webej
2 years ago
It’s like Crypto & Covid.
At first you keep thinking there must be part of it you don’t get.
The unbelievers are put away as people who just don’t get it.
But then, sooner or later, it turns out it was the believers caught up in their mental acrobatics.
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dtj
dtj
2 years ago
When the capacity of an economy exceeds current needs, you wind up with malinvestment like ghost cities.
It seems to be a peculiar Asian thing to buy residential property as an investment, but not to rent it out. It only decays with time.
So the scheme is to buy a residential property and hold it as savings (until retirement?) only to sell to someone else who is not going to live in it, but is just investing in it. An unnecessary waste.
Any idea why social security was created almost 100 years ago just after the Great Depression?
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8dots
8dots
2 years ago
GB econ blockade destroyed Zimbabwe and Argentina. In the 20’s, Germany. GB became a roaring Mouse.
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Mouse
Mouse
2 years ago
Reply to  8dots
Think you meant to say the Panama Canal was completed in 1914 – and ships started bypassing the long expensive trip around South America. Buenos Ares went from a major stopping port to off the beaten path. Sailing all the way around Strait of Magellan is not something anyone would do once they have a shorter option
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8dots
8dots
2 years ago
Reply to  Mouse
Falkland Islands
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Mouse
Mouse
2 years ago
Reply to  Mouse
@vanderlyn – geography and the panama canal might explain why Beunos Ares was removed from global trade routes. It doesn’t explain why the entirety of Latin America is an economic basket case. The answer to that is: socialism (or marxism, bolivianism, petronism — all different names for what is practically the same thing).
The US had iron ore and Andrew Carnegie. The US had fertile soil and Dreyfus, Cargill, Bunge, etc. The US had oil and Rockefeller. The US had Thomas Edison, Eli Whitney, and so on.
Brazil has iron ore, oil, and more fertile soil than the US has. But they don’t have capitalists like Carnegie, or Rockefeller. They don’t reward, and tend to punish, people like Edison and Whitney.
Latin America has Simon Bolivar, Petron, and Karl Marx. They have/had literally cruise ships full of European trust fund babies — the industrious siblings stayed in Europe or emigrated to the USA.
Argentina was already circling the Marxist sewer (just like the rest of Latin America) when the Panama Canal was opened. The fact is they shot themselves in the foot with socialism — and labeling the same stupid idea marxism or petronism or bolivarism changes nothing.
Brazil keeps coming tantalizingly close to exploiting the natural resource treasures they have (which are as good and possibly better than the US has)… but each time they get really close and then shoot themselves in the foot again. Lots of people (not just de Soto) have tried to explain this cultural brain fart. No one has a satisfactory answer
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Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  Mouse
You forgot that Central America has the United Fruit Company. 😉
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JackWebb
JackWebb
2 years ago
Reply to  Lisa_Hooker
I love bananas, because they have a peel. So there.
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Mouse
Mouse
2 years ago
Reply to  Mouse
@Comrade Lisa… I’m afraid you have been engaged in self righteous protesting for so many years that your information is decades out of date. United Fruit Company went bankrupt in the late 1970s. After years in bankruptcy courts, it emerged as Chiquita Brands in the early 1980s. Chiquita International, Chiquita Brands, Chiquita Banana …. it went in and out of bankruptcy under different Chiquita variations for decades.
In 2015, two Brazilian Companies (safra and Cutrale) bought Chiquita. United Fruit Company made for great marxist propaganda back in the day, but it hasn’t existed in 40 years. Please update your protest signs. United Fruit hasn’t existed in decades, and its successor companies are now owned by Brazilians.
As for your underlying idea that “the man” kept central americans down… well you should know that Dreyfus is a French company that dates back to before the USA was created. The capitalists in the USA managed to create ADM, Bunge, and Cargill (plus many smaller firms) despite the evil Europeans at Dreyfus holding them down. It wasn’t just Dreyfus… there were quite a few large and extremely well financed French and British firms that sought to control north american agriculture. US firms were created anyway, and several became sucessful.
So why couldn’t Central Americans overcome the United Fruit Company the way ADM et al overcame Dreyfus et al? Certainly the constant victimhood mentality of marxist protesters didn’t help. Seeing yourself as a victim is never a good thing.
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Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  Mouse
Thanks for bringing me up to date.
And I meant “had” not “has.” Mea culpa.
