China’s most famous ghost city, Ordos in inner-Mongolia, has regularly been cited as a prime example of China’s unsustainable construction-led economy.
In 2009, AlJazeera posted an explosive video showcasing Ordos’ ghost apartments and frenetic pace of construction, which exemplified the “build it and they will come” approach that has underpinned the Chinese economy. AlJazeera provided a follow-up in 2011, which was equally revealing.
Then Business Insider posted a slideshow of China’s empty cities, headlined by Ordos.
And late last year, a video from NTD Television showed how Ordos’ home prices were crashing, having fallen by almost one-third. Meanwhile, construction had finally ground to a halt, leaving many construction workers unemployed.
Now we have the above video, from the Atlantic, which follows a group of skaters through Ordos. While the skating is worth watching in itself, the bigger takeaway is that Ordos – a shiny city built to house one million residents – remains almost completely empty three years after Aljazeera’s first ground-breaking report.
These kind of malinvestments – projects that cost billions of dollars but provide next to no economic return – have the potential to become a millstone for China’s banks and economy going forward, subtracting from its growth potential.
With the real estate market accounting for around 10% of China’s GDP growth, and affecting many related industries, there also remains the concern that construction and sales could grind to a halt, crimping local government land sale receipts and dragging China into a sharp recession.
Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
