Thursday, October 27, 2011

The (Not So Great) Mall of China

Legal Insurrection has an intriguing video concerning the Chinese real estate bubble. The vast, well-maintained but almost empty new city of Zheng Zhou is haunting.

Gee, I wonder who’s going to be buying U.S. debt when the bubble pops?

7 comments:

richard mcenroe said...

Sometimes problems solve each other. For example, we have thousands of Occupiers who obviously have nowhere to live except tents and the Chinese have huge empty cities with a socialist government like the one the Occupiers claim to want.

See where I'm goin' here?

Paco said...

Hmmm, m'yes...

JeffS said...

I call that a win-win!

bruce said...

But Paco, aren't all these potemkin cities already paid for?

Meanwhile here in Australia baby-boomers own a large portion of all real estate, and will need to sell-down in near future as they retire. And we have an actual market in real estate, very much based on mortgages, ie pretty much nothing, a bubble.

I'm open to being persuaded otherwise, but I think the Chinese are ok here. With an aging population it's sensible to build infrastructure now if they have the money, even if it suffers some deterioration, it's still miles ahead of what was available before, and rising population will see costs of materials soar, while labour (maintainance) is more abundant.

But I may be completely wrong, what do you think further on this?

bruce said...

I mean here in Aust a lot of middle class/working class people own multiple dwellings they don't need, and we have some of the world's highest prices too!

bruce said...

I searched 'chinese debt' and came up with this.

Which points to a large bad debt problem in China's banks, but then "To be sure, China's semi-private economy means the government would still be able to bring significant resources - or arm-twist creditors - to contain the problem, he said."

No one really seems to know in the end. It sounds more like a feudal economy with debt at lower regional levels of the hierarchy, ensuring strong central control - maybe that's the plan.

Paco said...

Bruce: Already paid for? Could be. I just wonder how long the government can continue supporting such huge, unproductive outlays.

I think that, in China, most home purchases are for cash, with full, or at least substantial, upfront payments by the buyers. Which perhaps makes the untenanted apartments of Zheng Zhou something of an anomaly.