Ghost Cities in China

According to Wade

Countries, particularly the Chinese government, have always carried out what is known as infrastructure development in various sections of their country. These could include the construction of bridges, buildings, and road tarmacing, as well as the implementation of incentives such as rent caps, which prohibit all property owners from raising rent above a certain level. All of the above programs are intended to entice individuals to move to and live in such locations or cities. According to research, people will at all cost fail to migrate and live in such developed areas putting in mind that there were significant efforts exerted in the form of setting up to date buildings, roads, and state of the art railway network to see that people live in such areas but instead people continue to avoid such hugely financed areas hence resulting into “ghost towns”. The Aghast town is that area or town that has been left vacant with no visible residents but with visible substantial remains such as buildings, roads, hospitals and other different infrastructures (Wade).

Economic impact, and financial impacts of ghost cities in China.

There are several reasons why there are so many ghost towns in China one of them being that so many people in China have huge sums of money that they have accumulated in their course of doing business and are so interested in real Estate venture. They buy the incomplete or sometimes complete houses in the outskirts of the city for example in the town of Chenggang which is a new town planned to inhabit 1.5 million people in the few years. This result is the creation of empty building with very few people living in those areas. This results into holding of capital in such investments which are not earning enough returns hence resulting into financial constrains to the investors leading to bankruptcy within a short period of time. Coupled to that, investors will build in such areas with the anticipation that one day in the future the value of such building will have to improve hence creating Chenggang ghost town in the short run.

Figure : (Chao)

It is also believed that due to the tax policy of China, which does not tax property but instead taxes developing land. Here the government does not tax the property that is erected on the land but instead it taxes the land that is left vacant without any development hence resulting in the creation of such ghost towns like Chenggang district even though the towns do not have such important infrastructures like hospitals, roads, and banks. Average Chines who has no enough money will resort to leasing out the land since in China there is no selling land resulting into a swarm of constructions all in the aim of avoiding the taxes that is imposed on developing the land.

In addition to the above, Chenggang is still in transit meaning that different people, especially the rich, are looking at the possible financial advantages that could come with buying now any building irrespective of where it is located. Upon acquisition of families by the sons and daughters of such people, they will spend less in terms of renovation compared to when they would buy such properties when such towns have fully developed and with a lot of inhabitants.This creates ghost cities in China having in mind that building space in China is very limited.

Long-term viability and good health services

Long-term viability and good health services could be some of the other significant factors that are resulting in a lot of mushrooming ghost towns in China. Urban centers like Beijing are infested with a lot of both air and noise pollution coupled with other urban setting disadvantages of cities, which were built way back following poorly designed plans. Cities are congested, poor transport system and a lot of crimes being committed in Beijing.Careful planning with the help of the planning authorizes are implemented in these ghost cities which act as pulling factors for people to come and have a life in such areas.Additionally, as per the policy in China, it is the government that owns land and citizens are given land-use right for any given piece of land for a grace period of two years to have built there some building or else you lose the land. This puts the leaseholders on the pressure to build on such lands before they lose the right hence resulting into ghost towns like Dantu in Zhenjiang. Such buildings are scattered all over the place resulting into ghost towns.

Another reason for the increased ghost towns in China

Another reason for the increased ghost towns in China is the fact that buildings in China are often sold as concrete shells. This insinuates that if at all you happen to have one apartment you will have to spend big some of the money in caring out both internal and external decorations as it can look appealing to the potential customers hence a disincentive to rent out any form of apartment resulting into ghost towns in China(Shephard and Wade). With support from the government through such initiatives like getting land at discounted rates and being paid for developing, the area has seen the creation of ghost towns in China. Part of China’s program is to have literally all the area developed so they will provide all the mentioned advantages to investors who will end up building in such areas though there no people but hoping for the long term benefit since they have nothing to loss as they are paid from the government for non-occupancy of such facilities. This arrangement in the short run hinders the purchasing power of citizens since all the money has been invested in real Estate. Investors are unable to pay back the loans in time to put back money in circulation in the economy so that people can have the purchasing power.

Ghost towns in China are because of expensive tenancy charges

Ghost towns in China are because of expensive tenancy charges in the newly created towns. High interest rates charged on the investors on the loans from the bank to finance such huge projects are passed back to the tenants as a way of recovering the money to pay back the loan to avoid losing the building to banks. These results into the abandonment of such expensive houses hence creating ghost towns in China for example, Zhenjiang’s Dantu district. With such ghost towns created, tenants are forced to live within highly charged houses since they do not have an option hence resulting into failure to have enough money to start up other businesses and succeed in other sectors financially like looking after their children, provision of basic needs to their families which is only affordable to a few wealthy citizens. With this kind of financial oppression, the government is put under pressure to provide such social amenities to citizens at subsidized prices.

