Chinese Ghost Cities: $6.8 Trillion Lost

Daniel Drew,  11/29/2014

Chinese Ghost Cities


China's National Development and Reform Commission says it was an "ineffective investment." That's what I said the last time I lost $6.8 trillion at my weekly poker game.

How much is $6.8 trillion? The value of all the stocks in the S&P; 500 is $19.3 trillion. If the value of the Chinese ghost cities were taken from the S&P; 500, it would wipe out 35% of its value.

Ordos City, one of the more prominent Chinese ghost cities, looks like a scene from Inception, the Christopher Nolan movie - that scene when Leonardo DiCaprio goes to Limbo, the ghost city of his subconscious. If you thought Los Angeles was sprawled, don't go to Ordos City. The urban area is about twice as large as LA: 825 square miles for Ordos vs. 469 square miles for Los Angeles. If Ordos City were as dense as LA, there would be 6.8 million people there. But there are only 600,000. It only has about 9% of the population density of LA. Rush hour in Ordos is probably less crowded than the 110 freeway at 2 a.m.

How can something like this happen in real life? Why isn't the massive ghost city phenomenon confined to Leonardo DiCaprio's subconscious? Why would private companies invest in a random city in the middle of a Mongolian desert? Because it's a massive government project. What a surprise. It would be like the Federal government launching a new project to turn Bakersfield into the largest urban area on the west coast.

The Chinese government has a propaganda office and is actively recruiting villagers to become city dwellers. It sort of makes sense. You would need a recruiting office to convince millions of people to move to Bakersfield too.

Ghost city is sort of an unusual word to describe Ordos City. The phrase typically refers to cities that have been abandoned for some reason, like Pripyat, the Ukrainian city that was evacuated after the Chernobyl Disaster in 1986. But the Chinese ghost cities weren't abandoned. They were never even fully occupied. It seems like a new phrase is required to accurately describe it: government city.