Courtesy of Mish.
Malinvestment in China proceeds at a staggering pace. Technically, this growth adds to GDP, but eventually it will be written off.
Ghost cities, ghost malls, and empty train stations in China have been in the news for years. The world's largest mall is unoccupied and entire cities sit vacant.
We can now add another ghost city to the list, a big one. Bloomberg reports China Builds Its Own Manhattan — Except It's a Ghost Town.
China’s project to build a replica Manhattan is taking shape against a backdrop of vacant office towers and unfinished hotels, underscoring the risks to a slowing economy from the nation’s unprecedented investment boom.
The skyscraper-filled skyline of the Conch Bay district in the northern port city of Tianjin has none of a metropolis’s bustle up close, with dirt-covered glass doors and construction on some edifices halted. The area’s failure to attract tenants since the first building was finished in 2010 bodes ill across the Hai River for the separate Yujiapu development, which is modeled on New York’s Manhattan and remains in progress.
The deserted area underscores the challenge facing China’s leaders in dealing with the fallout from a record credit-fueled investment spree while sustaining growth and jobs in the world’s second-biggest economy. A Tianjin local-government financing vehicle connected to the developments said revenue fell 68 percent in 2013 to an amount that’s less than one-third of debt due this year.
“There will have to be a reckoning,” said Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong. Sales of bonds by local-government vehicles to repay bank loans are just “buying time,” he said. “The people will pay” for it through bank bailouts, recapitalization with public money or inflation.
Conch Bay showed few signs of life during a June 19 visit by Bloomberg reporters. Work on Glorious Oriental, a two-tower residential and office complex, had stopped, and at the north end of Conch Bay, the main building of the Country Garden Phoenix Hotel, billed as Asia’s largest hotel, was a deserted shell with no signs of any work under way.
Calls to Glorious Oriental’s Beijing and Tianjin offices went unanswered.
Wang Wei, a 34-year-old Tianjin resident, was driving through the area to check out property prices, finding them six times higher than what he’d be willing to pay. “I’ve seen a lot of reports about the area, but apparently it’s not a place fit for home — at least for now,” said Wang. “No shops, no schools, no hospitals and no neighbors.”
Buildings stand in the Conch Bay district of Tianjin, China. Photographer: Steve Engle/Bloomberg