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China's White Elephants: Ghost Cities, Lonely Airports, Desolate Factories

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A state-owned company started building "Liquor City" in a suburb of Luliang to help diversify the economy away from coal. But a massive anti-corruption campaign has damaged demand for expensive Chinese<em> baijiu</em> or white liquor and for now, the factory complex remains unfinished.

When you drive the new expressway to the airport in the Chinese city of Luliang, you are as likely to come across a stray dog as another vehicle. When I recently drove it, a farmer was riding in a 3-wheel flatbed truck and heading in the wrong direction. But it didn't matter. There was no oncoming traffic.

That's because the city's $160 million airport, which opened in 2014, gets at most five flights a day and as few as three. Officials began building the airport when this coal town was still booming. Since then, though, global commodity prices have plunged as China's old industrial economy has sputtered. The airport has become a white elephant.

"Because this place is economically backward, the flow of passengers is small," says Wu Dexi, a local corn and tomato farmer who brought his 78-year-old mother to the empty terminal because she wanted to see an airplane for the first time. "People's income is too low, they can't afford this."

No country has built so many roads, bridges and airports as quickly as China. Many projects, including the nation's remarkable high-speed rail network, have had big benefits.

But Anne Stevenson-Yang, research director at J Capital Research, an economic research firm in Beijing, says the government has simply built too much. She says lonely airports like the one in Luliang are not uncommon. There's another one northwest of Beijing in Hebei province, in a place called Zhangbei.

"It's an impoverished county," Stevenson-Yang says. "They built the airport in order to increase the revenue of the county. But nobody ever agreed to land there."

In other words, the airport in Zhangbei has no planes.

Stevenson-Yang says local officials across China have greenlighted lots of infrastructure projects not because they make economic sense, but just to boost GDP. Now, she says, some are having the opposite effect: They're dragging growth down.

"This is why, as fast as China rose economically, this is as fast as it will decline," says Stevenson-Yang. "During the rise, all of these things were accelerating GDP and now they're sitting around as costs."

Despite a lot of recent bad economic news, it's important to remember that China's economy is still growing. Projects that sit empty one year can rumble to life the next.

Wade Shepard documents some of the country's deserted new cities in his book Ghost Cities of China: The Story of Cities without People in the World's Most Populated Country. Recently, he took a Russian TV crew to see one outside Shanghai.

"We're walking around and — oh, no, all of a sudden, I see cars," Shepard recalls. "There are people!"

"Within the 10 months since the last time I'd been there, people had been flooding into this area," Shepard says. "It just shows how quickly these things can change."

One project that's unlikely to change anytime soon is Luliang's new "Liquor City." It's a gigantic complex of ancient-style Chinese pavilions covering an area the size of several pro football stadiums, surrounded by an unfinished, life-size replica of the Great Wall.

Inside, factories were supposed to pump out tons of high-priced white liquor — called baijiu in Mandarinfor which the region is famous. Baijiu is made from grain and high-end brands have been a staple at official banquets. As recently as 2012, baijiu sales were a staggering $92 billion.

Today, though, Liquor City looks like an abandoned movie set.


The project was to be funded largely by coal revenues, which collapsed with the drop in global prices. In addition, planners failed to anticipate the Communist Party's anti-corruption drive, the biggest in modern Chinese history. China's leader, Xi Jinping, launched the campaign nearly three years ago, cracking down on lavish spending for which officials have been notorious.

"Now things are bad," says Lu Cuie, who runs one of the scores of white liquor stores in town. "High-end liquors don't sell at all. Officials don't buy. No one buys."

Before the crackdown, Lu could sell more than $14,000 worth of alcohol for a single event — big money in this poor part of central China.

"On average, when an official held a wedding banquet or birthday party, the banquets used to last three to four days," says Lu, who wears a shirt with the face of Audrey Hepburn emblazoned on the front. "Now, it's simply impossible. It only lasts one day and the scale is much smaller."

Fenjiu, the state-owned company that's building Liquor City, refused to discuss the project. Lu and other local shop owners say the company is struggling and relies on bank loans to pay employees.

When I ran into some managers outside Liquor City's unfinished gates, I asked when it planned to open. They shook their heads wearily and laughed.

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