
‘China’s Manhattan’ Borrowed Heavily, but the People Have Yet to Arrive - ilamont
https://www.nytimes.com/2019/04/10/business/china-economy-debt-tianjin.html
======
chrischen
I’m not a big fan of centrally planned cities, but this author has it out for
China. The original articles about “China’a ghost town” were also not true. A
narrative was invented to sell an interesting story about some failure of
China... this article is a non-story, and just an attempt to revive a topic
parroted since the last decade.

Many of China’s urban districts were centrally planned and sat empty before
they were eventually filled, including the famous Pudong district of Shanghai.
[https://www.google.com/amp/s/www.forbes.com/sites/wadeshepar...](https://www.google.com/amp/s/www.forbes.com/sites/wadeshepard/2018/03/19/ghost-
towns-or-boomtowns-what-new-cities-really-become/amp/)

"If you look around, you will think this is a normal city and just assume this
is the way it always was, not knowing that 10 years ago people were calling it
a ghost city, 20 years ago it was just apartments and villages."
[https://www.google.com/amp/amp.abc.net.au/article/9912186](https://www.google.com/amp/amp.abc.net.au/article/9912186)

Short story is some developments work, others don’t, but investing in real
estate is one way for people to park money so people still end up buying up
all the properties.

~~~
ilamont
Quoting from Caixing Global, a PRC-based financial news source:

 _China Investment Network, a business newspaper in Beijing, released a "ghost
town index" to determine which cities were, well, the most ghostly. The
newspaper devised its index using a government standard that says cities
should have 10,000 people per square kilometer. The editors at China
Investment Network determined that if a city's ratio of people to area was 0.5
– that is, it was half full – then it is a ghost town. To take the example a
step further, if a city had a ratio of .10, then it had one-tenth the
population the government thought it deserved. Based on this approach, at
least 50 Chinese cities fit the description of "ghost town."_ (1)

This report is from 2014, so maybe some of those cities were eventually filled
... but surely not all of them.

1\. [https://www.caixinglobal.com/2014-10-17/graphics-ghost-
towns...](https://www.caixinglobal.com/2014-10-17/graphics-ghost-
towns-101012983.html)

~~~
ChuckMcM
I think both of these positions (its a fake narrative, and "ghost towns
abound") have elements of truth. What it is, is impossible to compare.

Given the structure of western governments, and by that I mean nominally
liberal democracies, a policy of funding the development of a city prior to
their being any economic reason for the city to exist, is not possible.
Western forms of government wait for economic pockets to develop, then tax
them, and then with the tax revenue improve them to increase their economic
potential. Without a tax base there is no mechanism for funding development.

China on the other hand, has a central government with a fiscal policy of
borrowing from the central bank to fund the _creation_ of economic zones prior
to there being any economic activity. Once that zone exists, it does not
enhance the existing zones nearby thus as they grow there is incentive to move
their activity to "nearby" zones which are under utilized. This takes time of
course and between the time of construction and mass migration, well the zone
is under utilized or a "ghost" town.

When China guesses wrong, and the zone never supports additional economic
activity, then its a complete write-off. Something a western government could
not survive (they would be booted out of office for it) but one that a central
government can (and does) survive.

The bottom line is that it is easy to write stories that amaze people who live
in one system by playing on the differences of the other system.

~~~
Retric
A building sitting empty for 5 years is a massive cost even if it’s later
filled. This goes beyond time value of money and into the limited lifespan of
infrastructure. Ghost cities are a problem with an easy and obvious solution,
slow down the rate of construction to more closely match population movement.

~~~
sandworm101
>> A building sitting empty for 5 years is a massive cost even if it’s later
filled.

Don't look too closely at NYC, Vancouver, london, or any of the other hot
markets. Whether for historical preservation scams or investment trickery, it
is not unusual for a building to sit empty for many years. Given the effort
that it takes to oust tenants, and the length of time necessary for
zoning/planning, many owners would rather a building sit empty for years
pending redevelopment rather than the hassle of filling it.

