CHINA’S BUBBLE?

IS CHINA A BUBBLE? AND WHAT IF IT BURSTS?

Luxury goods are selling fast, houses are barely affordable, and there are too many office buildings. China’s economy is showing signs of overheating, but economists say it won’t boil over. Sound familiar?

Clifford Coonan

The Irish Times, January 22, 2010

The view from the 52nd floor of the Ritz-Carlton in Shanghai is spectacular: China’s high-net-worth individuals can gaze across some of the world’s most expensive properties while choosing pricey reds from the encyclopaedic wine list and tucking into antipasti so authentically Tuscan they are guaranteed to melt the heart of even the stoniest of billionaires. The sleekly groomed staff are French and Indian as well as Chinese, and the sight of Shanghai’s new rich is so far removed from the China of 20 years ago that it has an almost science-fiction quality.

Could all this simply go pop? Something about the sheer level of luxury brings to mind the decadence of the last days of the Raj, ancient Rome or the latter part of the Celtic Tiger. It’s not hard to see why people are fearful that the strong rise in China’s property market, which is a key factor in the country’s economic rise, could turn out to be a bubble that will burst and take the fragile global economy with it.

Satellite images released recently showed thousands of empty “ghost towns”, much like the ghost estates in Ireland, and there are lots of empty offices in the central business districts of many major Chinese cities.

A few floors down in the same hotel, at a showcase fair for China’s luxury-minded billionaires, Norah Jones warbles softly through Harman Kardon speakers as Rupert Hoogewerf, publisher of the Hurun Report, which counts China’s wealthy and analyses what they do, lists off the brands favoured by the country’s rich: Patek Philippe watches, Mercedes E-Class cars, Gulfstream jets, Armani suits, Azimut yachts and Louis XIII brandy.

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