China News Roundup – x-ghost cities, over 13 million unregistered ghost children, booming mobile commerce and US bungled policy

Nextbigfuture will be bundling news that relates to China or India to make articles on these topic less frequent and easier to skip for those not interested in this topic. We will still have standalone articles on China and India where appropriate. Here we hae four topic related to China.


The dominant angle on China’s ghost cities is that four decades of overzealous growth is starting to catch up with China. China is accused of irresponsible development. The so-called ghost cities are shown as irrefutable evidence of an imminent economic meltdown. But when a Chinese “ghost city” does fill up with people and businesses it inconspicuously falls off the radar of the dominant international media. It becomes a regular city, mashed into China’s broader urban matrix — a success story that few seem interested in hearing about. We are amused by empty streets, vacant shopping malls, and barren financial districts in China, not budding new cities steadily coming to life. Ex-ghost cities are rarely news.

Standard Chartered had 2014 report on the ghost cities.

Our travels reduced our worries about ghost cities but raised our concerns about credit supply across the sector.

We believe ‘ghost’ cities are a temporary phenomenon for a country such as China that pursues continuous urbanisation. This is because of the long development cycle of new districts – typically divided into three main stages: the initial phase, the rapid growth phase and the mature phase – which normally lasts for 10-15 years.

The occupancy rate for the first few years typically tends to be low and then gradually rises during the second phase, when infrastructure and economic activity continues to improve. The occupancy rate could reach 70-90% levels when the area is fully developed and mature.

Occupancy rates were apparently higher than media reported in the four cities we visited. For example, the occupancy rate for Zhengdong New City in Zhengzhou has improved to 50-60% currently from only 20-30% several years ago. The occupancy rate for the other three ghost cities have also improved in comparison to two to three years ago.

City               Residential occupancy 2012         2014       Inventory
Dantu, Zhenjiang      10%                              40%        18-20 months
Wujin, Changzhou      20%                              50%        18-20 months
Zhengdong, Zhengzhou  30%                              60%        15-18 months
Sky City, Hangzhou    30%                              50%        15-20 months
Pudong, Shanghai                                    70-90% 

Milton Friedman criticized Pudong in 2001, but Pudong bounced back in 2005 and now has high occupancy rates.

Even in China it takes 11-20 years to get a new city or large scale new urban development area to mature.

2. The Toronto Globe and mail has a feature on the “ghost children” and adults in China who are unregistered and forced to live in the shadows because of the one child policy. Paying massive fines would enable them to get documentation and get state benefits.

China’s 2010 census estimated that there were 13 million people without official documentation. The US estimates there are 11 million undocumented illegal immigrants in the USA. China’s 13 million estimate is likely too low.

Bloomberg business discusses China’s demographic problems of an aging population.

3. China’s online retail sales grew 49.7% to RMB 2.79 trillion last year, prompting Ma Jiantang, head of the National Bureau of Statistics, to comment: “This is where our hope lies.” It was by far the most high-profile signal that China’s leaders, perhaps helped along by the successful IPO of Alibaba and many other Internet companies, recognize the potential of China’s 780 million online users. It is a sign that they embrace the benefits of the Internet which is expected to create 46 million new jobs in China by 2025, according to a July 2014 report by New York-based McKinsey and Co.

China’s retail real estate is dying, stores are closing, and the losers will be as many as 31 million traditional jobs, according to the McKinsey report.

Last year, desktop e-commerce for the US holiday period reached $53.2 billion, while mobile commerce hit $7.9 billion, representing 13% of total digital commerce and growing at an annual rate of 25% vs. the previous season. The figures are even more promising in China: mobile gross merchandise value (GMV) accounted for 45.5% of the total GMV of RMB 57.1 billion in Alibaba’s online shopping festival on “11.11”, as compared to 15% last year.

4. Ambrose Evans-Pritchard of the Telegraph UK describes the US bungling its economic diplomacy.

The US Treasury’s attempt to cripple the Asian Infrastructure Investment Bank (AIIB) before it gets off the ground is clearly intended to head off China’s ascendancy as a rival financial superpower, whatever the faux-pieties from Washington about standards of “governance”.

Such a policy is misguided at every level, evidence of what can go wrong when a lame-duck president defers to posturing amateurs in Congress on delicate matters of global geostrategy.

Washington has enraged Britain by trying to browbeat Downing Street into boycotting the project. It has forced allies and friendly countries across the Far East to make a fatal choice between the US and China that none wished to make, and has ended up losing almost everybody. Germany, France, and Italy are joining. Australia and South Korea may follow soon.

The AIIB is exactly what the world needs. China must recycle its trade surpluses and its $3.8 trillion reserves by one means or another. It can buy US Treasuries, Bunds, or Gilts, perpetuating a global bond bubble. It can make surgical investments abroad to acquire technology for its champions and pursue a narrow national interest.
Or it can recycle the money in concert with other members of the AIIB – with a start-up capital of $50bn – for sewage projects, clean energy, ports, roads, and railways in Asia, helping to plug a $700bn shortfall in infrastructure investment that the World Bank is too small to cover and which is of collective benefit to the world.
Britain recycled its surpluses in the 19th Century by building the world’s railways. America did so in the 1950s through the Marshall Plan. China must do likewise, and it is hard to see why the AIIB is considered such a villainous variant.