Friday, June 27, 2014

China’s Replica of Wall Street is Full of Half-Built, Deserted Skyscrapers

The skyline of Yujiapu in the Chinese city of Tianjin looks more like an expensive, abandoned movie set than it does “China’s new Manhattan,” as the financial district was once billed. A patina of dust covers the glass doors of the 47 office buildings and hotels that still sit empty, and in come cases unfinished.
This Manhattan-style ghost city on some of the best real estate in Tianjin, a port city just south of Beijing, is a victim of China’s investment boom—and, as is increasingly apparent, its bust... 
Much of the construction ceased back in 2010, and the deserted avenues left behind reflect the reckless borrowing of local-government financing vehicles (LGFVs)—companies created by city and provincial governments to borrow cheaply from state-owned banks to fund prestige-boosting infrastructure projects. Built by one of Tianjin’s most powerful local-government financing vehicles (LGFVs), Yujiapu promised to become “the world’s largest financial district,” with at least 200 billion yuan ($32 billion) invested to create a new center of Chinese “financial innovation.”

As I have been reporting in the EPJ Daily Alert, a large part, but not all, of China's spectacular growth is phony growth. It is phony growth fueled by money printing by China's central bank, the People's Bank of China. Much of the money has been fueled into crony government projects that make no economic sense. Further, I suspect much of the residential and offices buildings consticted are unusable and never were.

In the ALERT, I have written more than once that I suspect that the coming downturn in the business cycle in China may well result in the greatest financial and economic collapse ever.


(ht Adam Muntner)


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