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All Quiet on the Oceanfront

The housing glut in cities along China’s coasts has swelled local coffers at a heavy cost to the environment. Experts caution that increased government scrutiny of new coastal real estate projects is urgently needed

By NewsChina Updated Mar.1

One weekend in late November 2020, a grandiose apartment sales ceremony was held in the coastal city of Rushan, East China’s Shandong Province. 

“All employees stand up please and let’s extend our warmest congratulations to this gentleman from Zhengzhou, Henan Province, who has successfully purchased an apartment in Jinding Residential Community,” a host at the event announced in a booming voice. “Let’s give him a big hand. Welcome aboard.” 

A middle-aged man walked on stage to a standing ovation. He was handed a bouquet of flowers amid thumbs up from the crowd. Fireworks cued to music rang outside the sales hall.  

Back in the sales office, agents sealed more deals by the minute, huddled at dozens of small tables as middle-aged clients handed over hefty deposits for apartments.  

But despite the development’s sales blitz, Rushan is facing a real crisis. Fewer seasonal tourists are visiting the seaside city, which by late autumn appears deserted from the outside, with most apartments along its famed Silver Beach left empty. 

Tourist Trap
In April 2019, Li Meng’s 60-year-old mother joined an apartment purchasing group organized by Xianghai Real Estate, a company in Rushan.  

Like most real estate developers and agencies in China, Xianghai wrangles purchasing groups, luring retirees and those soon to be with all-expenses paid trips to their seaside communities, promising early-bird discounts.  

What often begins for many as plans to sit through a sales pitch for a free vacation at the beach ends with signed contracts. 

Increasingly, these companies have been at the center of disputes over illegal advance sales and false advertising, particularly in Rushan.  

On April 26, Li Meng’s mother took a free shuttle bus to Rushan to a new Xianghai-developed community. 

“Salespeople told my mother that the amenities are perfect, and a new [top-tier] Peking Union Hospital would open near the community,” Li told NewsChina. Their claims included pending construction of undersea tunnels from Rushan to Dalian, in North China’s Liaoning Province, and even to South Korea, Li said. 

Li’s mother put down a 70,000 yuan (US$10,700) deposit for a 50-square-meter apartment. Li’s father learned of his wife’s decision with a text from their bank alerting him of the withdrawal. 

Li scoured the contract and found more misleading information. The developer said Rushan Railway Station is a 30-minute trip from the community. However, the community is 35 kilometers away from the station - a two-hour trip by public bus. 

In addition, the developer was unable to provide any documented proof about the undersea tunnels. A spokesperson from Rushan government told the reporter that no hospital would open near the community and the undersea tunnel project was proposed 12 years ago by South Korean officials, but it was “only an idea.” 

Developers have separate sales teams for local buyers and purchase groups - and separate pricing schemes. “All the [trip] expenses are eventually tacked on to the closing price,” a salesperson from a local-buyer team told the reporter on condition of anonymity. 

A Rushan official told NewsChina that the local government has been combating practices such as misleading advertisements and released regulations to tighten management. However, the problems persist. 

Sun Yingning, a senior official at Rushan Housing and Urban-Rural Development Bureau, told NewsChina that many real estate sales agencies are not registered in Rushan, making it difficult for local authorities to supervise them. The local government has rolled out measures to cool the market, such as the buyer’s right to withdraw from a purchase contract within a set period. 

Retirement Dreams
Located on the northeast corner of the Shandong Peninsula, Rushan is known for Silver Beach, its 21.3-kilometer strip of scenic coastline. More than 200 residential communities dot the area, most of them consisting of small apartments no larger than 80 square meters. 

Yan Yuejin, a director with E-house China R&D Institute, told NewsChina that seaview apartments are the main selling point for developers. 

“People from across the country are motivated to buy apartments in Rushan for investment, retirement or vacationing,” he said. 

The Rushan official told our reporter that since 2010, the market has been flooded with pre-owned apartments, and housing prices fluctuated between 2,000 and 4,000 yuan (US$306-612) per square meter. Rushan has only one train station which is not linked to China’s high-speed rail network. In addition, there are no major hospitals near Silver Beach. A taxi driver who has lived in the city for six years told the reporter that the hospital is not equipped for CT scans and the closest major hospital is a 30-minute drive from the city center. 

