In China’s Inner Mongolia province, in the middle of the Gobi desert, row upon row of largely vacant apartment towers line the streets of Kangbashi, a new district of the city of Ordos. Earlier this month, Xu Yongfen and his family moved into one 28-story building. In the hallways there are a few signs of life—tricycles, slippers and pink children’s shoes in front of some doors. But most apartments remain unoccupied, their doors still covered in plastic wrap, and at street level, barren storefronts are visible in all directions. “This area is nearly totally empty,” Mr. Xu says, tapping a cigarette into a bowl of ashes at his dining room table.
The city has spent 14 years planning, erecting and maintaining Kangbashi, which has the distinction of being one of China’s best-known “ghost towns”—gleaming but sparsely populated new urban centers adjacent to older metropolises. Built by the dozen across the country, the new areas reflect—and were meant to accelerate—China’s economic boom. As the country’s growth has slowed, many of them have become serious liabilities, deep in debt, with little prospect of full occupancy anytime soon.
‘Ordos officials have reduced their population goal from one million to 300,000, and they are just halfway there.’
A decade ago, Ordos was one of China’s wealthiest cities, thanks to its big coal deposits. Full of optimism for the future, it spent billions on roads, water and gas pipelines to transform a patch of barren desert into a vision of the urban future. But the city has been hit hard by the drop in demand for coal, and its annual growth rate has fallen by more than two-thirds since 2008. Real-estate values have cratered too, and the city’s debt has ballooned to almost 250% of its budget.
Local officials had hoped to attract a million people to the new area, nearly matching the size of the old city 20 miles away. Architectural showpieces—a museum in the form of a giant metallic bean bag, a library resembling a shelf of books, a sports stadium reminiscent of a modern Coliseum—were built as attractions. Officials have since reduced their population goal to 300,000, and they are just halfway there. An early resident, Hu Richa, has been waiting seven years for more neighbors. Still, he says, “There’s barely anyone living here.”
Mr. Xu’s family is part of a small recent uptick of new arrivals in Kangbashi. A 40-year-old construction worker who had previously lived in the older part of Ordos, he is hoping for the best. “The air quality’s good, there’s no traffic, and most of all, it’s quiet,” he said. For his son, there is an elementary school down the street with a new running track and turf field, but retail options are still very limited. For grocery shopping, he has to drive for a half hour, over a bridge, to stores in the old town.
Many of China’s other ghost towns have yet to figure out how to jumpstart their economies without slipping back into the old pattern of borrowing and building. To become economically viable, some may take 20 or 30 years, or “maybe even forever,” said Zhou Jiangping, a professor of urban planning at the University of Hong Kong. In some cases, Mr. Zhou said, local officials encouraged ambitious plans to advance their own careers: “You see all these empty towns, these areas at the edge of cities. They may symbolize the power of some officials.” Because many of them then move on to other jobs, he said, they didn’t think about ensuring long-term growth.
China’s national government pledged last year to reduce the housing glut in smaller cities, and in April, its Central Financial and Economic Leading Group urged local governments and companies to lower their debt ratios as quickly as possible. At the same time, however, a national subsidy program to relocate people from rural to urban areas has been applied particularly aggressively across Inner Mongolia, accounting for three-quarters of the region’s housing sales in 2016. The small upward turn in the Ordos area has led some property developers to get their cranes going again, even as existing units sit unoccupied.
Ordos City Investment Real Estate Development Co. recently resumed work on two housing projects that it had set aside five years ago, including Mr. Xu’s complex. “Kangbashi’s real-estate sales improved, so our company decided to restart construction,” said Wang Tianyong, a branch manager, noting that the government’s subsidy program favors new projects. Of the company’s eight towers in one project, two have sold out, he says; one of those is Mr. Xu’s building. But sold apartments aren’t necessarily occupied. Chinese families often use them as investments or to hold until their children become adults, which explains why Kangbashi is so thinly populated.
Asked about excess inventory in the new district, an Ordos housing official said that Kangbashi is still growing toward its capacity. “Supply is low, and the need is large,” she said. Neither local officials nor the national housing ministry responded to requests for more comment.
Ghost towns will continue to weigh on China’s growth, said Rosealea Yao, an analyst at the Beijing research firm Gavekal Dragonomics. “There’s still a lot of inventory to be cleared, and towns to be filled up, therefore the investment incentive is not that strong.” According to a study by Lu Ming, a professor at Shanghai Jiao Tong University, 272 new districts across China have been built with borrowed funds near existing cities. Other researchers, using different definitions for ghost towns, find smaller numbers, but all agree that there is a serious problem.
Examples aren’t hard to find. In another northern desert city, Lanzhou, the drive from the new district’s airport to downtown takes at least an hour, past rows of hollow apartments and a half-finished theme park with a full-size replica of Egypt’s Sphinx. A new district of the city of Shenyang, in China’s northeastern rustbelt, covers 3,500 square kilometers, more than the area of Shenyang itself. Even a new district of Zhengzhou in central China, which is thriving thanks to its iPhone factories, has telltale empty apartment towers amid its stretches of strawberry fields and open land.
Developers seem to be paying little heed to the lessons of the last building boom. In Dalu New Area, a town of some 30,000 people about a two-hour drive from Ordos and modeled after Kangbashi, a 230-unit housing project is under construction amid partly vacant complexes. Jia Runhua’s building has slowly filled up since she took a government subsidy to move there more than five years ago, but surrounding buildings haven’t, and she’s waiting for a shopping center to open. “Is it lonely? Yeah, it can be,” she says. “It’s all still being developed.”
—Liyan Qi and Lin Zhu contributed to this article
Write to Dominique Fong at Dominique.Fong@wsj.com