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StukiMoi
StukiMoi
2 years ago
Reply to  Mouse
The US was left alone to be “conquered” by 40 acres and a mule; deputised citizens, mine/wash out your own money, citizen militias with exactly the same guns any “standing army” could buy.
Latin America was not left alone to be conquered by those guys. But was instead, a priori, handed out in massive land grants to connected dilettantes; a “professional” army; all the gold belonged to The Crown; and all the rest of the pathologies which could be dragged over from Europe.
As in: Latin America preserved “The System”: Of birthright privileges, connections, court intrigue, dependencies, rents, restrictions on rights to own and carry etc…..
The US, back when it still mattered, didn’t. Instead leaving the frontier to those willing and able to tame it.
Ever since the US dilettante classes, like the Latins before them, in 1971, fully gained the powers to “preserve The System”, the US has gone exactly the way of Latin America. It started from a much higher level, so most Americans may still have a bit more than most Argies. But year in, year out, the differences are shrinking. Unsurprisingly.
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8dots
8dots
2 years ago
Argentina is #2 econ in South America. The inflation rate reached 100%. If Messi fail the soccer communities in Argentina and Brazil will
be devastated. Talent will be forgotten, shift elsewhere. Africa soccer will create jobs and new millionaires. Since the fifties Argentina was in recessions more than any other nation. 40% of Argentina population live in poverty. Argentina cannot pay debt. If Messi fail hope will fade.
From ecstasy to a full blown depression.
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Mouse
Mouse
2 years ago
Reply to  8dots
At the turn of the previous century (1899-1900), Argentina used to be the largest economy in all the Americas – north and south. The USA was an emerging economy at the time, much smaller than Argentina at the time. Argentina had a HIGHER standard of living than the USA at the time.
The USA was capitalist and growing. Argentina went marxist / socialist. And the rest, as is often said, is history.
Capitalism turned the USA into the largest economy in the world.
Marxist / Socialiism sent Argentina into a 120 year tailspin that it still can’t escape.
Thousands of illegal immigrants risk their families, their dwindling fortunes, and their very lives to illegally cross the border from socialist utopia in Latin America, and enter the terrible capitalist economy of El Norte. Why are these people hiring human traffickers and walking across deserts with almost no water, when they already live in Bernie Sanders’ idea of utopia?
Its a history lesson that the “intelligentsia” of US academia are too stupid to grasp.
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astroboy
astroboy
2 years ago
Reply to  Mouse
A ten second search on wiki has the US per capita GDP in 1900 at $4096, Argentina at $2756. US population at 78 million, Argentina at 4.5 million, that is, 1/17th of the US population. Not even close. It is true, that Argentina (and Venezuela also, for that matter) were much wealthier nations than they used to be.
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Mouse
Mouse
2 years ago
Reply to  astroboy
Neither of those numbers are correct.
Wikipedia is not a reliable source. Sorry
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RonJ
RonJ
2 years ago
Reply to  Mouse
Correct. Steve Kirsch is not a disinformation spreader, as Wikipedia claims.
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Mouse
Mouse
2 years ago
Reply to  astroboy
If you wanted to argue about GDP – pick a better source than wikipedia. Its garbage written by a very tight clique in San Francisco. Technically, anyone in the world can edit, but the clique will very quickly reverse any edit that doesn’t match their political leanings. Its worse than twitter. Quote it and be mocked.
Hernando de Soto (who leans pretty left himself) has done loads of studies and is a more reliable source for Latin America. In his opinion, the economic mess is due to cultural differences (no history of private property rights in Latin America — only the European settlers had the concept). de Soto says that Argentina had a higher than south american average influx of European settlers, and the laws the settlers brought with them caused more than average upheaval in Argentina in de Soto’s opinion.
de Soto, the IMF and other sources also have different opinions about the correct exchange rate to use in comparing GDP. By most accounts, Argentina was much bigger than the USA in 1890, slightly bigger by 1910, and started falling behind dramatically after WW1.
If I wanted to dispute the Marxist collapse of Argentina, I would point to the Panama Canal. Buenos Ares went from a major port for world trade (making it cheap to export Argentine agriculture) to being off the beaten path (as ships went through the canal and avoided the very long and costly trip south.
