Ordos: Boom town to ghost town

A wealthy coal-mining town in Inner Mongolia, designed to house one million people, remains nearly empty, five years after construction began.


In 2009, the year of our first visit to Ordos, China’s gross domestic product (GDP) grew by 9.1 per cent, and it was easy to see why.

We had seen the factories producing for the rest of the world, the Louis Vuitton stores popping up across the country, and even witnessed farmers in the cave dwellings of Gansu with their mobile phones.

However, with Ordos, we witnessed the other side of the coin: local officials in the provinces were hell-bent on boosting their regional GDP – often a criteria for their promotion.

If building a road pumped up GDP, then building a whole city would really propel GDP growth to unknown heights.

Ghost town ‘a must see’

Ordos was empty – an entire city out in the middle of the desert. The “ghost city” became a radical example of China’s obsession with growth. 

We had discovered Ordos by accident. Our team was in the area filming a report on the environment when we learned the city was nearby. I had heard about “Ordos 100”, a residential building project that had invited 100 globally renowned architects to design 100 homes for the city. It would be a fun detour.

We imagined wealthy residents, made rich over the past decade from the region’s mining boom, living in homes created by the Ordos 100 project. But instead, we found ourselves arriving at Ordos in the evening, checking into the only hotel we could find – a fancy one, encased in marble whose staff looked perplexed to see us.

We were the only guests there for the night. In the morning, we drove past streets of empty, but beautiful buildings. Never mind Ordos 100 – we never found it. City centre had us spellbound, and wondering if officials had watched that film classic, Field of Dreams.

If you build it, they will come

Others who later visited Ordos, including economist Ting Lu of Bank of America-Merrill Lynch, pointed out that the real estate was not sitting idle, but had all been sold. So while the city lacked human beings, it was certainly supplying this odd demand from Chinese purchasers for empty apartments.

Ting Lu went on to recommend it as a “must see for emerging market investors”.

However, Ting Lu’s bullish assessment of Ordos was challenged by Patrick Chovanec over at Tsinghua University’s School of Economics and Management. He wrote a rebuttal, which you can read here in full.

Below is Chovanec’s main point:

“Demand for empty residential units as a store of value [like gold] is real demand, but it’s also a historical aberration. It’s based on a highly unstable set of unique circumstances, including (1) limited investment alternatives for Chinese savers, (2) a limited track record, since China converted to private home ownership in the early 1990s, in which investors have never really seen a sustained downturned, and (3) minimal holding costs for idle property, including the absence of any annual property tax.” 

Right. Keeping your savings in the bank yields very little because interest rates are so low in China.

Inflation hit a three-year high this past July at 6.5 per cent, meaning that wherever Chinese store their savings, it had better yield something that can keep up with the rate of inflation.

The stock market is no longer a popular choice for many ordinary citizens, who find it too unpredictable. That really only leaves property to dump your money.

Ordos is one oversized, inefficient bank vault.

And when we decided to check in after two years to see how “Bank of Ordos” was doing, we found a surprise: construction is still happening at a fierce pace.

Ordos now boasts Asia’s largest fountain show. Its theatre has managed to hold a few concerts this year. There are definitely more signs of life than the last time around – but still comparatively little relative to the size of the city. We came to realise just how little when our team got thirsty midway through our shoot and decided to buy water. 

Hunt for water 

We ended up spinning around and around city blocks, searching for a store selling water. Eventually we found some – but not without the feeling we had gone on a treasure hunt. There is no major supermarket in Ordos, because not enough people live in the city.

This just seems nuts. I am neither an economist nor a dedicated, full-time financial reporter but I do know Ordos is not habitable. The numbers might look good, but from a qualitative standpoint, there is a problem if you cannot buy bottled water around the corner. Something is just terribly wrong with this situation.

A country’s GDP is a measure of a country’s economy and, consequently, how a country’s people are faring. As it turns out, the irony is that while there appears to be plenty of houses to buy, lots of people in China who really need homes, do not own one.

“China isn’t Dubai in the sense there are 1.3 billion people here who would gladly live in as nice a place as they can,” says Chovanec, when we followed up with him to see if he remained bearish.

“But what’s the market-clearing price for that? I suspect the market-clearing price is far below the value listed on the market and may even be lower than what it cost to build a lot of these places. Because what caused people to build them was not demand for affordable living space. It was that there was demand for people who needed a place to stash their cash.”

As it turned out, while no real estate sales offices in Ordos really wanted to talk to us, we were told off camera that apartment units up for sale in the secondary market were not getting offers. And, as we poked around apartment buildings in Ordos, we noticed broken windows and cracked paint on the exteriors, suggesting that building managers were not too fussed about keeping the place spiffy.

A wander into the buildings themselves showed dusty hallways and vacant apartment units. Some apartments were clearly halfway through interior decorating when work stopped, presumably because the owners decided, quite practically, that since they were not going to live in the unit, why bother?

Over the past two years, Ordos has not changed. But its economic model is not sustainable, because the city cannot possibly continue building for ghost inhabitants forever. Yet there does not appear to be anything to slow Ordos down.

It may require a readjustment in local government thinking that lower GDP growth is not necessarily a bad thing. They would certainly be able to look at the Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan) for examples of economies that have slowed down, yet done extremely well for themselves.

It might be good to finally focus not just on quantity, but on quality of life.