China has these "ghost cities," which are built all over the place but nobody wa...

Steko · on Jan 11, 2012

"but nobody wants to live in"

Not true, people want to live there, most just can't afford it. In fact in some of these towns most of the units have been sold -- just not sold to people who live there.

"Can someone explain why this does not indicate the Chinese economy is headed inexorably towards a massive crash"

Probably in the same way that no one going to see Adventures of Pluto Nash didn't cause a massive crash in the US economy or even in the film industry here. I'll elaborate...

What percent of the Chinese economy is real estate? 6%?

What % of Chinese real estate do these ghost towns represent? 1%? 5%? 10%?

Are there 20 success stories (boom towns) for every ghost town? 5? 10? 100? None?

Ghost towns maybe a real and dangerous symptom of a coming Chinese crash. Or not. It's really hard to jump from "giant examples of waste" to "the economy is going to crash".

There are certainly other indicators that housing is a huge bubble in parts of China. There's also the inexorable and unbelievable growth that China has experienced over the last few decades. Growth like that has a tendency to make lots of things look like bubbles that aren't.

polshaw · on Jan 12, 2012

Lets not forget China's economy is overwhelmingly export driven; so the fact that they might decide to build towns and not use them- whilst seeming really odd- doesn't seem to me to be predictive of any kind of an economic crash.

The difficulties that western economies are having would seem a much greater threat to China's economy than this.

JonnieCache · on Jan 12, 2012

>There's also the inexorable and unbelievable growth that China has experienced over the last few decades. Growth like that has a tendency to make lots of things look like bubbles that aren't.

Thanks for the explanation. Same goes to the other replies.

Tsagadai · on Jan 12, 2012

There is a mindset of used being bad in China. Don't interpret "never lived in" as "not sold". Many of these cities have been sold but no one lives there because if the house has been lived in the value will drop. Some houses being flipped now as new are actually 10 years old but no one ever moved in.

I wouldn't be too quick to call a crash. Large cities become self-sustaining after a point. Except for Detroit (where the 'city' was mostly divested of wealth in favour of surrounding suburbs), there are few examples of modern cities failing without something catastrophic causing it.

Ignoring scam developments, because they happen everywhere, there isn't much chance of a crash unless everyone rich leaves China. Look at places of very significant development, like Chongqing, has a population of 20 million and housing for about 30 million at the moment. It's marked as one of the four 'direct-controlled municipalities' and it's likely to grow further because there are few other places for young educated people to move to out of the rural areas of Southern and Central China.

This isn't a defence of China, I'm no fan, but there are realities that must be considered. Urbanization is a real process, people will move from the country to the city seeking wealth. When you start with a huge rural base, like India and China, the urbanization process will send property markets berserk.