Google "Calgary new horizons mall". From the owner/developer's perspective
that mall is technically full and, at least for them, profitable.

~~~
Retric
US national vacancy rate is ~6.9% and NYC sit's well below that at under 4%.
Much like the unemployment rate these things don't hit 0% for various reasons.
But, that's very different from building a 11th building when your first 10
are all at 90% vacancy.

~~~
sandworm101
"Vacancy" is something above a building being empty. Vacancy is a building
that has space available that hasn't been filled. It does not cover buildings
deliberately left empty by owners. A building waiting years to be demolished
and replaced isn't vacant, nor a condo kept only as an investment and never
lived in.

That mall in Calgary isn't vacant either. Each store/stall is technically
occupied by its owner. There just aren't any flesh and blood people in the
mall.

~~~
Retric
NYC has ~60,000 buildings. Less than 1% of them are deliberately left empty by
their owners. It’s a very different situation in a city which can make use of
that space as demonstrated by the low vacancy rate.

That mall does have people shopping in it. In terms of retail square footage
it’s underutilized but a long way from empty. Good or bad investment they are
not building 3 of them next to each other while the first is far from full.

Really, you have some edge cases with people trying to time the market, deal
with zoning or lawsuits etc. But, that’s different from seeing 6 empty
apartment buildings and saying let’s build another one.

------
gzu
I’ve been browsing around satellite view of Chinese cities for a while now.
There are hundreds of thousands of high rise apartment complexes without
visible activity around them. Literally copy paste buildings surrounded by
empty fields. How does this bode for China’s economy? They are all over the
place.

~~~
vkou
China has moved 300 million people out of rural poverty, into nearly-first
world lifestyles in the past 30 years.

At that rate of development, it would be a failure of planning to not have
millions of empty units.

~~~
ng12
It's a failure of planning if those new units fall into disrepair before being
rented.

~~~
crazygringo
Nowhere does it say the buildings are falling into disrepair.

On the other hand, if you would otherwise have high unemployment right now
that can productively be channeled into construction that is less expensive to
achieve, while you expect a massive influx of people in 15 years with a tight
labor market... then it makes perfect economic sense to build out a decade in
advance.

I'm not saying this is the case, but there are plenty of reasons why building
in advance can make sense.

~~~
ng12
There's lot of videos of urban explorers who travel China looking for these
places, and many of them are in complete disrepair. Even if you don't trust
the CNN/NYT narrative, those are harder to discount.

[https://www.youtube.com/watch?v=E8TbOPzpeKc](https://www.youtube.com/watch?v=E8TbOPzpeKc)

[https://www.youtube.com/watch?v=4wuyRxc99h8](https://www.youtube.com/watch?v=4wuyRxc99h8)

[https://www.youtube.com/watch?v=lL9qfucWqu0](https://www.youtube.com/watch?v=lL9qfucWqu0)

~~~
kkarakk
haha that last video has a guy cycling through an indoor marble floor mall and
a dog just casually wander in.

------
seppin
Can we stop using Manhattan as shorthand for a giant city center? NYC is a
cultural world capital, as well as economic hub.

Good luck trying to actually build another one of those. There's a reason why
there's only 3-4 in the world and they haven't changed in centuries.

~~~
jimmaswell
What do you consider the other ones?

And I'm guessing the reason is valuable geographical position (in NYC's case
it's a major shipping hub for both the Atlantic and the Hudson River) and the
network effect. But valuable geography can change over time, and who knows how
long the network effect of cities is going to last when we finally start
making more jobs remote instead of wasting space and other resources on
offices and people are free to live wherever they want.

~~~
saalweachter
It was the Erie Canal that really made New York -- it allowed shipping into
the Great Lakes.

------
heurist
Garden cities have never worked and never will work. I'm sure they have their
reasons for building these now, but they will be big liabilities for China in
30 years, just like they have been in the US. (Speaking as a fan of Jane
Jacobs and someone who works with fine-grained microeconomic data)

------
ucosty
Just in case you've reached your article limit
[http://archive.is/xDydO](http://archive.is/xDydO)

------
yardie
Whenever western media tries and portray China as being ridiculous I'm
reminded of the 80s or 90s magazine article showing empty highways being built
around Beijing when 99% of the population didn't drive a car.

