Monday 23 August 2010

CHINA’S EMPTY BUILDINGS

China Briefing

IS CHINA GROWING TOO BIG?

Chris Devonshire-Ellis

China Briefing, August 23, 2010

For many years now, as I’ve traveled China on business, I’ve been skeptical of the GDP growth figures. From Shenzhen to Changchun and from Wuhan to Kashgar, via Chongqing, buildings have been going up, rather like mushrooms after a rain storm, as signs of the new prosperity and growth of China.

In fact, every single Chinese city, large and small, seems to have acres of new developments – but all lying empty. The giveaway is a quick evening tour of residential and business blocks. If no lights are on, why were they built? Entire development zones with no businesses. Blocks upon blocks of high rise apartments for tens of thousands of families – all unused, empty shells instead of the dream homes the advertising hoardings proclaim they are.

Local governments and real estate developers have been working together to “improve the value of the land,” and reap income and gain growth credits for doing so, but how is the land improved if no-one is using it? In fact, land in which money has been spent to build a block of high-rises may show an increase in value on paper, but until those units are sold or rented out they have been erected at a loss. Value of land is a key indicator in China’s GDP growth figures, yet if no one is utilizing it, obviously those figures are wrong. Traveling from the airport to downtown Chongqing for example, there are masses of expensive, premium apartments and villas for sale. Chongqing’s minimum wage level is US$1,221 per annum. But priced at US$1 million each, who is going to buy them? Adding value to land only works if you have a market for the property, otherwise the valuation is just a paper exercise representing no real financial asset or gain.

(...) [artículo aquí]

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