Is it economically useful to build useless buildings?

[Xithras]

9. A major part of the problem in China is their tax model, but the cities won't be empty long.

Because it is still theoretically a communist state, virtually all of the tax revenue flows to the central government, and only a relatively small amount flows back out to the local and regional governments for infrastructure and other maintenance. This leaves those local governments in a state of perpetual poverty.

The Chinese government then did two things that created the current situation. First, they legalized private property ownership. Second, they announced an "urbanization plan" that calls for the partial depopulation of the poverty stricken rural areas of China. Farms will be merged to improve their economic viability, and the "excess" population will be encouraged to move to the cities.

Local governments and developers immediately went nuts. The governments started seizing farmland while paying the owners a pittance, and flipped it to the developers for a huge profit. This actually became the LARGEST revenue source for many local governments around China. The more land they flipped to the developers, the more money the governments made.

Developers, anticipating a huge influx of new residents, built like crazy. The Chinese banks lent the builders countless billions to build out these cities, and the builders expected to repay those loans and make a nice profit when the people started flowing in. In many of the more questionable situations, the local GOVERNMENTS actually pulled the loans for the developers when the banks thought the loan was too risky...in China, the banks can't tell the government NO, and the regional governments are protected against default by the central government.

The problem was that the Chinese government took its own sweet time putting the ACTUAL urbanization plan together, and only finally released their nearly $7 TRILLION dollar roadmap a few months ago. The plan is projected to move around 100 million people from the farms to urban centers by 2020. That will finally fill up these empty cities, and will spur another round of major construction across the country.