This week, Ian Williams’ Vampire State was picked as one of the Financial Times best new books on economics for 2024. In it, he tells the terrifying story of China’s vampire economy and the single-minded and ruthless policy of the Party to bend economics and business to its own will. 

Rules and agreements mean little. Markets are distorted, statistics fabricated, foreign industrial secrets and technology systematically stolen. Companies and entrepreneurs, at home and abroad, are bullied – often with the collusion of the victims themselves. The Party is in every boardroom and lab, with businesses thriving or dying at its will.

This extract is from Chapter 5: Ghostly Monuments to Economic Madness.

During my time as a correspondent in China I developed a morbid fascination with ghost cities. I found them especially surreal because of the dramatic contrast with the usual bustle of China’s older cities. It was as if you’d landed on another planet, one devoid of human life. Some consisted of endless eerie rows of ugly towers; others were sprawling fields of villas. All were almost empty. There was Kangbashi, an extension to the city of Ordos in Inner Mongolia, built for 1 million people at the cost of $500 billion, complete with museum, large library and theatre, all surrounding a deserted central square. There was a nine-storey hospital that during my visit was treating just one person a day. But at least the buses ran on time, down largely deserted streets and undeterred by the almost complete absence of passengers. I met a student who exchanged an empty campus by day for an evening job in an empty restaurant. ‘I can’t wait to get out,’ he told me. By night barely a light shone from the windows of the monstrous high-rises. ‘It’s quiet, too quiet,’ a lonely policeman told me, but at least there was no crime.

Then there was Yujiapu, a new district of the port city of Tianjin, built as a copy of Manhattan, and billed as the world’s largest financial centre in the making. During my visit, construction had largely ground to a halt and stray dogs roamed the dusty windswept streets in the shadow of the empty half-built shells of towering buildings, including a replica of the Rockefeller Center. Tianjin’s 117 Tower was to be the world’s sixth tallest skyscraper, part of another new business district with multiple residential and commercial towers, French and Italian style manor houses, a wine museum, extensive gardens and even a polo club. Construction of the 128-storey ‘ghost scraper’ began in 2008, but it is now a derelict and rusting eyesore, having never been completed or occupied. Another ghostly conurbation near the southern city of Dongguan boasted the world’s largest shopping mall, which was a familiar boast. Cavernous dusty halls, layer upon layer of meandering marble-lined walkways beside the shells of hundreds of shops, but not a soul to be seen. Wires hung from ceilings like an infestation of snakes. An artificial river wound through the complex, its water stagnant and dark green.

China also pioneered a bizarre brand of copycat architecture, and it is here that the ghosts were at their most surreal. About twenty miles southwest of Shanghai sat Thames Town, built as a replica of a British market town – right down to the cobbled streets, Victorian-style terraces, a mock-Tudor pub, random red telephone boxes, and a fish and chip shop. Most were shut during my visit, and the town was largely deserted apart from the occasional couple posing for wedding photos, with whom it was popular. They posed beside statues that included Winston Churchill, James Bond (with a passing resemblance to Roger Moore) and Harry Potter on a broomstick. On the outskirts of Hangzhou, farmers were evicted to make way for a Chinese version of Paris, with a scale replica of the Eiffel Tower. Elsewhere, China built copies of Amsterdam, Venice and Madrid. A ninety-minute drive into the hills north of Beijing sat a clone of ‘Jackson Hole’. The American original in Wyoming is known for its outstanding natural beauty, but during my visit to the Chinese version it was shrouded in smog so thick you could taste it. Security guards dressed in cowboy outfits trailed me as I explored the empty mock-rustic lodges. ‘It’s busy at the weekend,’ one of them assured me.

China’s property market only dates back to 1998, which is when urban households were first allowed to buy and own flats, unleashing huge pent-up demand on the back of rapid urbanisation. Average prices increased fivefold between 1998 and 2021, albeit from a very low base.12 Initially at least, the new homeowners were buying places in which to live, but sustained price rises soon empowered the speculators.

China’s banks were only too happy to throw money at the developers to the extent that by late 2020, property-related lending accounted for an astonishing 39 per cent of bank loans.13 Foreign investors also piled in, snapping up the bonds of the developers in the belief the boom would never stop and that ultimately the government would never let the property developers go bust. By the middle of 2021, developers had run up debts of $5 trillion, equivalent to almost a third of the country’s GDP, according to Nomura, an investment bank.14 Flush with cash, the developers bought land from local governments, for whom it became a vital source of revenue, accounting for around a third of their income.15 They in turn obtained it from local farmers, who were often forced off their land with little compensation. All the while, this huge and tangled web of debt grew and ghost cities spread like a virus across the country, an inevitable consequence of an economic model that required property to be built at an ever greater rate and sold at an ever higher price. Over two decades the bubble was inflated to the point where real estate and related services became China’s main economic driver, accounting for around 30 per cent of economic activity.

China even found an export market for these ghostly creations. In 2016, Country Garden, a troubled developer we will meet later in this chapter, launched Forest City, a massive $100 billion ‘dream paradise for all mankind’ in Johor on the southern tip of Malaysia. It was supposed to house 700,000 people, but by early 2024 was barren and largely empty, with few of the units in its thirty storey tower blocks occupied. Stray dogs outnumbered people on a deserted beach dotted with ‘Danger Crocodiles – No Swimming’ signs.16 It served as a reminder that it wasn’t necessary to be in China to feel the impact of its property madness.