China Cities

TST Real Estate – China

China real estate values are a driver of the Chinese economy and thus the global economy.  We believe that a key driver of China’s real estate values is the speed with which its new cities fill up.  The new cities are also referred to as “ghost cities” and “empty cities” market commentators, such as Jim Chanos and the Wall Street Journal, and have been the subject of broadcasts by 60 Minutes, Al Jazerra and Dateline Australia.  We believe, however, that these reports were misleading.

Wade Shephard is the authoritative source of China’s ghost/empty/new cities.  He provides the most balanced view of the cities in his book “Ghost Cities of China” and his frequent reports on them.  One of his most informative factoids is that Pudong was China’s original ghost city.

Importance of Transportation Master Plan

One of the best ways to get a Big Picture view of the future absorption rates of China’s new cities is through its high speed rail system.  China has the world’s longest high speed rail network with over 9,900 miles of track in service as of December 2014, which is more than the rest of the world’s high-speed rail tracks combined — with an additional 10,400 miles under construction or in planning.   Since high-speed rail service was introduced in 2007, daily ridership has grown from 237,000 to 2.5 million in 2014, making the network the most heavily used in the world.

The development of the high speed rail system is important because the completion of new lines is often the catalyst for a huge spike in absorption rates.  See Yujaipu and Zhengdong examples that follow.


Pudong in Shanghai


“You now look at the Pudong financial district – the place in Shanghai with all the skyscrapers that you see when you look across the Huangpu River from the Bund — and it’s easy to assume that it’s always been there. It is now one of the most iconic sights of China, and its towers form one of the most well known skylines in the world. But if you looked at the same scene 20 years ago you would only see the Oriental Pearl Tower, some warehouses, ramshackle fishing villages, and little else.  Within the lifetime of a university sophomore, Shanghai built one the most vibrant economic zones in the world from scratch. Though the entire process was mocked each step of the way by foreign analysts, economists, and journalists, who snickered at the city as though it were a kid wearing a suite two sizes too large.

Most infamously, in 2001, Milton Friedman, called Pudong a “Potemkin village” and said that the Lujiazui financial district was, “Not a manifestation of the market economy but a statist monument for a dead pharaoh on the level of the pyramids.” A Time magazine editor called it “what-is-wrong-with-this-picture economics.” Pudong was China’s first ghost city.”

Yujaipu – Another Pudong, Wall Street, Rockefeller Center or Ordos?

Yujaipu is an amazing story.  A group of enterprising developers and government officials have engaged in the most extensive and ambitious knock-off in human history: the creation of a Manhattan-themed financial district — in China.  Scheduled for completion in 2019, Yujiapu isn’t just a copy of Manhattan’s Fnancial District. but it is set to be even larger than the original. At 3.86 sq km in area, it is to become the “largest single financial center on the world.” So not only is this a colossal knock off, it’s a colossal development in its own right.

When finished, Yujiapu and the area across the Hai River immediately adjacent to it is slated to provide 15.2 million square meters (164 million square feet) of office space. Though larger in surface area, Yujiapu only intends to offer a little over a third of Manhattan’s business capacity.   Yujiapu is something that has never been done before: the DNA of an entire district of a city has been replicated on the opposite side of the globe. The Atlantic reported that: “The miniature city is a near facsimile of New York–down to the river wrapping around the peninsula’s southern tip.”   Rockefeller Center is being cloned and there is an identical pair of skyscrapers going up that resemble the twin towers of the original World Trade Center.

Amazingly, the Rockefeller Center replica and Yujiapu Twin Towers are being handled by Yinfeini Property, the China subsidiary of Tishman Speyer — the firm that built the original World Trade Center and the new 1 World Trade Center. The Rockefellers’ Rose Rock Group is helping develop Yujiapu’s centerpiece: a 588 meter high tower that will be even taller than 1 WTC, which itself is set to become the tallest building in the western hemisphere. Lincoln Center is helping design Yujiapu’s performing arts center. So not only is Yujiapu being built to resemble Manhattan, it is being built by some of the same firms who made the original.




Impact of New High Speed Rail Connection

High-speed trains have begun running from the new railway station at Yujiapu, cutting journey times to Beijing to just 45 minutes.  Yujiapu – the world’s biggest and deepest underground high-speed station – will have 35 high-speed train departures every day, delivering rapid service to the capital every 30 minutes.

The new Yujiapu high speed service is designed to  help bind Tianjin, Beijing and Hebei province into a single megalopolis, the so-called Jing-Jin-Ji region.  The plan calls for the three areas to be united into one economic sphere, making the Bohai Bay area a growth region similar to the Yangtze River Delta and Pearl River Delta.  The plan is to then make the megalopolis into a template for China’s future urbanization.


Zhengdong New District is one of the biggest success stories of modern China.  The sheer proportions of this new district are almost incomprehensible: it started as a 150 sq kilometer new development zone but was eventually expanded to encompass 500 sq kilometers — more than three times the size of San Francisco. What’s incredible is that Zhengdong is not even a city in its own right, it’s just one district of Zhengzhou, the 9 million person capital of Henan Province.

Since 60 Minutes and the other networks aired their ghost city report about it, Zhengdong has gained momentum. Zhengzhou’s first metro line went into operation, and was extended out to its CBD in December 2013. This metro line tied the new district together with the old city, which is one of the prime criteria for residents to flood into a fledgling new area. Over 5 million people are expected to live in Zhengdong by 2020. Eventually, Zhengzhou will be connected with neighboring Kaifeng via Zhengdong, creating a 20 million person megacity that will become the economic heartland of central China.

Now a Thriving Metropolis

The picture below isn’t the one 60 Minutes painted.