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China's Ghost Cities

 

One remarkable piece of economic news barely rated a mention this week, China surpassed the United States as the world's leading manufacturer. It is hard to grasp the magnitude and speed of China's economic transformation, however, things may not be as rosy as they seem. It's estimated that ten new cities are being built every year - a sign of future growth or just another bubble waiting to burst? Adrian Brown reports.

 

REPORTER:  Adrian Brown

 

 

These are satellite images of one of China's newest cities, a sprawling urban centre complete with public buildings, hotels and apartment blocks and this is the view from the ground. 11am on a Thursday morning and Zhengzhou's CBD is deserted, shops unoccupied, hundreds of apartments uninhabited.

 

All the shops in this mall are empty, not that that worries the government, because they're simply more concerned with maintaining economic growth and one way of achieving that is building cities like this one. The big question, though, is how much longer all these shops and properties can remain vacant?

 

But all around me, the construction of this metropolis goes on and here in the southern city of Dongguan, another example. This is the South China Mall - toy shop owner, Tian Yu Gao, is doing his best to keep his spirits up but is already after 2pm and he's yet to serve a single customer.

 

REPORTER:  Do you get very lonely in here?

 

TIAN YU GAO, TOY SHOP OWNER (Translation):  It is a bit boring looking after the shop here – there are too few customers.

 

But then, slow days are what he's used to.

 

REPORTER:  When was the last time you sold something?

 

TIAN YU GAO (Translation):  Yesterday – I sold one toy.  Once it took four or five days

 

His shop is a rare sight in the Great Mall. The majority of this vast shopping centre remains as empty as it did when it opened six years ago. Back then, developers boasted that it would become the world's biggest shopping mall, with plans for 1500 shops that would attract 70,000 shoppers a day - the mall was heralded by the New York Times as proof of China's astonishing new consumer culture. But today, the not so great Mall of China, as it is known, is a glaring indication that this consumer culture has been grossly overestimated.

 

A gondola ride through the mall lasts 20 minutes and takes you past an unsettling and almost unending vista of emptiness. For the few workers kept on to maintain this vast and now eerie complex, it is boring and lonely work and already, there are signs of creeping neglect. Even filming an empty shopping mall is a sensitive issue in China - police arrived and ordered us out but the mall is so vast, it was easy to slip back in unnoticed and just like in the city of Zhengzhou, building goes on.

 

Despite repeated requests, the mall's management refuse to talk to Dateline, but Tian Yu Gao wonders if the mall may become another victim of the government's obsession with big infrastructure projects.

 

REPORTER: Do you think that the South China Mall will be around in five years time?

 

TIAN YU GAO (Translation):  It is hard to tell, we’ll have to see what happens next year. My feeling is, they said Level Two was all leased out, if it is true and the customers come, there may be a chance, otherwise it’s hopeless.

 

We're on our way to another new city, Daya Bay, a three-hour drive from the not so great mall. As you enter the city, the touts pounce and a well-rehearsed sales pitch begins.

 

MAN (Translation):   Inspecting properties? Two minutes from here.  Have you seen any?

 

WOMAN (Translation):   In May we will have another site for sale in the city centre.

 

Daya Bay is a city carved out of agricultural land and designed for 12 million people. That ambitious forecast, though, appears to be wildly out of kilter with reality because, according to even China's State-controlled media, 70% of these new units remain unoccupied.

 

REPORTER: Is China experiencing a property bubble?

 

GILLEM TULLOCH, FORENSIC ASIA:  Absolutely. A property bubble like which I don't think we've ever seen.

 

REPORTER: Bigger than the one in the United States?

 

GILLEM TULLOCH:  Yes, I think it will make the United States pale in comparison. It is said that there are 64 million empty apartments in China.

 

REPORTER:  64 million?

 

GILLEM TULLOCH:   64 million.

 

Gillem Tulloch is a Hong Kong-based analyst who has been investigating China's residential and commercial real estate market. He maintains that there's massive oversupply and over valuation of properties right across China.

 

GILLEM TULLOCH:  It's essentially the modern equivalent of building pyramids. It doesn't really add to the betterment of lives, but it adds to the growth of GDP.

 

And maintaining economic growth is the government's number one priority.

 

GILLEM TULLOCH:  It's basically happening because China is a command economy and the Chinese Government can dictate where the resources are spent.

 

REPORTER:  And so, if the order goes out to build, local governments build?

 

GILLEM TULLOCH:  That's right. If the central government a GDP target, they have to meet the target and the easiest way to do it is just to build.

 

REPORTER:  Isn't all this construction a good thing? It's creating jobs and getting the economy moving? That's a good thing?

 

GILLEM TULLOCH:  People forget that it is not the quantity of GDP that matters but the quality and essentially, they're building things for where there's no demand and so they're creating a large problem for the future.

