Under-occupied developments in China


Under-occupied developments in China are mostly unoccupied property developments in China, and commonly referred to as "ghost cities" or "ghost towns". The phenomenon was observed and recorded as early as 2006 by writer Wade Shepard, and subsequently reported by news media over the decades, often cast in a negative light. News stories around the topic have been criticized as hasty judgments.

Terminology

Media outlets often label under-occupied development areas in China as ghost cities or ghost towns. However, the two terms are technically misnomers since the term "ghost town" describes places that previously had economic activity but have since become defunct and abandoned, while many under-occupied developments in China are new installations that have yet to receive resident immigration.
Additionally, some reported cases of ghost cities are not in and of themselves administrative entities but instead districts built in the suburban region of functioning cities to provide accommodation for a growing urban population.

Background

The way in which property values are structured in China plays a role in the creation of "ghost cities", according to author Wade Shepard, who has traveled widely to research the phenomenon of China's underoccupied cities. "Economically affordable housing" must be lived in by the owner, and can not be bought and sold as an investment. The developer is only permitted to sell "economically affordable housing" at 5% over the cost of construction. By contrast, "commodity housing" can be bought and sold as an investment. Because housing is a physical object, and China's large population guarantees an ongoing demand for housing, commodity housing is considered a more secure way to store money. Except in some Tier 3 and Tier 4 cities, which have different government regulations, "commodity housing" generally sells as an investment. In addition, these homes typically serve as future homes for the buyer's offspring to live in when they get married.
Construction of "commodity housing" is driven by the disparity between urban and rural land prices. Rural land, which must be collectively owned, is redesignated by a municipality as urban-construction land, which can then be resold by the municipality at as much as forty times the price. Shepard explains that municipalities must pass on about 40% percent of their tax revenues to Beijing and are responsible for about 80% of their expenses. Hence, there is an incentive to seek non-tax-income streams. According to Shepard, as of 2015, "40% of the revenue that local governments in China make is from land sales." In 2012, this type of development created $438 billion for China's local governments. A common assumption is that local officials are strictly incentivized to start construction on this newly created urban land to boost GDP growth and look good within the Party. However, Shepard points out many places which started becoming ghost cities were under the jurisdiction of an area with already strong GDP growth. He argues that these developments are seen as an investment for the future and promote development with timescales of over 20 years.
Developers acquire new plots of land from local governments and are mandated to construct something more or less immediately. Developers can't sit idly on vacant land and wait for the surrounding area to develop until it's economically viable. This creates the quick-buck mentality in developers to rapidly build in the new area without the necessary demand for housing.

Criticism

Many developments criticized as ghost cities did materialize into economically vibrant areas when given enough time to develop, such as Pudong, Zhujiang New Town, Zhengdong New Area, Tianducheng and malls such as the Golden Resources Mall and South China Mall. While many developments failed to live up to initial lofty promises, most of them eventually became occupied when given enough time. The "ghost city" moniker has been criticized for "calling the game at halftime".
Ordos Kangbashi is often seen as one of the first and most prominent examples of the international Chinese ghost city phenomenon and fascination. Some journalists have pointed to the Ordos Kangbashi ghost city stories as an example of media hastily and often misinformed reporting of developments in China. Reporting that often eschews perspectives of local officials and experts in favor attracting readers unfamiliar with China’s development model and bemused at China's perceived backwardness. As of 2015, it was reported that Ordos Kangbashi has a population of 100,000 people, 80 percent of which are full time residents, with the remainder commuting daily from nearby Dongsheng for work.
Wade Shepard, author of Ghost Cities of China, visited a number of the so called 'ghost cities' several years after they had come under publicity, and noted that:
After investigation, Chicago-based photographer Kai Caemmerer also noted the discrepancy between the news reports and actual situation. The cities are product of plan-driven economy that many cities are not expected to be complete or vibrant after 15 years of construction. He noted:

List of cities