Chinese Megaprojects

China is an easy example of overcapitalization in parts of its economy, most commonly seen in:

1. Bullet trains that transport a few people

Parallel to these concrete jungles is China’s $300 billion high-speed rail network, the largest in the world. While flagship routes between megacities like Beijing and Shanghai are packed and profitable, the story changes drastically on the secondary lines built to connect these new ghost cities to the broader economy.

For example, high-speed lines running through sparsely populated provinces in the west and northwest—such as those connecting Lanzhou to Urumqi—often run with carriages that are 70% to 80% empty. The trains themselves are state-of-the-art, capable of cruising at 300 km/h. Yet, ticket sales barely cover the electricity costs, let alone the massive maintenance fees, staff salaries, and the multi-billion-dollar principal used to lay the tracks across treacherous mountain terrain.

Economically, these trains are overcapitalized assets: they possess immense fixed capital (the trains and tracks) but suffer from severe underutilization. The operational losses are so staggering that they must be continuously subsidized by profitable eastern routes and state bank bailouts.

2. Sprawling urban metropolises that are unoccupied

Drive two hours outside of Shanghai or Beijing, and you will find the most striking symbol of overcapitalization: the “ghost city.” Take Kangbashi District in Ordos, Inner Mongolia. Built to house one million people, this futuristic city boasts wide boulevards, world-class museums, luxury high-rises, and manicured public squares.

However, a decade after its construction, satellite imagery and on-the-ground reports show occupancy rates hovering below 20%. The capital invested—billions of dollars in steel, glass, and labor—was predicated on a migration boom that never arrived. Local governments borrowed heavily to finance these developments, betting on rising property prices to pay off the debts. Instead, they are left with massive fixed assets that generate negligible rental income or property tax revenue. The capital is literally cemented into the ground, yielding a negative rate of return while the interest on the construction loans continues to compound.

The Macroeconomic Trap

When viewed together, these two examples reveal a dangerous synergy: The state built ghost cities to fuel real estate speculation, and then built bullet trains to make those ghost cities accessible. In doing so, China channeled a disproportionate share of its national savings into unproductive fixed assets.

This is the hallmark of macroeconomic overcapitalization—too much capital chasing a speculative dream, rather than flowing into consumer goods, healthcare, or education that would have generated sustainable, organic demand. Today, local governments are drowning in debt servitude to the very infrastructure they built, and the “zombie” trains and empty skyscrapers serve as a quiet, costly reminder that a nation can indeed have too much of a good thing. The capital is there; the economic return is not.