China’s urbanization may produce ghost towns

Urbanization may produce ghost towns

By Wang Yong | August 20, 2013, Tuesday |  PRINT EDITION

AS China expands many of its suburbs into new cities to boost economic growth, the American story of a shift from suburban prosperity to suburban poverty in about half a century warrants our attention.

In today’s lead opinion article, we read this: “When the suburban boom took off in the US in the 1950s, many middle class families moved to those communities as a way to escape the country’s increasingly crowded, dirty and financially strapped cities. But now, as many American cities are gradually being revitalized and the suburbs have expanded outward, some of these former refuges for the middle class are becoming more and more like the places that early suburbanites were trying to escape.”In other words, many middle-class Americans escaping the urban crowds in the 1950s did not foresee a suburban fall from prosperity half a century later, as the urban poor would pour in during financial crises and the cities would be resurrected.

There’s a “go-suburban” craze in today’s China, too. Despite many dissimilarities, there’s one thing in common between America and China: suburbs, if not well planned, will resurrect all the urban ills.

People’s Daily warned yesterday that many cities in China have been locked in a race to build new cities on the basis of suburbs. Some are grabbing precious arable land.

The newspaper cited a recent study by the National Development and Reform Commission (NDRC) saying that out of 12 provinces surveyed, all the capital cities plan to build new urban districts. For example, Shenyang, capital city of Liaoning Province, plans to build 13 new urban districts, while Wuhan, capital city of Hubei Province, proposes to create 11 new urban districts. Of the 305 smaller cities surveyed, 200 have decided to do likewise. China has more than 600 cities.

“You can certainly build new cities, but in practice many of these cities are artificially created without regard to the natural law of development,” People’s Daily quoted NDRC official Li Tie as saying. “In many cases, while they cover an area only half as big as that of the old city, planned new urban districts have to accommodate the same amount of population as the old city.”

To be sure, when middle-class Americans moved to the suburbs in the 1950s, there was a realistic demand. In China, demand to urbanize the suburbs has often been hyped, which is demonstrated by the birth of uninhabited ghost towns. It may take less than half a century to see the fall from “prosperity” of hastily urbanized suburbs in many parts of China.

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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 (www.heroinnovator.com), 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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