Other believed reasons behind the creation or development of ghost town

Other believed reasons behind the creation or development of ghost town are all about history and future prediction about any given town in China. History, for example, the southern China less inhabited region is characterized by a lot of floods and different dangerous weather conditions like strong winds which discourage people from migrating in such areas in fear of being harmed or affected by such extreme weather conditions hence ghost cities. The forecast from metrological stations about some areas have a lot led to the creation of ghost cities, for example, the prediction of possible constant floods in any given area of China have led to the creation of ghost cities with people fearing to live in such dangerous areas.

There have been different measures put in place by the Chinese government to have such ghost towns fully occupied and filled up. For example, there has been the introduction of ceilings to different things like rent, fuel prices, and transport costs. Though investors get loans to build such infrastructure, the government has put in place policies that deter banks from charging high-interest rates that are transferred to tenants hence resulting in fewer rent charges and eventually gradual migration in such areas or towns (Wen). Proper and well-designed road network has been one of the initiatives implemented to attract people in such ghost cities. Eco-friendly means of transport as electric trains are used which are noise-free but effective towards what tenants want. As part of reasons given for the migration from urban places is the pollution in the urban areas so China has tried to put all this into consideration when building and designing the new ghost towns.

Ghost towns have been able to provide houses for few residents who are capable of such prices imposed on the houses. All the government will do is to aim at the distribution of different services to the locals at an affordable rate to be seen as economically developed. Such services are sent to different parts of China (Wen).

China’s ghost towns are not as a result of being abandoned because some bad disasters like a flood occurred

China’s ghost towns are not as a result of being abandoned because some bad disasters like a flood occurred but because investors have built in a given place and people are expected to migrate to such areas come future. Many Chinese are expected to migrate to such areas in the future hence creating a lot of future source of revenue to the investor is hence economic development of China. A lot of taxes will be collected from such ventures in the long run hence creating national wide development and availability of different job opportunities to the locals in such towns for example there will be taxes assessor’s, builders, and city cleaners who will all be able to get jobs hence long term solution to the unavailability of jobs in China (Chao).

According to Wen

Some of the short-term financial implications of the ghost towns is the high expenses involved in the acquisition of finances for example loans to develop the acquired piece of land. Banks are taking advantage of the two-year ultimatum of developing the land or else investors lose the land due to failure to develop the land by increasing lending rates. This has seen people refuse to rent in such houses because investors will increase rent to try and recover the loan they got. Another negative financial implication about ghost cities is holding of capital in non-productive ventures for a long run. Many business persons in China have been forced to sell off some of their portfolios just because of failure to realize profits within a short period. This hinders the expansion of such billionaires and sometimes leads to bankruptcy (Wade).

With the creation of such ghost towns in China, there is a need for the government of China to stretch its budget in the form of construction of hospitals, schools, railways, and roads to cater for the population that is expected to migrate to such areas. In the short term, this is seen as expenditure but in the end, the government will be able to reap big in form of taxes that are levied on different entities that come in the areas due to occupancy by citizens, above all the nation will have achieved nationwide infrastructural development. Furthermore, financially citizens in China are able to receive cheap accommodation facilities because of offers from the investors trying to persuade people to come and rent their houses. Philip notes that this favors citizens because there is no demand for the houses and so investors will have to offer the houses at subsidized prices.

Conclusion

Many ghost cities in the world are due to different factors like constant bad weather conditions, insecurity, and poor infrastructures which is not the case with the ghost cities in China. They are built waiting for the occupants to arrive. Economic and financial constraints are created due to this over-ambitious venture like holding of operational capital in non-lucrative ventures, increase in capital expenses (interests charges), and indirect robing of the purchasing power of citizens.

Sources cited

Shephard Wade, Ghost Cities of China: The Story of Cities without People in the World’s Most Populated Country. Zed Books, 2015.

Philip Wen, “Are China’s ’ghost’ cities building towards economic ruin?” retrieved on 20th April 2017. http://www.smh.com.au/business/are-chinas-ghost-cities-building-towards-economic-ruin-20140321-358l2.html

Steve Chao, “Inside China’s ghost towns: ’Developers run out of money’” retrieved on 20th April 2017. http://www.aljazeera.com/blogs/asia/2016/09/china-ghost-towns-developers-run-money-160914084316042.html