Las Vegas vs. China’s Replica Cities

Las Vegas Does Manhattan

Las Vegas Does Manhattan

When Las Vegas does New York, Venice, Egypt, or Paris, it is purely for show. These “mini-replicas” are meant only as enticement, to bring guests into casinos where they can promptly lose large amounts of money. People come from all over the world to these imitations — and then they promptly leave to go home, their wallets somewhat lighter.

Chinese replica-towns are larger than their Las Vegas counterparts, and represent a larger investment. They are meant as places for people to live and work. And they are situated firmly in the middle of China’s immense real estate bubble.

The Chinese replica of Manhattan is still under construction, but it is being built in an unfortunate neighborhood — not a good omen.

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. __Bloomberg

Chinese real estate developers have built replicas of Paris, London, Hallstatt (Austria), Jackson Hole, Aspen, a Swiss Alpine town (Spring Legend), and more.

In the outskirts of Shanghai stands a fake Eiffel Tower overlooking a replica of the Champ de Mars and rows of Parisian townhouses. This is not Disneyland in China, this is the gated community of Tianducheng, built in 2007 by real estate develepors Zhejiang Guangsha Co. Ltd.

Rather mysteriously, very little information about the town has been made available since it’s opening in 2007. This might be because it’s one of the latest in a string of near ghost towns that reveal a very serious problem in China… __Europe Clone Made in China

China is full of “ghost cities” — vastly underpopulated developments that sit and decay while the people of China, great and small, gamble on the future of China real estate.

Rather ominously Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong concludes,

“There will have to be a reckoning,” as 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.

But apart from that… and the residential real estate bubble.. and the commodsity financing ponzi scheme… and the promise of no major stimulus… we are sure China wil have a soft landing. _Zerohedge

China’s Property Wager

What does all of this mean? No one really knows, yet. Large parts of the Chinese economic system are hidden in the shadows, out of sight. No one believes the Chinese government would allow the Chinese economic bubble to collapse — if it had the choice. But in a big enough crisis, anything could happen.

What crises actually do is expose the underlying fragility and structural flaws within an economy and society. Some of this is endemic – financial markets are fragile because they are giant pools of sentiment and leverage at their heart. However, some of this is also self-inflicted and reflects poor planning and understanding on our part of the true complexity of an economy. If we don’t deal with these deeper issues (often born of our all too human myopia and ill thought incentives) and simply paper over the cracks, we can still get growth and a seemingly good life. But this is only for a while till the same problem comes back worse than ever. Unfortunately, the latter is often what happens.

Throughout history, therefore, you see waves of crises building up to a crescendo, [when] a crisis of finance eventually becomes a crisis of society. That is also usually when you have a debt crisis, rather than an equity crisis. __ Boom Bust Manias

Sometimes a crisis of society becomes a crisis of finance. Sometimes it is the other way around. China’s prospects may seem particularly precarious due to the precipitous transformation of a formerly impoverished and starving dictatorship into a global financial superpower. China’s aggressive rush to claim the mantle of regional hegemon complicates matters as well.

It is perhaps a time to watch and wait. Unless you are feeling particularly lucky, you may not wish to become too deeply involved, personally or financially.

Remember that the ongoing global pseudo-recovery is being largely enabled by China’s ongoing internal stimulus spending spree and real estate bubble. Should that bubble burst, repercussions will be felt globally.

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1 Response to Las Vegas vs. China’s Replica Cities

  1. jabowery says:

    Wait till they start populating their clone cities with mass produced clones of 168IQ Jayne Mansfield. Has anyone tried estimating a price elasticity of demand for that?

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