Ghost cities springing up near China’s first-tier cities

Ghost cities springing up near China’s first-tier cities

Kao Hang and Staff Reporter

2013-10-22

China’s property prices have continued to boom, but the phenomenon of the so-called ghost cities, a result of high vacancy rates, has been worsening. In the past, the ghost cities were mainly third-tier or fourth-tier cities, but recently first-tier cities have also seen the rise of this phenomenon, with Shenzhen’s neighboring Daya Bay area going into an apparent state of hibernation, ringing alarm bells in relation to the abnormal development of the mainland property market, our sister paper Want Daily reports.Daya Bay has lots of new high-rise buildings which see few residents moving in, in sharp contrast to the lively city of Shenzhen. The city saw an intensive period of construction in 2010, attracting lots of Shenzhen residents to speculate on the property market there, but now the number of houses there has almost matched the city’s population. Land earmarked for construction projects in Daya Bay will grow sevenfold by 2020, with population expected to grow sixfold, according the local government. The high vacancy rate, however, highlights the risk of property bubbles.

The previous “ghost cities” were mostly located in Inner Mongolia and the northeast, but Daya Bay’s case illustrates that the phenomenon of ghost towns can affect the neighboring districts of first-tier cities, which is a bad omen for the property market.

Guiyang, Guizhou province’s capital city, also saw a high vacancy rate in new buildings after heavy speculation in the property market there last year, triggering worries over creating new ghost towns, according to a recent Xinhua report.

Guiyang’s property market has been enjoying a boom, attracting investments from mine owners and coal suppliers from other parts of China, with some new projects claiming to be able to house 500,000 residents, Xinhua said.

Although Guiyang’s property market didn’t see any sharp fall in prices, part of the city runs the risk of becoming a ghost town, with lots of the new buildings towering at 40 stories but equipped with only three elevators that take at least half an hour during peak office hours.

In the past, Fengdu was the only celebrated “ghost city” in China. Now, as China accelerates its urbanization efforts, 12 new ghost cities have been created with few inhabitants, including four in Inner Mongolia and even two in the prosperous Jiangsu province, as Want Daily reported in mid-July.

According to China’s Terminology Committee of the National Science and Technology, a ghost city is a geographical term referring to an abandoned city with depleted resources. Now, however, the definition has been expanded to describe any city with a high vacancy rate, few inhabitants or that is dark at night.

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 (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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