stephen roach
Bloomberg TV
China has received much flak for building "ghost cities" and "bridges to nowhere." Recent reports show that construction in Ordos, the most famous Chinese ghost city has stalled.
Analysts argue that the prevalence of ghost cities proves that such infrastructure investment can't be sustained and can't continue to drive economic growth.
But in a Project Syndicate column Stephen Roach, Yale professor and former chairman of Morgan Stanley Asia, writes that China isn't headed for a hard landing, and that "China doubters" are wrong about its ghost cities:
"Reports of ghost cities, bridges to nowhere, and empty new airports are fueling concern among Western analysts that an unbalanced Chinese economy cannot rebound as it did in the second half of 2009. With fixed investment nearing the unprecedented threshold of 50% of GDP, they fear that another investment-led fiscal stimulus will only hasten the inevitable China-collapse scenario.
But the pessimists’ hype overlooks one of the most important drivers of China’s modernization: the greatest urbanization story the world has ever seen. In 2011, the urban share of the Chinese population surpassed 50% for the first time, reaching 51.3%, compared to less than 20% in 1980. Moreover, according to OECD projections, China’s already burgeoning urban population should expand by more than 300 million by 2030 – an increment almost equal to the current population of the United States. With rural-to-urban migration averaging 15 to 20 million people per year, today’s so-called ghost cities quickly become tomorrow’s thriving metropolitan areas.
Shanghai Pudong is the classic example of how an “empty” urban construction project in the late 1990’s quickly became a fully occupied urban center, with a population today of roughly 5.5 million. A McKinsey study estimates that by 2025 China will have more than 220 cities with populations in excess of one million, versus 125 in 2010, and that 23 mega-cities will have a population of at least five million.
China cannot afford to wait to build its new cities. Instead, investment and construction must be aligned with the future influx of urban dwellers. The “ghost city” critique misses this point entirely."
Roach believes that this part of "China's grand plan" and thinks this rapid urbanization is crucial to the evolution of the Chinese economy.