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Can China Save the Motor City?

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China Power

Can China Save the Motor City?

As Detroit filed for bankruptcy in July, Chinese interest in Motor City real estate skyrocketed.

After more than a decade of urban decay, the American city of Detroit filed for bankruptcy in July.

One of the surest signs of Detroit’s decline has been the bottoming out of its housing market as people have been fleeing the city since the 1990s. Many have left in search of greater economic opportunity or simply to escape the city’s rising crime rate and other social ills. Today, just 700,000 people live in Detroit; at its peak, 1.8 million people called the Motor City home.

A week after Detroit declared bankruptcy, Quartz reported that “bargain-hunting Chinese investors” had been buying up as much cheap real estate in Detroit as they could find. Quartz interviewed Caroline Chen, a real estate broker in Michigan, who said that she has received numerous calls from people in China who want to buy properties in Detroit. The publication quoted Chen as saying: “I have people calling and saying, ‘I’m serious—I wanna buy 100, 200 properties.’” Chen added that investors tell her, “We don’t need to see them. Just pick the good ones.”

News about the city’s financial demise has become a very popular topic on Sina Weibo, a Chinese microblogging website. Tea Leaf Nation reported some of the comments posted by Weibo users, including those of one blogger who listed off some of the admirable qualities the city offered Chinese citizens: “Seven-hundred thousand people, quiet, clean air, no pollution, democracy.”

“What are you waiting for?” the blogger then asked his followers.

In addition to the (relatively) cleaner environment and democratic political system that Detroit boasts, China’s own real estate situation also explains why the city is viewed as such an attractive alternative to Chinese cities.

New home prices have been rising dramatically across China over the last several years. Earlier this week Bloomberg reported that “China’s new home prices jumped in August by the most since December amid a recovery in land sales and some easing of policies by local governments.” In fact, home prices overall  are 8.6 percent higher than what they were at the same time last year according to a survey conducted by SouFun Holdings Ltd., which was cited in the Bloomberg article. The survey indicated that Beijing’s home prices alone jumped 22 percent from last year.

With China’s rising home prices and other issues such as political instability, environmental pollution, and local government corruption – it is no surprise that many Chinese are looking for a way out. 

As Chinese investors are looking abroad to invest in cities like Detroit, China has its own problem of failing cities in desperate need of productive investment back home. Reports of uninhabited “ghost cities” abound across the country, such as Liaoning province’s Tieling New City and the failed Dongtan eco-city project just outside of Shanghai. Many of these cities are considered failed or failing projects because they have proven unable to attract sustainable investment or create jobs. As a result, population sizes have failed to reach anticipated levels.

Tieling New City is an urban project in Liaoning province that was developed as part of an attempt to revitalize older industrial bases in the country’s northeastern regions. In 2005, Tieling’s municipal government decided to build Tieling New City because “Tieling Old City was already full, its infrastructure over-burdened, and its growth restricted by rivers to the North and West, and mountains to the East.” However, four years after work began on the city, it remains a ghost town according to the Wall Street Journal.

WSJ notes that Tieling’s government had invested massive funds into the new city in hopes of attracting businesses to the region and increasing local incomes. However, the lack of jobs in Tieling New City is the major problem. “The businesses that were supposed to create local employment haven't materialized. Without jobs, there is little incentive for anybody to move here.”

The Dongtan eco-city project has also been deemed a failure, but this is due more to funding issues and corruption scandals which have left the city half-constructed, according to The Grid, a blog run by Global Sites Plan, an online and print media development company that specializes in environmentally friendly projects.

Dongtan, located 25km outside of Shanghai, was supposed to be an environmentally sustainable city that was completely carbon neutral. The original goal was to complete construction of the city in 2020. By 2050, the city was supposed to be home to to 500,000 people. However, according to Spiked, other obstacles such as “the use of challenging technologies, lapsed planning permissions, or the greed of major international consultancies” have prevented the project from being really getting off the ground. .

This is unfortunate because eco-cities are sorely needed in China, considering the environmental issues the country has been facing because of increased urbanization. The Grid notes the importance Dongtan could have played in alleviating Shanghai’s overcrowded population: “with millions moving to urban areas like Shanghai every month, Chinese cities will need to develop new urban strategies to accommodate these new residents.”

However, there is reason to think that the Dongtan project hasn’t been totally scrapped yet. The Grid also mentions that a tunnel was built in 2009 linking Chongming Island (and Dongtan) to Shanghai, giving the eco-city potential as a surburb for wealthy people in Shanghai. 

In addition to needing a better urban planning strategy, Chinese developers and local governments need to ensure that when new cities are planned, they have sufficient investment and jobs to attract citizens there. Many of these cities have failed because there are no people, no jobs, no investment, or because corruption is inhibiting development.

Notably, these issues are similar to the ones plaguing Detroit, even if they arrived at their current situations in very different ways. Thus, if Chinese investors think Detroit is going to be any better, they may be in for a surprise. In many cases, Detroit is just as bad. As Caroline Chen, the Michigan real estate broker, said of the Chinese investors contacting her: “Once they see the scary area, they give up.”

Elleka Watts is an Editorial Assistant at The Diplomat.