I'm way less worried about brand new empty cities. They fill up eventually.
I'd be worried more about people abandoning populated cities. A problem the US
is facing now.

~~~
itake
What cities are being abandoned in the US?

~~~
britch
Small/mid size cities in the midwest like Cincinnati, Pittsburgh, Cleveland,
Detroit, and Chicago (though to a lesser extent).

Other "cities" are growing in the sun-belt.

It's complicated because many of the up-and-coming cities are being built with
cars in mind and are not very dense. They are "cities" but they are not urban.

~~~
adventured
Saying those cities are being abandoned, is more than a stretch.

Cincinnati's population has expanded since 2010.

Pittsburgh and Cleveland have both had stable population numbers the last
decade. The declines have been very small over that time. As with Cincinnati
they did suffer drops for a couple of decades in the past. They're not being
abandoned.

Detroit is losing 0.004% per year at this point. There's a reasonable chance
the worst is over for Detroit.

Chicago is not being abandoned at all, that's particularly incorrect. Their
population has been stable for 30 years, it has seen a small 70k decline (less
than 3% decline over three decades doesn't get you in the lesser extent
abandoned category at all).

~~~
britch
I take your point, abandoned is too far.

As I understand it: it's a bad sign if a city is not growing. If a city's
population is steady, but the countries population is increasing that means
people are leaving the city. It at least indicates a lack of growth which can
be a marker of a weak economy.

Abandoned is too far, but I think it's true that many of these cities are in
some form of decline from their historical peak.

~~~
aglavine
"it's a bad sign if a city is not growing" is something taken as true by many
people, but I think it is absolutely arbitrary. Maybe the opposite is true for
some cities. Other metrics as land value (San Francisco is the obvious
example) and media income must be taken into account.

I guess there are people out there that thinks that cities have a healthy
population limit and growing beyond that can harm environment around.

------
narrator
Ghost towns are only scary if there is a credit collapse and no one can buy
them because of the unavailability of bank financing. The central government
in China will always make sure there's bank financing because it controls the
printing of money.

------
jlarocco
That's interesting, but I don't know what I'm supposed to take away from it.
The article is trying to spin it as negative, but they never get to the point.

In the United States we'd never preemptively build up a city like this, so
obviously China is different, but I don't see what the problem is. They have
lots of interview with people saying buildings are empty, but nothing official
saying it's a problem or that the Chinese government is worried about it. What
were the expectations for filling the buildings? Are they behind schedule?

And sure, $4.5-10 trillion in debt sounds bad, but it's less than half of ours
in the United States.

------
duxup
My understanding is that the amount of local government debt is pretty high
generally in China, but the central government is basically the one backing it
all to some extent correct?

So the question is what does the central government choose to do about it?

~~~
neffy
It's mostly in the banking system. They introduced loan securitization about 5
years ago, and have been walking down the same path the US went in the 90's
and 00's.

It will be indeed be interesting to see how they handle a banking system
implosion.

------
chvid
On the coast, one hour from Beijing. This is obviously an extremely attractive
area. Give it a couple of years and it will be busy and wealthy.

------
kpU8efre7r
Are there any healthy, major, "planned" cities? It seems to me that the vast
majority of successful healthy cities just spring up naturally at a time and
place that makes economic sense. Humans tend to gather and live in groups that
are either near a resource or in a location that serves as a hub between
resources.

~~~
yhoneycomb
irvine, ca

~~~
kpU8efre7r
I didn't know that, thanks.

Reading up on it though, it seems like there was already a lot of growth in
the region and development happened over the course of decades.

------
umeshunni
Meanwhile, in major American cities, people sleep on the streets and even
middle class people can't afford housing.

------
jedberg
It sounds like the construction might have been a big jobs program.

------
aglavine
Why not to move government? Move China government to one of these planned
cities? That seems to work when doing well.

------
taobility
Western economists have predict China economy would collapse in two decades
ago and repeated every year, and their faces been slapped hardly every time.
If Yujiapu is called China's Manhattan, there are dozens of bigger Manhattan
in China right now and they are doing really good.

