Thursday, May 19, 2011

In China, some new cities are ghost towns -- is the Chinese real estate bubble about to burst?

In China's Inner Mongolia, Kangbashi district offers residents "new modern" living, with tree-lined streets, shiny apartment buildings, vast parklands, restaurants and even a motor racing track.

But seven years after construction workers broke ground on the arid plateau, most of the apartments appear empty and the wide streets are almost deserted -- earning Kangbashi the tag of "ghost city".

The new section of Ordos city on the edge of the Gobi desert was designed to accommodate about 300,000 people but residents say fewer than one-tenth of that number live in Kangbashi. Estate agents insist the number is much higher.

New districts like Kangbashi are springing up across China as the world's second-largest economy undergoes an unprecedented urbanisation process with hundreds of millions of people heading to fast-growing metropolitan areas.

Ordos is part of a nationwide building boom that has been fuelled by a massive credit binge, raising fears of a real estate bubble and a potential explosion in bad debts, especially among local government investment vehicles.

In the northern port city of Tianjin, the government is building an "eco city" covering 30 square kilometres (11.6 square miles) of non-arable salt pans and former fishing villages that can accommodate 350,000 people.

Near the southwestern city of Kunming, authorities started developing a new district for nearly one million people in 2003 but the area is reportedly still largely empty.

"These sorts of towns raise the question -- does the government have some amazing vision for filling these cities... or are they just great white elephants that are wasting public funds?" Rupert Hoogewerf, founder and compiler of the Hurun rich list, told AFP. (read more)