Argentina’s economy was already a mess by the time the canal opened in 1914. But the canal sealed Argentina’s fate. de Soto’s argument about European settlers establishing private property laws and assimilating over time might explain the rise of Marxist policies (which were “petronist” in local terms)
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vanderlyn
vanderlyn
2 years ago
Reply to  Mouse
agree with most of that. i sum it up this way. the spanish empire like the other europeans had noblesse oblige. but that did NOT extend to non europeans. when the spanish empire collapsed and retreated like the portuguese, the ruling class who took over, have had zero philosophy of noblesse oblige. i would also argue that USA lost this philosophy mid century 20th. call it what you want, barbarians at the gate novella, the amerikan empire slowly collapsing since mid 60s………..lots of stuff. just look around any sunbelt city and the tent cities will tell you all you need to know about amerikan noblesse oblige……….
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vanderlyn
vanderlyn
2 years ago
Reply to  Mouse
i would also analyze and conclude argentina reacted to the 1929 crash and great depression like our masters of amerika reacted to the panic of 2008. the ruling class their just printed and stole everything not nailed down. argentina for past century is just left v right convincing peasants to elect them, so they can steal all the goods down there. like our D v R game here now. we are following the same path…….
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Mouse
Mouse
2 years ago
Reply to  vanderlyn
As I wrote above, Brazil has come tantalizingly close to realizing their natural bounty (resources and people) several times… and each time they shoot themselves in the foot. No one knows why, although several very smart people attribute it to various cultural issues.
Whatever the issue/issues may be, they seem to be slowly seeping into the USA as well. I tend to think it is the mindset exhibited by trust fund babies (sell off the family silver and go smoke dope at a Grateful Dead concert) replacing the family scion (learn to run the family business). Karl Marx was essentially a trust fund baby himself — living off the allowance he got from his capitalist father. The “new” (but frustratingly similar to marxism) mindset is wrecking the USA economy
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Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  Mouse
“Why are these people hiring human traffickers and walking across deserts
with almost no water, when they already live in Bernie Sanders’ idea of
utopia?”
Cellphones.
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Maximus_Minimus
Maximus_Minimus
2 years ago
It would seem that the Chinese developers built cities in China, but the Chinese found better opportunities to launder money elsewhere, particularly in British Columbia, and the US west coast.
For those who drone about communist planning, the name is Evergrande, a private developer who went full monty. It is as if they learned these tricks somewhere else.
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Galfer1
Galfer1
2 years ago
Reply to  Maximus_Minimus
And, MM, WHERE might they have learned?
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ZZR600
ZZR600
2 years ago
Chinese population growth may not be what it is purported to be. Some demographers have suggested the population may actually be now in decline.
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Galfer1
Galfer1
2 years ago
Reply to  ZZR600
ZZ, WHAT numbers emanating from China can be deemed trustworthy?
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Jojo
Jojo
2 years ago
Reply to  Galfer1
The ones that best fit the story you want to tell.
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Maximus_Minimus
Maximus_Minimus
2 years ago
Reply to  ZZR600
Are you suggesting they cheat on their population number?
Since the government goal was to reduce population growth ever since Deng Hsiao Ping, it would count as a great success.
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GodfreeRoberts
GodfreeRoberts
2 years ago
Since 1950, China has built 600 cities with populations over a million and a few have given rise to stories of ‘ghost towns’.
But real ghost towns are communities that have died, while China’s empty towns are signs of approaching birth, not death, as author Wade Shepard, who has visited most of them, attests, “I’ve been chasing reports of deserted towns around China and have yet to find one. Over and over, I would read articles in the international press claiming that China is building towns that are never inhabited–only to find something very different upon arrival. The New South China Mall had a lot of empty shops but, by the time I arrived, it turned out to be a thriving entertainment center; Dantu showed me that an initially stagnant new town can become populated and come alive and I found that Xinyang’s new district, called a ‘ghost town’ since 2010, hasn’t even been built yet”.
In 2010, all of these cities had under 50,000 population. Today they’re 90% filled. https://www.bloomberg.com/news/articles/2017-05-16/china-s-manhattan-sheds-ghost-town-image-as-towers-begin-to-fill
1. Ordos
2. Dantu
3. Pudong
4. Wujin
5. Zhengdong
6. ZhuJiang
7. Zhengzhou
8. TianDucheng
9. Lanzhou
10.XiangLuowan
Xiangluowan is full
Lanzhou is full,
Zhengzhou is full
Zhujiang is full
Zhengdong is full
Dantu is full
Wujin is full
Pudong is obviously full
Ordos population went from 40,000 —> 2 million
The fact of the matter is that Ordos is a prefecture-level city that has a population in excess of two million.
