Patrick Chovanek, who writes from China, features an South China Morning Post story on his blog that helps give a better sense of the scale of overinvestment in real estate projects in China than isolated pictures of large, empty buildings. Data, of course, would be nice, but the Chinese officialdom specializes in misleading statistics.
From the South China Morning Post (via Chovanek):
China’s economic stimulus programme has accelerated the already aggressive pace of urban development in the country. But while investment in construction is creating much-needed infrastructure in some cities, it is also adding to the number of ghost towns with nearly empty facilities in other parts of the mainland….
Over in Guangdong, many residential units sit empty, said Neeraj Sawhney, a Hong Kong textile trader who often travels to the province.
“I have seen houses and shops built in second and third-tier cities in Guangdong in 2005 that are still empty,” he said…
China’s fixed-asset investment increased at a faster rate after Beijing launched its four trillion yuan (HK$4.5 trillion) stimulus package in late 2008 to combat the global economic crisis. Investment rose 30.1 per cent to 22.5 trillion yuan last year, 4.6 percentage points higher than in 2008, the National Bureau of Statistics said. Gross domestic product grew 8.7 per cent last year, thanks to the stimulus.
To support the stimulus, banks lent out a record 9.59 trillion yuan last year, of which a quarter went to infrastructure construction….
Although it is difficult to judge any single project as unviable, given that so many massive projects are being rolled out, the probability of waste increases, Chovanec said.
“All over the country, every province has at least one mega project. It’s one thing to build one mega project over a 10-year plan. It’s another thing to build this 10-year project in two years and do many of them all over the country. How much capacity expansion can the economy digest at one time?”….
“I can’t think of any economy where that rate of growth is sustainable,” Bruce Richardson, an American businessman living in Yingchuan, said….
Some local officials have realised the massive build-up is generating undesirable effects and are switching towards sustainable growth, including Yun Guangzhong, the mayor of Ordos, a city in Inner Mongolia.
Ordos, with a population of 1.55 million, has been described as a “ghost city” in blogs and Al-Jazeera television, because it contains a newly built city centre with ultra-modern buildings that is nearly empty. Ordos’ population density is 17.8 people per square kilometre, compared with an urban density of 10,606 people for New York City…..
In contrast to focusing on building infrastructure last year, Yun recommended alternate policies like attracting competitive industries to Ordos and increasing jobs this year.
Yun admitted failings in the administration of projects, saying: “We must not undertake prestige projects for the sake of image and must not fake data.” …
Jonathan Woetzel, a director in the Shanghai office of international consultancy McKinsey, said: “There is a lot of living dead out there.”