In 2016, China’s communist regime launched a series of policies to develop cities outside the largest urban conglomerates as part of a redevelopment drive. But inadequate planning and widespread corruption ended up producing flawed projects that left cities abandoned, super-indebted, and millions of homes unsaleable.
The crisis of China’s real estate giant, Evergrande, revealed a serious situation that affects the company and the entire Asian country. According to recent reports, China has more than 30 million unsold houses at the moment, giving rise to hundreds of “ghost towns,” completely indebted and with no horizon of how to get out of the abyss.
All over China, ghost towns abound, poorly planned and full of unsold houses. Local governments cannot afford the costs of the growth of their own cities, and as a result, nightmarish scenarios emerge due to lack of maintenance, neglect, lack of jobs, and the consequent lack of movement of people.
Last month, as reported by the South China Morning Post (SCMP), the National Development and Reform Commission, the Chinese regime’s state planner, announced that these “characteristic cities” will be evaluated and could even be closed if they do not meet a set of criteria, including appropriate land use, associated debt, and security.
The initiative to develop characteristic cities outside megacities was launched five years ago as part of China’s urbanization drive.
Some new urban centers were developed with new industrial nodes, e-commerce, sports centers, and many were even developed with tourism in mind.
Local authorities were attracted to sell land and develop real estate, thinking that economic growth could be generated from the real estate market, a practice that has expanded strongly in recent years throughout the country.
In this context, real estate development companies such as Evergrande began to build throughout the country and take on debt in the local and international markets. At first, many buyers appeared, allowing the business to expand, but the steep decline in real estate sales rates drove potential buyers away.
Many of these towns were even abandoned midway through construction due to lack of financing or have faced bankruptcy due to lack of real estate buyers.
Faced with this situation, real estate developers are unable to pay the interest on debt, forcing the government to intervene to avoid a possible financial collapse.
Hu Meilin, manager of Shenzhen OCT Culture Group, said during an interview with the National Business Daily that real estate companies jumped on the bandwagon to develop these characteristic cities quickly, but none of them are particularly successful, and “basically 90 percent of them were doomed to fail,” SCMP reported.
The real estate market has been one of the Chinese regime’s economic growth pillars over the past decades. However, critics have always questioned this engine of growth, pointing out that a “ticking time bomb” was being created due to the huge debt being generated by developers.
However, the Chinese communist regime turned a deaf ear to experts’ recommendations and continued along the same path. Today, the results are beginning to show, and the danger of a total financial collapse is imminent, affecting not only the Chinese economy but also the entire world.