Ghost cities are sprawled across China. Nikkei Asia said that Yunnan alone has more than 80 ghost towns.

These new cities are typically created in existing towns in rural areas.

They are designed for populations of hundreds of thousands. The mass construction projects can include towering high-rise condominiums, massive shopping malls, and replicas of cities in Europe and elsewhere. 

Ghost Cities in China have it all, such as lakes, parks, city squares, street lights, and sprawling road networks. But it is missing one crucial element — the people.

Some Ghost Cities were demolished.

The second phase of Liyang New City had been suspended for seven years. It was demolished by blasting on August 27, 2021, and fifteen unfinished buildings were blown up within 45 seconds.

Taiwan News said that the value of these structures is around 1 billion yuan ($154 million). The housing project began in 2011, and it saw frequent interruptions even after ownership changed. Finally, it was destroyed.

However, this isn’t the first time China has seen simultaneous demolitions of this size. On August 4, 2017, 36 high-rise buildings in Chenzhai were demolished by centralized blasting, consuming 2.5 tons of explosives. This was also the most extensive blasting in the history of Zhengzhou.

There are two government motives for creating ghost cities in China.

First, Chinese local governments used real estate development to boost the local economy.

According to a research by OpenEdition Journals published in 2017, the residential real estate sector has replaced the manufacturing industry, becoming the driving force of the local economies.

Harvard Professor of Public Policy and Economics Kenneth Rogoff and IMF Economist Yuanchen Yang published research in 2020. The report estimated that the real estate sector accounts for around 29% of China’s gross domestic product. 

Therefore, Residential and commercial land expands quicker than housing demand.

According to Nikkei Asia, many wealthy people own numerous homes in cities, and the apparent rate of homeownership is over 90%. It was higher than in the most developed countries, and the vacancy rate is higher than in Japan or the United States, at around 20%. Supply and demand are unbalanced.

As a result, it led to overbuilding. Then the ghost city phenomenon occurred.

Second, a few ghost cities have succeeded in becoming prosperous cities. So the government has expectations the rest of the cities will be the same. 

Shenzhen, borders Hong Kong. It is now China’s fourth-largest city, but it used to be a ghost city before.

Another city is the Pudong new area of Shanghai. It used to be a swamp across the river from the central city. 

The cited Dinny McMahon, author of China’s Great Wall of Debt. He said that these examples were outliers, not the rule.

McMahon added that for a ghost city to become an inhabited city, it must be to create jobs and industrial growth.

Another example is Zhengdong in Zhengzhou, the capital of Central China’s Henan Province. McMahon said that the government offered tens of millions of dollars in incentives to Foxconn, the Taiwanese creator of Apple’s iPhones. So the firm decided to construct a facility in Zhengdong.

McMahon said, “Most Chinese ghost cities don’t have the resources — or they don’t have the pull — of a major city like Zhengzhou does.” 

The needs of the Chinese people also contributed to the creation of more and more ghost cities.

First, the Chinese prefer to invest in real estate rather than the stock market.

According to The InterestingEngineering, In China, only about 7% of the population owns stocks, whereas 90% of the population owns the home. Compared, 52 % of the people in the United States own stocks, while around 65 percent own property.

Although ghost cities might be largely empty, the apartments were mainly sold. Many people bought the home as an investment, but they didn’t intend to live there. Thus supply far surpassed demand.

Dinny McMahon said, “And this speaks to the underlying problem of the Chinese economy … the importance of the property market and the extent to which it’s actually a bubble propping up prices.”

Second, Parents buy houses, so their children have the best place to study. It makes ghost towns grow up more and more.

In the Inner Mongolian region, the Kangbashi district of the prefecture-level city of Ordos was created to house 300,000 people. But for many years, the population was only around 2,000.

To attract citizens to the area, the local government moved many of its offices and jobs to Kangbashi. A university opened in 2008, and then the best school in Ordos City was relocated to the region in 2010.

 Under China’s hukou ( or residency permit) system, parents need to own a home in that district to send their children to their desired school. So existing apartments have all been sold out. Local agents intended to begin construction on ten new residential projects last year.

Real estate companies have borrowed excessively to develop this field, and it has not only created ghost cities but also led to a debt crisis.

Nikkei Asia said that China’s nominal GDP is only 70% of that of the United States. However, China’s real estate prices are 2.6 times greater than in the United States.

In addition, the residential real estate sector has become the driving force of growth. The Chinese government boosts lending to grow this sector.

Real estate companies have depended on debt for development for the two reasons above.

According to data compiled by Founder Securities, by the end of June 2020, property-related loans accounted for 38.9% at China Construction Bank Corp and 38.5% of total outstanding loans at Bank of China. 

Evergrande is an example of a Chinese property developer that grows based on debt. 

Evergrande would borrow to buy land. After that, the firm gets homeowners to buy off the plans. Then Evergrande borrows again to start another project. Behind the rapid growth, a significant interest bill was mounting. By July 2020, its liabilities had grown to 86 percent of its total assets. Evergrande was increasingly reliant on high-interest short-term loans. 

Dinny McMahon said, “Private property developers will build housing in places that end up being ghost cities because they believe in the ability of the Chinese property market to only go up and up and up.”

But In August 2020, China regulators outlined caps for debt for property developers. 

Therefore, Evergrande fell short of cash. In September 2021, the company missed payment on an $83.5 million bond. Since then, suspicion has been rife that it is due to a $300 billion debt.

For real estate investors in China, the most significant risk is the excessive borrowing of developers.

The debt crisis in China’s property sector has sparked a record wave of defaults. 

Evergrande is one of the top two real estate companies in China, and it recently ranked at 122nd position among the world’s leading Fortune 500 companies. Evergrande has to pay over $300 billion in debt.

Then, the debt crisis is spreading to high-rated issuers. Goldman Sachs raised the default rate of high-yield Chinese real estate bonds in 2022 from 19% to 31.6%.

Greenland Holdings has long been seen as a resilient and stable developer. But last week, it surprised all investors after asking to extend its bonds.

Earlier this month, China’s fourth-largest developer, Sunac, failed to pay interest on a dollar bond before the grace period ended. 

According to Bloomberg, five developers in the top 50 largest firms in China have come to the alarm.


The luxury builder is China’s 20th-largest developer. This year, Shimao, by contracted sales, has $2.1 billion in bond payments to make it through the rest of 2022, including a $1 billion note due on July 3.


Logan is China’s 22nd-largest builder. Logan has a 1 billion dollar note payment planned for the rest of the year, including August’s almost 280 million dollar bond. 

Ronshine China

The firm is China’s 23rd largest builder. This year, Ronshine has almost 940 million dollars in bond payments, most of which is a nearly 690 million dollar note due in October.


Agile, China’s 28th largest construction company, has 1.16 billion dollars in bond obligations due through years-end, including 600 million dollars in principal on August notes and a 225 million dollars security owing in July. As a result, its stock touched a 13-year low earlier this month.

Powerlong Real Estate

Powerlong is ranked 43rd in contracted house sales this year. It owes more than 690 million dollars in onshore and offshore bond payments through the end of the year, including a 200 million dollars note due on July 25. In addition, last month, a Powerlong unit announced that it would not redeem an almost 75 million dollars perpetual note.

Firms and individuals’ mistaken faith is that the government will save them in any case. Foreign investors have also flocked to China’s corporate bonds, despite the country’s low credit rating. When the debt explodes, the pain will spread across the globe.

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