What are our commodity PRICES / our primary industries dependent on? China’s ghost cities aren’t going away... Back in 2010, residents of Kangbashi (new city of Ordos) were defensive when the place was dubbed a ghost city, but now many had come to accept it. ..Schmitz said that many people had abandoned these ghost cities & moved back home. I met dozens of migrant workers who were renting vacant office spaces as apartments for as low as $US65 a month. China’s economy today is very different. It’s slowing down and China’s economic planners are taking the first steps to rebalance the economy from one built on investment-led growth to one built on consumer growth. ... ... I have a hard time believing people will eventually move into these empty complexes in the next five years, especially in the scenario of a cooling economy. The other thing to keep in mind is that many of this new housing isn’t built well, and it’s hard to imagine them retaining their value over the time it may take for China’s economy to return to its glory days. I think another danger is that once housing prices begin to plummet — which we are already seeing initial signs of in second tier cities in China — it will devastate the financial stability of cities like Ordos. ... Some of them will survive — we’ve already seen that happen in places like Zhengzhou and even in some of the exurbs of Shanghai that have filled out — but many won’t. I was talking with Arthur Kroeber at GK Dragonomics a couple of months ago, in my mind one of the best experts on China’s economy, and he was telling me about the city of Guiyang and how the province it belongs to, Guizhou, has an 80% debt-to-GDP ratio, which is incredibly dangerous. Arthur’s usually pretty bullish on China’s prospects, but he threw his optimism out the window when talking about the empty suburbs of that city, where hundreds of thousands of apartments sit, empty, while the largely mountainous province continues to plod along as one of China’s poorest. ..
Posted on: Sun, 21 Sep 2014 00:30:29 +0000
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