Wade Shepherd Video interview: https://youtu.be/T7y_ejVBkmE
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vanderlyn
vanderlyn
2 years ago
Reply to  GodfreeRoberts
it seems like mish is recently been commenting on things he has absolutely no knowledge of. i hope i am wrong, but i’d suspect he’s got other writers, or just looking for click bait stuff. mish is good on amerikan r/e. no doubt. but this analysis on chinese r/e was just wildly weak. thanks for putting up a fine rebuttal. i already collected bets with my trader and investment banker pals i made new years into 2000, new centuries. i bet china would roar, and amerika would cower, economically for the first decade. i even doubled or nothing some of the fools, for the second decade. like taking candy from babies. i almost felt dirty. but not really. such arrogant and ignorant amerikans. grew up among them. so i know they know nothing but what is spoon fed in ivy league and state u………and amerikan media.
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Galfer1
Galfer1
2 years ago
Reply to  GodfreeRoberts
GFR, your post (which is 180 degrees divergent from the gist of this article) forces the inquiry: in what sources shall we trust?
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Jojo
Jojo
2 years ago
Reply to  Galfer1
Roberts is an obvious agent of the Chinese government. He pops up in a variety of internet forums to the defense whenever a negative story on China is posted.
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Maximus_Minimus
Maximus_Minimus
2 years ago
Reply to  GodfreeRoberts
There was/is a commenter on Wolf Street who lives in China.
According to him, the appartments are left unfinished by developers, and then completed by the buyer according to his taste.
As opposed to myself and the majority of others, who almost immediately replace the carpet, contertops and fridge at a giant waste.
But we have the best green agenda in the world.
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Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  GodfreeRoberts
@GFR – Are we supposed to believe someone who has actually been to China?
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StukiMoi
StukiMoi
2 years ago
Reply to  GodfreeRoberts
+1
Just the realisation that there actually exists people out there, who are so hopelessly dense that they think having MORE available residential units, is somehow less valuable than having FEWER; anywhere in the world, is pretty darned depressing……
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8dots
8dots
2 years ago
It’s all about GDP growth. China became #2 global economy, leaving behind devastated communities. These ghost towns are China
Johnstown PA. China emphasized RE consumption for GDP growth. It was growing every year until it stalled. RE consumption might spiral
down. Poor investment might become no investment. China might diversify it’s economy. Diversification vs the very focused RE and export sectors, forsaking GDP atrophies.
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HippyDippy
HippyDippy
2 years ago
While I’ve never been to China, I do know that we need to adjust our thinking when we think of what constitutes a city. I remember watching a video some 10 years ago about a village rioting over a “suspicious” death blamed on a local party official. The footage showed the villagers driving soldiers back with their rocks. The size of the village? Over a million people. Apparently all of them were pissed off.
On another note, these ghost cities show, again and again, just how ignorant central planning, especially the infamously ignorant five year planning model the ism we call communism loves. Of course, none of this would be an issue if the people only sustained their rage against injustice as those villagers did. But for a bit longer. If, instead of killing all the lawyers, though not a bad idea, we should kill all the narcissists who love to turn heaven into hell. Just a thought.
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Denver1
Denver1
2 years ago
You left out the part that chinese consumers saved up over 2 trillion extra during their lockdowns. And, they are about ready to spend the mother of all snap backs into world wide demand…. but, “ghost cities”
MMMH? I guess that might be important too.
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Zardoz
Zardoz
2 years ago
Reply to  Denver1
This is bad news for Americans that derive existential justification from making consumer purchases.
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vanderlyn
vanderlyn
2 years ago
Reply to  Zardoz
how dare you take away my god given rights to buy ijunk and junk junk to fill up my big ugly tank size auto and put in my ticky tacky mcmansion. i have proposed a solution. why not just allow amerikans to borrow money and direct the chinese factories to directly ship their wares to the landfills. cut out all the temporary handling and clogging up attics basements and garages etc…………..it’s ESG. i might write my congressmen in fact. where is my chinese produced crayons?
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Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  vanderlyn
That would be cutting the roll-up garage-door stand-alone personal storage economy out of the picture.
Every true American should have several off-site storage spaces.
