page_title: Under-occupied developments in China
section_title: Background
hierarchical_section_title: Under-occupied developments in China / Background
caption_attribution_description: Français&#160;: 'Grand pont Kang Bashi (康巴什大桥), dans le nouveau quartier de Kang Bashi à Ordos, Mongolie-Intérieure, en Chine.English: Kang Bashi Great Bridge (康巴什大桥), in the new district of Kang Bashi at Ordos, Inner Mongolia, China.中文: 于中国内蒙古自治区鄂尔多斯市康巴什新区的康巴什大桥
context_page_description: Under-occupied developments in China are mostly unoccupied property developments in China, and commonly referred to as "ghost cities" or "ghost towns". The phenomenon was observed and recorded as early as 2006 by writer Wade Shepard, and subsequently reported by news media over the decades, often cast in a negative light. News stories around the topic have been criticized as hasty judgments.
context_section_description: The way in which property values are structured in China plays a role in the creation of "ghost cities", according to author Wade Shepard, who has traveled widely to research the phenomenon of China's underoccupied cities. "Economically affordable housing" must be lived in by the owner, and can not be bought and sold as an investment. The developer is only permitted to sell "economically affordable housing" at 5% over the cost of construction. By contrast, "commodity housing" can be bought and sold as an investment. Because housing is a physical object, and China's large population guarantees an ongoing demand for housing, commodity housing is considered a more secure way to store money. Except in some Tier 3 and Tier 4 cities, which have different government regulations, "commodity housing" generally sells as an investment. In addition, these homes typically serve as future homes for the buyer's offspring to live in when they get married. 
  Construction of "commodity housing" is driven by the disparity between urban and rural land prices. Rural land, which must be collectively owned, is redesignated by a municipality as urban-construction land, which can then be resold by the municipality at as much as forty times the price. Shepard explains that municipalities must pass on about 40% percent of their tax revenues to Beijing and are responsible for about 80% of their expenses. Hence, there is an incentive to seek non-tax-income streams. According to Shepard, as of 2015, "40% of the revenue that local governments in China make is from land sales." In 2012, this type of development created $438 billion (394 billion euros) for China's local governments. A common assumption is that local officials are strictly incentivized to start construction on this newly created urban land to boost GDP growth and look good within the Party. However, Shepard points out many places which started becoming ghost cities were under the jurisdiction of an area with already strong GDP growth. He argues that these developments are seen as an investment for the future and promote development with timescales of over 20 years.
  Developers acquire new plots of land from local governments and are mandated to construct something more or less immediately. Developers can't sit idly on vacant land and wait for the surrounding area to develop until it's economically viable. This creates the quick-buck mentality in developers to rapidly build in the new area without the necessary demand for housing.
caption: Bridge in Kangbashi, Ordos
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