Well-Planned New Cities in China Becoming Ghost Towns

In China's Inner Mongolia, Kangbashi district offers residents "new modern" living, with tree-lined streets, shiny apartment buildings, vast parklands, restaurants and even a motor racing track. But seven years after construction workers broke ground on the arid plateau, most of the apartments appear empty and the wide streets are almost deserted -- earning Kangbashi the tag of "ghost city".

The new section of Ordos city on the edge of the Gobi desert was designed to accommodate about 300,000 people but residents say fewer than one-tenth of that number live in Kangbashi. Estate agents insist the number is much higher.

New districts like Kangbashi are springing up across China as the world's second-largest economy undergoes an unprecedented urbanisation process with hundreds of millions of people heading to fast-growing metropolitan areas.

Ordos is part of a nationwide building boom that has been fuelled by a massive credit binge, raising fears of a real estate bubble and a potential explosion in bad debts, especially among local government investment vehicles.

In the northern port city of Tianjin, the government is building an "eco city" covering 30 square kilometres (11.6 square miles) of non-arable salt pans and former fishing villages that can accommodate 350,000 people.

Near the southwestern city of Kunming, authorities started developing a new district for nearly one million people in 2003 but the area is reportedly still largely empty.

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"These sorts of towns raise the question -- does the government have some amazing vision for filling these cities... or are they just great white elephants that are wasting public funds?" Rupert Hoogewerf, founder and compiler of the Hurun rich list, told AFP.

Public servant Qiao Xiufeng, who moved to Kangbashi three years ago after the Ordos government relocated its departments to the new district, says she likes the open space and relaxed lifestyle of the sparsely populated town.

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"Everything is really good," Qiao told AFP as she strolled along a street lined with near-empty restaurants and shops selling cakes and bridal outfits.

"Life is easy and comfortable."

Kangbashi -- located 30 kilometres (20 miles) from Ordos' main district of Dongsheng -- boasts a potato-shaped history museum, a tilted library, expansive parks decorated with modern sculptures, cinemas, schools and a university.

"This is a gold mine -- it is a place to make money," said Zhou Yuanhua, who moved from the eastern province of Jiangxi a few years ago to open one of the few supermarkets in the new district.

"A small population means it is very easy to make money," Zhou told AFP outside his store, pointing out the lack of competition along the street where a handful of local residents had gathered to chat after work.

Scores of cranes and half-finished high-rise concrete buildings are visible across the district and, despite the vast number of apparently vacant flats, more land is being cleared for construction.

In nearby Yijinghuoluoqi, another district getting a facelift, taxi driver Liu Zhiqing said the Ordos government paid him 300,000 yuan ($46,170) in compensation when his 200-square-metre (2,153-square-feet) house was knocked down to make way for a forest of high-rise apartment buildings.

Liu said he and his family will also receive two apartments when the construction is finished.

Resource-rich Ordos, whose population of 1.5 million has the highest GDP per capita in China at more than $20,500, built Kangbashi to cope with the city's growing population.

Another reason, according to Bank of America-Merrill Lynch economist Lu Ting, is to encourage wealthy mining bosses to invest their fortunes made from coal, gas and rare earths in the local area rather than Beijing or Shanghai.

"Its strategy is to invest massively in local infrastructure and urban expansion to attract coal bosses to buy local properties," Lu said in a report after visiting Kangbashi last year.

"In this regard, Ordos has been successful -- the old town has expanded three-fold over the past decade and homes in the new town are all sold out."

Real estate agents told AFP that 200,000 people currently live in Kangbashi and they forecast the population would more than double to 500,000 next year. But residents scoffed at the idea that more than 30,000 people lived there.

Despite the plethora of empty apartments in Kangbashi, Lu said there was "little risk of financial crisis" due to low debt levels and high returns from coal mining, the key driver of the local economy.

"Ordos is extremely unique in that it boasts rich resources and has the highest GDP per capita in China," said Lu, noting the region's huge natural resources and thriving cashmere industry helped the local economy expand by 19.2 percent last year -- nearly twice the national growth rate.

For school teacher-turned-restaurant owner He Mei, the move to Kangbashi two years ago from another town in Inner Mongolia has been a profitable one.

"The environment is nice and at the moment business is good. More and more people are coming," said He, standing outside her empty restaurant.

The restaurant is busier during the day, she said, when government employees who commute from Dongsheng to Kangbashi every day stop for lunch.

"Before (in our hometown) we used to make 3,000 yuan a month but now we make more than 10,000 yuan -- I'm very satisfied."

Source-AFP