The path of bankruptcy which crippled the once booming industrial city of Detroit is now being followed by certain cities in China
July 22, 2013 Leave a comment
Detroit clones cropping up around China
Staff Reporter
2013-07-21
The path of bankruptcy which crippled the once booming industrial city of Detroit is now being followed by certain cities in China. These cities, such as Ordos and Wenzhou, develop rapidly without considering market demand and become “ghost towns,” according to the China Securities Journal.
The difference between Detroit and ghost towns in China, said Yang Shaofong, chairman of Chinese property developer Conworld, is that the latter will never go bankrupt because Beijing will always bail them out through policy support. Many of the ghost towns are actually already bankrupt.The cities, much like Detroit, are sparsely populated and full of tattered, abandoned houses. They also share several common features: a homogenous industrial structure, rapid population decline and failed economic restructuring. Detroit fell into bankruptcy slowly after its automobile industry crumbled and tax revenue shrunk along with population decline. Ordos, which is known for its rich resources, developed and expanded rapidly to reach ambitious development goals and failed as quickly as it rose, said Yang.
Municipal governments in the floundering cities overemphasized performance and GDP growth and built nearly identical infrastructure, business districts and industrial parks, without taking the market and demand into account. Yang estimates that the number of idle houses in new business districts and industrial parks across the country is innumerable and still increasing since many of them are under construction.
These bankrupt cities would never file for bankruptcy; China has no definition for “government bankruptcy” and Beijing saves them through administrative measures anyway. Detroit, however, chose to file for bankruptcy because its present financial status cannot be resolved without intervention, according to Detriot mayor Rick Snyder.
Yang called for financial reform and realistic development goals to save the empty cities. Municipal governments should transform their economies and open up the private loans business. Ordos and other resource-rich cities should be able to slowly recover in two to three years.
Beijing should also play the role of a coach instead of a teammate in boosting urbanization, allowing the Chinese economy to be market-oriented. Beijing should help farmers obtain household registration when they move to the cities and allow them to trade their lands in the rural areas instead of resolving these issues through the property market, said Xu Yili, a commentator of China Network Television.
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