We seldom write about China’s “ghost cities” because in our view they show little more than pockets of inefficiency from which every economy necessarily must suffer, particularly one as big and as centralized as China’s. So it was nice to receive the following guest post from Dirk Chilcote giving us additional reasons not to worry about China’s ghost cities.
Dirk is a second-year law student at Washington and Lee University. Before that, (from 2008 to 2011) he worked as an English and international studies teacher in Zhengzhou, China and in 2012 he was a Kathryn Davis Peace Fellow at Middlebury College where he studied advanced Mandarin. He currently focuses on international law, specifically US-China policy.
The following is Dirk’s take on China’s ghost cities:
Though I am not as altogether unworried about the Chinese real estate bubble as some, including China Law Blog (see China’s Ghost Cities. No Worry, No Cry), I am less worried than many in the media would apparently like me to be. After seeing the recently aired 60 Minutes “scare story” on the subject, however, I am leaning more toward unworried than I was before. Why? Let me explain.
In another 60 Minutes piece, entitled “Zhang Xin: China’s Real Estate Mogul,” ostensibly about Zhang Xin’s unlikely rise from poverty to becoming one of China’s wealthiest women, Leslie Stahl decided to segue into a story about the impending catastrophe in China’s residential housing sector. As I watched, I could not help but wonder how much of Stahl’s own leftover angst from the US housing crisis was tainting the report. I am not an economist, but it seems to me that comparing the US and Chinese housing markets is like comparing apples and dragon fruit.
Just as I was starting to get a little bored, however, something interesting happened. The scene suddenly changed from the interior of one of Ms. Zhang’s Beijing office buildings to a familiar looking high-rise. As I watched, it suddenly hit me: “That looks exactly like the building next to my old apartment.” I continued to watch intently as the camera panned an empty street when Stahl’s voice came in and confirmed my suspicion. I was being shown footage of my old neighborhood in Zhengzhou.
Now, the previously bland story about China’s imminent real estate market collapse became interesting on a whole new level. Stahl and the Hong Kong based real estate expert (British) she was interviewing went from shockingly abandoned building to shockingly abandoned building, reinforcing the idea of a Chinese residential housing market self-evidently on the brink of collapse.
My own experience on the mean streets of Zhengzhou tells a slightly different story. In my three years living and working in the neighborhood 60 Minutes decided to use for its doomsday exemplar, the most enduring memory I have is not of desolation, but rather of lightening fast development followed shortly thereafter by burgeoning numbers of new residents. Though the buildings that Stahl and her news crew visited might well be empty today, I myself recall remarking at an empty mall similar to the one highlighted in the 60 Minutes story and located in the same area, only to discover a few months later that the formerly desolate shopping center had become a well used retail attraction. To be sure, my Chinese friends and co-workers frequently complained about rising housing prices in Zhengzhou and how no one could afford them. At the same time, however, the population of the part of the New District in which I lived and which is located not far from the area featured by 60 minutes has witnessed a remarkable increase in population over a relatively short time.
Again, I am no economist. But after watching 60 Minutes’ coverage of China’s real estate market, it seems more apparent than ever that much of what Western news has to report on China should be received with a healthy dose of skepticism.