 

Prices for units here range from $70,000 to $100,000 - a fortune in a country where the average worker's annual wage is around $6,000. But units here are selling - the vast majority as investment propers whose owners live in other parts of China. The agent bundled this prospective buyer away before we could talk to her.

 

REPORTER:  You've come today - you've had a look around - what was your impression?

 

GILLEM TULLOCH:  It's pretty alarming. It's incredibly interesting - I don’t think that there are many places in the word like this. I mean, we've seen empty apartments, empty condominium projects.

 

REPORTER: Do you imagine that any of these apartments will be occupied in five years?

 

GILLEM TULLOCH:  I think that the occupancy rate in five years will still be around 25%, but if they bring the prices down to close to zero, some people will move in.

 

REPORTER:  Well here’s the thing - you got millions of Chinese who, like people anywhere else, they dream of owning a home, and they can't.

 

GILLEM TULLOCH:  That's right - these are far too expensive for them.

 

Millions of expensive empty homes and millions of Chinese who can't afford to live in them. George Jiao is one of them - his rented home lies at the end of a narrow alley in the capital of Beijing. He knows that one day soon, all this will be demolished. In its place, more upmarket condominiums like the ones that tower above his neighbourhood - a daily reminder of his own frustrated efforts to buy a home. He and his wife live in a single room off a small courtyard.

 

GEORGE JIAO (Translation):  10 households, two people per household.

 

There's a communal sink and toilet - there is no place for children here, which is why their daughter remains with his parents in Sichuan - they see her once a year.

 

GEORGE JIAO (Translation):  It’s no good, we have been working in Beijing for years, we want to but a property but prices are too high – honestly, we just can’t afford to buy.  People speculating in the market have pushed prices too high – we need the government to intervene.

 

George and his wife both work six days a week in a beauty parlour, their combined salaries are around $900 a month, of which a quarter goes on rent. He says owning a home should not be a dream but a basic human right.

 

GEORGE JIAO (Translation):  If the government considered us and provided budget housing as part of our human rights - that would be the right thing to do. I am not optimistic now, I don’t like what the government is doing.

 

Zhao Gang also knows about the difficulties of home ownership, he shares a two bedroom apartment with nine other people, including a married couple. Ironically, he's a government property developer. Three men sleep in this room with Mr Zhao sharing a bed - none of which is exceptional here in China, until you remember all those millions of homes that are empty. Something he didn't want to talk about.

 

ZHAO GANG (Translation):  I can’t tell you my views because I work in the property sector, I know a lot about it and if I talk about it I will get into trouble.

 

But trouble is looming if the lack of affordable housing continues, warns this prominent sociologist.

 

PROFESSOR ZHOU XIAO SHENG, SOCIOLOGIST, PEOPLE’S UNIVERSITY, BEIJING (Translation):  What worries me most is polarisation, according to Deng Xiaoping, if it leads to polarisation, then our reform has failed. Right now, China is polarised – it continues to be polarised – that is a big worry.

 

He fears a deepening of social divisions.

 

PROFESSOR ZHOU XIAO SHENG (Translation):  It is clear that polarisation will cause conflicts in society – poor people may come out and start a revolution.

 

A two-hour drive from Beijing, I'm being shown a duplex with an asking price of almost $300,000. It's a development called Green Island, though it is anything but outside. From the window, a smoggy view of another old neighbourhood developers have earmarked for demolition.

 

REPORTER:  So this will go next?

 

WOMAN:  Yes.

 

An unlikely prediction, considering buyers are required to pay 50% of the asking price upfront and the balance within three years. Such stringent terms, which keeps so many workers out of the market, are also the reason why China has yet to experience a US-style credit implosion.

 

AGENT (Translation): This is a good place for you high-income earners, it’s quite and the environment is good.

 

REPORTER:  Who will come to live here?

 

WOMAN:  People who can afford a house in Beijing.

 

REPORTER: But they haven't come yet? 

 

WOMAN:  No.

 

And only months after the first tenants moved in here, the For Sale signs and For Rent signs are already appearing. China's authorities are trying to cool their overheated economy with a series of financial controls. But there are dangers.

 

GILLEM TULLOCH:  It can't stay this way because we're in the upswing of a bubble, and when the bubble bursts, it will impoverish vast numbers of people.

 

REPORTER:  Will there be anger and disgruntlement?

 

GILLEM TULLOCH:  Yes, it increases the chances that you get some form of social unrest.

 

MARK DAVIS:  Adrian Brown reporting there. And there are more satellite photos from the report showing the scale of those cities and their empty streets on our website.

 

Reporter/Camera

ADRIAN BROWN

 

Producer

VICTORIA STROBL

 

Editors

wayne love

NICK O’BRIEN

CATHERINE WHELAN

 

Translation/Subtitling

KONGWO TANG

 

Original Music composed by

VICKI HANSEN

 

 

20th March 2011

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