Thursday, October 6, 2011

64 Million Vacant Apartments in China

As a follow up to Vice President Biden's remark that there are somewhere between 30 to 50 million vacant apartments in China, Brian Shelley sends along a link to this video clip on China's ghost cities and notes that at the 5:40 mark of this video, the number of vacant apartments in China is reported at 64 million.

What's likely going on here is that the apartments were built by local governments, thus they are not reflective of market demand in any sense. These apartments would sell if the prices were marked down dramatically. Simple supply and demand economics tells you that, but local government officials, unlike private developers, will just sit on them and let them rot away rather than mark them down and take a loss.

A 64 million apartment vacancy problem is a big enough problem in itself for China, but it is likely reflective of many parts of the Chinese economy, where the government has played a major role. In other words, the GDP boom that is hailed by many, like Henry Kissinger, may be a huge facade.

The sad fact is that China never went into a full free market mode. Instead, government control is distorting what could have otherwise been impressive economic growth, after the shackles of Mao were thrown off. It looks, though, like China is really one big grand mess, with only pockets of thriving private sector activities.


  1. Imagine if they built solar panels instead. The end of global warming!

  2. This sounds EXACTLY like South America in the 70's. Huge public works projects and central planning in countries like Brazil, inspired by the Chicago school, to give the illusion of progress and growth. Which was followed by implosion and the ensuing economic/currency devastation from spending far in excess what was actually available. The credit card comes due, the bubble eventually bursts. But this time there is no 1st world left to help pick up the pieces.

    As for lowering the price, realize most of these apartments are priced around $70-100k. The average chinese factory worker pulls in around $9,000 a year. These apartments were never intended for the chinese people, only speculators trying to flip properties. Like the US, these properties will not be given away. They will sit and rot while the average person tries to get by in slums and poverty.

    It is a true evil.

    When this implodes China, I wonder if any of their manufacturing capacity would be forced to relocate? And if so, where? Or will it simply dry up?

  3. How can the people afford these apartments if their government pays them very low salaries for their work? China's economy is continually growing yet their people do not feel the benefits of it.