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vanderlyn
vanderlyn
2 years ago
Reply to  Denver1
oh hell yes. Xi is opening up china now. a year after rest of world. gonna be boom times ahead, it truly smells like. i told all my pals over the past 40 years, if you think China has NOT done pure capitalism with a command down, successful economy for the majority of the past few thousand years, i’d suggest a different history book, school, or idiot box channel. the amerikan history classes have done such harm to their middlebrows. i find it intriguing that the new silk road/shipping lanes are almost the same as back 1000 years ago. Genoa is a huge destination shipping for goods from china today, as it was long ago. had the best chinese food in my life, in venice italy. the old venetians trading with china many moons ago. anyone in the deflation camp, better have their seat belts on, and make sure their air bags are functional. and don’t drink and trade.
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vanderlyn
vanderlyn
2 years ago
this analysis is alright, but by reading economist and asia times for many years, and investing in some chinese r/e public firms(sold them as they started collapsing as a trend follower shall do), and living in bay area chinatown for 5 years, i think this is flawed. it’s much more involved. r/e there was a store of value as their middle class became wealthy. the properties are devalued if rented out. the underwriting of the building left many small chinese investors losing all their down payments and payments. the local governments involved in selling off the old communist owned land, with the blessing of the central committee promoting this. i also always look at history as my guide. in 1700s and 1800s USA there were many ghost towns built that collected tumbleweeds as the RR never arrived in time. these are the fits and starts and panics of emerging powerhouses. we being rich world denizons of past century plus, have maybe a small sense of the same process. i saw tiny little, communities in comparison in phoenix exurbs being built in past r/e bubble here. think that times 100x. didn’t china pour more concrete in first decade of 21st century than the us poured in entire 20th century? yes, it’s a disaster, but reading economist and asia times, it is certainly in the top few items that the central committee of XI………has as goals. housing for for all. i’m riffing off my memory, but didn’t china move about 500,000,000 or more people, in a few short decades from wrenching subsistence farming poverty with no running water or electric, into apartments with those luxuries? i’ve always tried to comprehend the enormity of it. i’d chalk this up to a certain problem without doubt. but a rich world problem. something quite recent for the 1,400,000,000 fellow humans, we refer to as the chinese. i was born in 1960. in rich world. us and italy citizen. in china my actuarial life expectancy was around 42 years. i have had this discussion with countless fellows and ladies, i call friends, who were born in china around my birth year.
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Business Man
Business Man
2 years ago
Reply to  vanderlyn
I appreciate you taking the time to relay your personal experience and understanding. Thank you, as I am trying to understand China as much as I can.
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LostNOregon
LostNOregon
2 years ago
I am glad someone asked about this. I was just thinking of the Ghost Cities last week!
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TheCaptain
TheCaptain
2 years ago
I think that the Chinese knew that paper currency was worthless and so they tried to store their national wealth in real estate. Unfortunately, they are good builders and thus supply far exceeded demand at the price needed to buy it. When will people ever learn that real money is gold. It is the real savings of the Earth. Silver is too but also a commodity and platinum is another commodity that will be incredibly useful if hydrogen fuel cells take off as a power source for electric cars once people realize that the grid simply cannot handle the energy load represented by moving all fossil fuel cars to the grid. Hydrogen is clean and we are getting better at generating it efficiently. Platinum is the only metal that can be used as a catalyst in hydrogen fuel cells.
Once the stock market collapses and housing collapse people will again wake up to the fact that gold is the best place to store long term savings simply because it is very difficult to create more of it. Believe it or not, it was far easier for China to build all of those ghost cities than it would have been to mine even 1/10 the value in gold.
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Zardoz
Zardoz
2 years ago
Reply to  TheCaptain
Good builders? Fast maybe.
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Portlander2
Portlander2
2 years ago
Yet construction still continues.
Is some of this going end up in the “Ghost City” column? If so, it would seem that “smoke and mirrors GDP” and moral hazard are still the modus operandi.
What about past investors, developers and mortgage holders–i.e. have they been bailed out, or if not, who’s left holding the bag?
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Avery
Avery
2 years ago
Bring in The Bernack, Paulson and Geithner to lead the bailouts!
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FlyNavy1
FlyNavy1
2 years ago
I’m sure given the high standards of Chinese accounting that the value of these buildings has been written down properly.
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vanderlyn
vanderlyn
2 years ago
Reply to  FlyNavy1
they hired the accounting staff at the pentagon and raytheon……………..US navy bean counters, makes SBF and his drugged out crypto hedge fund, look like button down swiss banker accountants. please laugh old sport. i remember the old D bag rummy misplaced a few trillion the day before 9.11.01. pentagon and department of war are like mad crack heads, with their pants down to their knees.
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