China's Ghost Cities Fuel Boom-To-Bust Fears

China's "ghost cities" show that the country's economic boom could be more fragile than it appears.

Kangbashi is a showcase city, laid out spaciously on the grasslands of northern China.

It was dreamt up by the local secretary of the Communist Party as a monument to the country's new-found prosperity.

The place is dominated by impressive public buildings - a marble-clad library, a state-of-the-art theatre and a giant convention centre.

In the centre of town a 70m-high statue of two fighting horses looms over Genghis Khan Square.

The only thing missing is the people.

Kangbashi was built to house one million residents, but so far only 20,000 have moved in.

Acres of apartment complexes - many of them luxurious by Chinese standards - are deserted. Store fronts are boarded up.

When they first began building Kangbashi, there was a frenzy of investment. The local government contributed a £200m road network. Nearly all of the homes that now lie empty were sold off-plan.

The buyers were China's cashed-up new middle class. The country's poorly-regulated stock markets, along with controls on investing overseas, have made second, third and even fourth homes a popular store of wealth.

But from the very outset, Kangbashi defied all economic logic. There's no industry in the city, and no real reason to live there.

Now Kangbashi - along with other "ghost cities" dotted around China - has come to symbolise what many believe is a dangerous property bubble that could be primed to pop.

The scale of China's housing boom is staggering. Over the past five years the country has built nearly 40 million new homes. In some cities the price of housing has tripled in the same period.

Chinese economist Zhang Bin said: "If you look at financial crises, they're always accompanied by property bubbles.

"Lower property prices would definitely be more sustainable and healthy, but a sharp drop would mean a big contraction in the economy and problems like unemployment."

In Kangbashi, many think the bubble has already popped.

Businessman Wang Pen spent his life savings buying a two-bedroom apartment. He says its value has fallen by 20% since the start of the year.

But Mr Wang finds it difficult to believe that the good times will ever stop rolling.

"When I bought this one three years ago I was still poor, so it's a bit small," he said.

"Now I'm thinking of getting another place, something bigger."

If the bubble bursts on a nationwide scale, it could be disastrous, not just for China, but for global economic recovery.

China is now the world's second-biggest economy , and by some estimates nearly half of its GDP is in some way linked to property.

Alistair Thornton, Beijing-based economist with HIS Global Insight, said: "Property is the core of the Chinese economy.

"With the eurozone weak and the US stagnant, a sharp contraction in the world's largest growth engine would have a dramatic effect. It's not a good story."