Ghost towns in Inner Mongolia

A report from Ordos, one of the largest mining town in Inner Mongolia, which we visited on the last China Energy trip.

Ordos: The biggest ghost town in China http://www.bbc.co.uk/news/magazine-17390729

"In Inner Mongolia a new city stands largely empty. This city, Ordos, suggests that the great Chinese building boom, which did so much to fuel the country's astonishing economic growth" could be drawing to a close.

Chinese developers continue to open up new tracts of land and build infrastructure -- the cranes are everywhere! -- but the question is whether anyone is moving in when these projects are completed, especially in middle-of-nowhere places like Ordos. In our visit, we definitely saw the large blocks of empty apartment buildings described in this article, even as construction continued to sprout everywhere, pushing up against the dry dusty outskirts of town. Our experience in the hotel was indicative of Ordos' mode of development: the showers didn't drain properly, flooding the bathrooms whenever they were used; students encountered seedy behavior in shady corners; and the lobby was dominated by banners welcoming a mining conference, the industry that's pumping money into this region.

Many local governments "seem to have become dependent on the proceeds of big land sales to developer" and may have an incentive to encourage still more construction, to keep the cycle going on -- and revenues rolling in -- as long as possible. "Western financial experts who fear a bursting of the Chinese real estate bubble point out that the Chinese economy is more dependent on house building than the United States economy was, before the sub-prime lending bubble burst in 2007." On the other hand, "Chinese economic commentators seem much less concerned" and are "still confident that the technocrats in Beijing...will soon be able to balance supply and demand in the housing market."

In many Chinese cities, the wealthy actually buy multiple apartments as a form of investment, since building prices keep rising. Real estate can also seem safer than stocks -- for example, a physical development may be less subject to the revelations of fraud that periodically pop up for listed companies in China (sigh). Someone from NRDC mentioned that some municipal authorities stumbled upon estimates of unoccupied luxury apartments because a certain proportion of flats would have energy bills that were always zero, month after month, demonstrating that no one lived there. (Which is a little ironic, because many ordinary people are still having difficulty affording a place in the big cities.) So whether there's a bubble or not, the housing market still has imbalances that need to be resolved.

It's just that continuing to feed the construction boom in Inner Mongolia may not be the solution. Here's another great feature in Foreign Policy magazine on the topic:

China's High-Growth Ghost Towns
Visiting the eerily vacant epicenter of unsustainable progress, far out in the grasslands of Inner Mongolia.
http://www.foreignpolicy.com/articles/2010/02/18/chinas_high_growth_ghost_towns

UPDATE: Al Jazeera English had a video today referencing the building boom as well.