November 22, 2014

WHAT A HOUSING BUBBLE ACTUALLY LOOKS LIKE...:

The End of China's Economic Miracle? (BOB DAVIS, Nov. 21, 2014, WSJ)

 When I arrived, China's GDP was growing at nearly 10% a year, as it had been for almost 30 years--a feat unmatched in modern economic history. But growth is now decelerating toward 7%. Western business people and international economists in China warn that the government's GDP statistics are accurate only as an indication of direction, and the direction of the Chinese economy is plainly downward. The big questions are how far and how fast.

My own reporting suggests that we are witnessing the end of the Chinese economic miracle. We are seeing just how much of China's success depended on a debt-powered housing bubble and corruption-laced spending. The construction crane isn't necessarily a symbol of economic vitality; it can also be a symbol of an economy run amok.

Most of the Chinese cities I visited are ringed by vast, empty apartment complexes whose outlines are visible at night only by the blinking lights on their top floors. I was particularly aware of this on trips to the so-called third- and fourth-tier cities--the 200 or so cities with populations ranging from 500,000 to several million, which Westerners rarely visit but which account for 70% of China's residential property sales.

From my hotel window in the northeastern Chinese city of Yingkou, for example, I could see empty apartment buildings stretching for miles, with just a handful of cars driving by. It made me think of the aftermath of a neutron-bomb detonation--the structures left standing but no people in sight.

The situation has become so bad in Handan, a steel center about 300 miles south of Beijing, that a middle-aged investor, fearing that a local developer wouldn't be able to make his promised interest payments, threatened to commit suicide in dramatic fashion last summer. After hearing similar stories of desperation, city officials reminded residents that it is illegal to jump off the tops of buildings, local investors said. Handan officials didn't respond to requests for comment.

For the past 20 years, real estate has been a major driver of Chinese economic growth. In the late 1990s, the party finally allowed urban Chinese to own their own homes, and the economy soared. People poured their life savings into real estate. Related industries like steel, glass and home electronics grew until real estate accounted for one-fourth of China's GDP, maybe more.

...it's when you have too much housing, unlike America, which has too little.  And they lack a president and a people who favor immigration.

Posted by at November 22, 2014 8:36 AM
  

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