Will ghost cities haunt China? (4)

Question of ghost cities

The ghost city phenomenon has attracted wide attention at home and abroad, with some foreign media speculating that these cities have become a symbol of China's economy downturn.

The best-known ghost city might be Ordos. It used to be one of the richest cities in the mainland and was nicknamed "China's Dubai," but its economy is now in a free fall.

The rapid growth of the city's GDP was created by the coal-driven industry over the past decade. A large part of the wealth it accumulated through the coal industry was then funneled into the real estate sector. Money gained from property investment went back into the coal industry or was re-invested into more real estate, forming a vicious circle.

However, the coal industry soon suffered from a slide in demand as well as increasing competition from cheaper imported coal. As a result, when the local economy cooled, the real estate bubble burst.

A similar story also happened in Hebi, Henan province, where an initial boom due to coal led to a collapse after resources dried up in the 1990s. The local government then started to build a brand new city 40 kilometers away in 1992. But a media report this May called it an "empty city" as few people and industries were found in the new town, even after 20 years of development.

Learning from Ordos, many other local governments are now trying hard to promote real industries in new development zones rather than solely depending on a real estate-driven economy to keep people around.

As early as 2009, the Changzhou government claimed they were launching a series of preferential policies to attract major new industries including equipment manufacturing, new energy, new materials, electronic information, biotech and medicine to come to the area to enhance their competitiveness for talents.

"With the high-speed train having formed a fast channel in the Yangtze River Delta area and tight relations among cities in the area, I believe the economy in Changzhou will continue to boom in the future," said Lu.

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