Thursday, August 18, 2011
China's Newly-Built Ghost Cities
In this report from Australia's DatelineSBS, Adrian Brown reports that China is building 10 new cities a year and many of them, after completion, remain ghost cities with few or no inhabitants. The largest such ghost city is Zheng Zhou New District in Henan Province in north-central China. (The old Zeng Zhou is the capital and largest city of Henan.)
This centrally-commanded economic activity is being done just to keep more people gainfully employed, according to Brown. However, it would appear to be building toward an ultimate crash and on a scale far larger than the U.S. housing bubble that created such havoc. There are an estimated 64 million empty new apartments in these new cities.
The apartments are priced at $100,000 to $300,000, while Chinese median income is around $6,000. Thus, the vast majority of Chinese live in tiny one-room apartments -- or even shared apartments, often with shared communal sink and toilet.
Buyers have to plop down half the price up front and pay the rest within three years. So, with no real mortgage finance system, an incredible run-away train of new construction appears to be careening toward a crisis.