A dangerous proportion of China’s vaunted GDP is based upon capital misallocation, overproduction, and “broken window” style investments. The “demolish and build” cycle so prominent in many Chinese cities is only one case in point.
Human “Monkey Brains” are Easily Impressed by Size and Glitter
Beneath its glossy exterior, ghostly troubles haunt the daunting Shanghai skyline. Only 20% of office space is actually occupied. So while Shanghai’s skyline paints an impressive facade of China to the world’s gullible, a deepening problem of “ghost tower architecture” spreads outward from Shanghai to other Chinese cities.
For two decades, Shanghai’s skyline has symbolized China’s economic renaissance and modernization. That’s by intention. In 1991, the local government held a competition to design a signature business district on the riverfront. The winning proposal included three supertall buildings intended to represent the rise of Shanghai’s financial district — and of China more broadly.
… The only problem? Finding people to work there: Only 60 percent of Shanghai Tower is rented out, and only a third of current tenants have actually occupied their leased space. __ Bloomberg View
Other cities have followed Shanghai’s “skyscraper facade” model, and are beginning to suffer from the same ghostly after effects. Back in the 1990s, China was booming and flush with foreign direct investments, technology transfers from the west, and an export bonanza that simply would not quit. Now, everything has changed. Today’s Chinese skyscraper boom is built on an entirely new economic model, which is quite unsustainable.
Famed capital manager Kyle Bass says: “I don’t know how they can hold this all together. The numbers are telling me that we are right. The numbers are getting so bad so quickly.”
Some 46 percent of the 500-foot-plus buildings under construction in the world are in China, partly spurred by local governments keen to emulate Shanghai’s skyline (just as the Shanghai government once hoped). In recent years, seemingly every aspirational Chinese city has followed the same model of highly concentrated downtowns topped by massive towers.
Yet for all its symbolic value, that model is almost certainly obsolete — and the Chinese cities of the future are likely to look very different.
One reason is that China’s breakneck urbanization is creating cities that sprawl further than ever, leading to long commutes, reduced well-being and economic inefficiency. __ BV
Since 2008, China has suffered significant losses of exports, foreign direct investments, and legitimate technology transfer from the west. Foreign owned factories are moving from China to Mexico and to friendlier countries in Asia. China’s economy has hinged on massive stimulus, local government driven city sprawl, shadow loans, and a massive indebtedness that is eating away at the pillar of corrupt state-owned enterprises.
Even China’s current diminished economic growth is largely an illusion, created by government policies and maneuvers which in the long run will have devastating effects on the lives of the Chinese people.
… the country’s economic growth has slowed considerably, and that changes the dynamics.
Worries about China’s economy are prompting companies and families to send their money out of the country for investment or safekeeping. If the Chinese central bank did nothing, the net outflow of money would cause the renminbi to weaken against the dollar. __ NYT
Many otherwise intelligent observers and analysts have become caught up in the excitement of the China boom –> bubble. But after all this time and turbulence, wise readers will have at least become sensibly sceptical and thoughtfully contrarian about China. Potemkin skyscrapers are no longer enough for intelligent brains — even for human monkey brains.
The “China Bubble” phenomenon still has a ways to go before most of Europe, the Anglosphere, and the free nations of East Asia wise up. But when things go “pop!”, those who “hoped for the best but prepared for the worst” will be feeling a good deal better than those with monkey brains who failed to read the portents.