China’s Gleaming Ghost Cities Draw Neither Jobs Nor People

August 8, 2013, 11:02 p.m. ET

China’s Gleaming Ghost Cities Draw Neither Jobs Nor People


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China seeks economic gain through urbanization, but when one city, Tieling, built a whole new city nearby, it drew few residents. Urban planners spent millions of yuan to clean up surrounding marshland in this small city in northeastern China. Four years later, Tieling New City is virtually a ghost town.

TIELING, China—When this small city in northeastern China launched a plan to build a satellite city 6 miles down the road, it got off to a promising start. Urban planners spent millions of yuan to clean up surrounding marshland that had become a dumping ground for the city’s untreated sewage. A pristine environment, they hoped, would help attract the businesses that would raise incomes and swell the population. Four years later, Tieling New City is virtually a ghost town.Clean waterways weave among deserted residential and government buildings. Housing blocks that won recognition from the United Nations for providing good affordable homes are almost empty. The businesses that were supposed to create local employment haven’t materialized. Without jobs, there is little incentive for anybody to move here.

Tieling symbolizes the enormous challenges Chinese Premier Li Keqiang faces as he touts urbanization—a process analysts expect will see 250 million people move from rural areas to cities over 20 years—as the force that will ensure his country’s economy keeps growing well into the future.

“Urbanization will not only drive tremendous consumption and investment demand, and create employment opportunities, but directly affect the well-being of the people,” Mr. Li said in March during his first news conference as Chinese premier.

Mr. Li has yet to present a detailed vision of how to achieve his economic goals.

In theory, urbanization stimulates growth because city dwellers typically earn more than their rural counterparts, allowing them to spend more on consumer goods and services.

For the government to realize that payoff, though, it must create jobs that will draw people into the cities. Tieling underscores the difficulty.

Among the few business owners lured to a development park in Tieling New City is Bo Yuquan, the middle-aged owner of a flooring store.

“Where are the people? There’s no one here,” said Mr. Bo. “I’ll be out of business soon. My staff and I are discussing moving to Beijing to find work.”

Said Hu Jie, the designer of the new city’s landscape: “In 10 to 20 years, Tieling could be a good development, but only if you can manage to bring businesses in.”

The Chinese export sector drove earlier waves of urbanization but is thought unlikely to do so again, what with demand still weak in developed economies and rising costs making Chinese goods less competitive globally. Massive overcapacity in many industries, including steel, solar and shipbuilding, will further constrain job creation.

In recent years, cities have filled the gap with construction jobs created by a nationwide investment boom. While that has kept China’s economy buoyant, it also has thrown up empty suburbs and ghost cities like Tieling New City across the country.

The investment boom has threatened to fuel inflation and bog down the financial sector with bad loans, particularly if people don’t move in and bring the promised economic dividend.

China has a record of building first and creating demand later, notably in Shanghai, where a decade ago the towering new Pudong business district initially failed to attract tenants but later became a symbol of China’s success.

Many smaller cities lack the pulling power of Shanghai.

“With more and better job opportunities in higher-tier cities, many lower-tier cities have actually been experiencing a net outflow of population, while land sales [to home builders] there increased rapidly, exacerbating the housing oversupply,” wrote Credit Suisse property analyst Du Jinsong in a recent note.

According to population data collected by Mr. Du on 287 Chinese cities, about two-thirds, mostly smaller urban centers, had fewer residents than people who were registered to live there, suggesting people have been leaving their home cities.

Tieling, a city of about 340,000, launched its plan to build a new city in 2005, part of a broader strategy by the Liaoning provincial leadership to revive a local rust-belt economy.

The plan was to stimulate growth around Tieling and six other nearby cities by building highways and high-speed rail lines connecting them with Shenyang, a metropolis that is about a 90-minute drive south of Tieling.

The idea was that companies would be drawn to the satellite cities by cheaper land and lower labor costs, while still enjoying proximity to the region’s largest city. Tieling’s new city was expected to house 60,000 residents in 2010 and later triple that number.

In 2009 the wetlands’ rejuvenation was complete, along with the new city’s infrastructure, canals, government offices and some apartment buildings. The new city won a special mention from the U.N. Human Settlements Program for “providing a well-developed and modern living space.”

But come dusk, the lights in row after row of apartment buildings remain off. Salespeople, security guards and the small smattering of residents say almost all of the accommodation is empty.

A development park set up to attract providers of back-office services to financial firms, such as data storage, was supposed to employ 15,000 to 20,000 people by the end of the this year, according to the park’s website.

Situated on the outskirts of the new city, the park is easy to miss. It is home to only two companies, one of which, a bank office, employs fewer than 20, said its security guard.

Another park filled with warehouses outside the new city fares little better. Marketed as a trading hub for China’s northeast region, it was supposed to foster a logistics industry by taking advantage of Tieling’s location near two major highways and a port, with rail links to Shenyang and the rest of the northeast.

Although most of the shop space has been sold, the park lies largely empty except for a handful of wholesalers. Meanwhile, there are plans for the park to double in size, an expansion that would include more apartment buildings.

“The park doesn’t have any advantages over Shenyang’s wholesale markets,” said Liu Wei, a researcher at the government-backed Institute of Comprehensive Transportation, who worked on Tieling’s plans for a logistics center.

So far, the new city’s greatest success has been a zone dedicated to building special-purpose vehicles such as snowplows.

According to a statement on the Tieling government website in April 2012, the park created 5,000 jobs for rural workers. But it also said the workers had bought apartments in a residential compound across the road from the park, far from the city centers of both old and new Tieling.

The few rural migrants who live in the new city used to farm the land it was built on. Some now work for the new city shoveling snow and sweeping streets.

Local authorities have tried to boost the population by pushing people from the old city into the new. That effort has involved moving government offices into the new city. But so far, most government workers still commute from their existing homes.

The effort also has involved closing schools in the old city and the greater Tieling county and corralling the students into newly built schools in the new city.

According to Sun Baocai, the office director of the Tieling Bureau of Education, 50,000 students are enrolled in classes in the new city, ranging from elementary classes to vocational courses.

The hope is that parents will move to be closer to the schools. But many residents of the old city say that despite the new city’s pleasant environment, its lack of services and absence of a community deter them from moving.

Against all this, Tieling is choosing to keep building. The municipal government has rolled out plans to spend a further $1.3 billion on projects in the new city this year, including an art gallery, gymnasium and indoor swimming pool.

That is despite municipal finances coming under increasing stress.

“Financing costs are rising all the time, and raising capital has become even more difficult,” the Tieling city government said in its budget forecast for 2013. “Some long-term problems and imbalances have accumulated in the management of the city’s finances.” It didn’t say how it planned to fund the new buildings.

Cui Xinzi runs a stall selling leather jackets at the only shopping center in the new city. Despite having bought an apartment there three years ago, she still lives in the old city and commutes.

Ms. Cui likes the idea of retiring to the new city but isn’t optimistic its population will increase. “It still needs more time, but it’s really hard to say,” she said with a sigh. “They’re building a new shopping center, so I hope so.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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