Ghost towns still a risk if local officials fail to do their homework

Unease surfaces for Baoding after property prices rise, but another Beijing satellite shows how work to lay a solid industrial base can pay off

PUBLISHED : Monday, 14 April, 2014, 9:38am
UPDATED : Tuesday, 15 April, 2014, 12:01am

Some mainland cities run the risk of building ghost towns as local governments, eager for rapid development, lack the patience to nurture a strong industrial base amid the mainland's urbanisation drive.

Such concerns have been mounting about Baoding, a city in Hebei province about an hour by high-speed train from Beijing. Baoding has led home-price gains on the mainland in recent weeks after news that President Xi Jinping had revived a proposal to move some institutions and businesses from Beijing to surrounding areas, including Tianjin and Hebei.

"Baoding may probably become another ghost town," although not as serious as Ordos, in Inner Mongolia, or Wenzhou, in Zhejiang province, said Li Enping, a researcher at the Chinese Academy of Social Sciences, a government think tank in Beijing.

"I'm worried that some officials in Hebei province are in such a rush to benefit from joint regional development that they will resort to excessive expansion of their cities."

I don’t need officials to drive me … this business pays a very good return

However, Baoding does not need to look too far for a pioneering experiment that could offer lessons in avoiding such a fate.

In neighbouring Langfang, Wang Jianjun has attracted 37 companies to the Longhe Industrial Park that he has been developing since 2005 on behalf of the local government, setting a solid foundation for the building of a vibrant satellite city outside Beijing.

Wang is chairman of Vast Group, an industrial park operator in Langfang, a small city that stands a better chance than Baoding of benefiting from joint regional development.

His client list includes GLP, the biggest modern logistics facilities operator on the mainland. His first investor was Foxconn, a major supplier to Apple, which arrived in Longhe in 2007 with a US$3.8 billion investment plan.

Wang's huge personal investment in the industrial park, with the local government only providing the development plan and guidelines on big projects without putting in a penny, spurred him to be careful about every step he took and gave the park a much greater chance of being successful than those run by government officials - who still get their monthly salaries even if development goes sour.

"I don't need officials to drive me to do anything," Wang said. "This business pays a very good return, but it is also very tough."

He was blazing a trail long before a key Communist Party meeting came up with a reform blueprint last year that will allow greater private participation in activities previously dominated by state-owned firms or governments.

Most of the mainland's ghost towns stem from local governments' ambitious growth plans and their thirst for easy money from land sales - designating an area as the site for a new town or a business park without feasibility studies or careful planning.

Wang sees great hope for business expansion in the new urbanisation push, which envisages turning 100 million rural farmers into urban dwellers, rebuilding shanty towns to shelter 100 million urban residents and helping 100 million migrant workers find jobs near their hometowns in the less developed central and western regions.

So does Yu Liang, president of China Vanke, the mainland's biggest developer by sales, which has stayed "cautiously optimistic" about the property market since 2008. "There can be a long list of reasons to bet against the industry: property prices are being cut in some cities, and others have turned into ghost towns," he told an earnings conference early last month. "But China's urbanisation is still progressing quickly."

However, Li said he was worried that China would repeat its past failure in developing remote interior regions in the next decade and create more ghost towns, despite some improvement.

What concerns him most is that if China aims to find jobs for migrant workers near their homes, the factories will move inland, bringing pollution.

"If the more developed coastal areas cannot upgrade their factories to become pollution-free, how can we expect the western regions, with no geographical advantages, to reject them?" Li said.