Only several residential communities in Silver Beach have central heating, and temperatures average 0 C in winter.  

The annual influx of tourists to Silver Beach starts in May, peaking in August. By November, most business are closed and few residents remain. When NewsChina reporters visited in early December, subletting signs hung in the windows of most of the seaside restaurants.  

According to Rushan government, around 100,000 seasonal residents live in Silver Beach, but only 10,000 stay year-round. Silver Beach was advertised as a resort in 2008, but by 2014, the local government had not approved any real estate developments and instead focused on developing it into a new urban area. 

In recent years, Rushan has invested over 3 billion yuan (US$460m) in infrastructure including roads, forestry, water utilities, public transportation, education and medical care. Rushan will be connected to the high-speed rail network, but not until 2023, when Beijing and Shanghai will be a four-hour trip. 

Rushan is home to 560,000 people, 150,000 of whom live in the city center. Over the past 20 years, an aging population and negative population growth have affected the local economy whose fiscal revenues registered only 4.6 billion yuan (US$704m) in 2019. 

The Rushan government official told our reporter that only in 2019 did the city have the finances to build three public kindergartens in the city center, costing 150 million yuan (US$23m). ���Each infrastructure improvement requires a large investment. It’s a gradual process that is unlikely to be completed in the short term,” he said. 

Listings for seaview apartments line a street in Rushan, Shandong Province, July 5, 2019

Waves of Exploitation 
The situation in Rushan is an epitome of the smaller cities along China’s coast. 

“Nowadays when night falls, these large residential projects turn into dark buildings,” said Gu Jun, a sociology professor at Shanghai University. “They have become nothing but ghost cities.” He added that excessive coastal development is damaging precious natural resources. 

Insiders say that it is still too early to develop China’s coastline resources as there is neither an overarching plan nor the industry or healthy economic chains necessary to sustain sound development. 

The government official told our reporter that real estate development in Rushan began en masse in 2004. Within a few years, the coastline was crammed with construction projects. In 2007 and 2008, 60 percent of city revenue came from real estate development. 

“We started real estate projects relatively early, and nearby cities developed after us. We have given other cities a salutary lesson in terms of urban planning,” he said. 

Guo Songhai, director of the Real Estate Institute at Shandong University of Finance and Economics, delivered several proposals to the Chinese People’s Political Consultative Conference of Shandong Province over the years, appealing for more oversight of coastal real estate development. Surveying coastal cities in the province, his team found commercial projects at nearly every sea-adjacent site. Many sprawl over more than 10 square kilometers. 

To make matters worse, since 2010 some cities started reclaiming land from the sea in the name of developing the maritime economy, a national strategy first proposed by the central government in 2010. According to Xinhua News Agency, many coastal cities in the provinces of Hainan, Guangdong, Shandong and Liaoning built residential projects on reclaimed land. Guo Songhai added that land reclamation in Dalian, Liaoning Province, has destroyed parts of the area’s Qianshan Mountains and coastal wetlands. 

Li Wenjun, former director of the maritime management office at the State Oceanic Administration, said the construction frenzy was driven by the promise of huge profits. He added that reclaimed land is zoned as “newly added land,” whose legal status is unclear. Local governments made fortunes from issuing land use transfers to real estate developers. 

Central and local governments have published regulations to rein in excessive land reclamation and real estate projects on coastlines. On November 1, 2016, China released the Measures on the Protection and Use of Coastline, a guideline which promised closer scrutiny of real estate projects and that they would be held to stringent environmental protection standards. 

Dong Yue, deputy director of the Law School of the Ocean University of China in Qingdao, Shandong Province, told NewsChina that after the release of the document, some coastal cities launched rectification campaigns targeting seaside residential projects. 

Sun Yingning told our reporter that while seaside apartments are popular with middle-aged and elderly buyers, they appeal less to younger ones due to the lack of industry in the area. “Rushan government must urgently improve infrastructure and win more policy support to make residents settle there and boost consumption,” he said.