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Tuesday 9 March 2010
A building boom of towering heights
Huaxi township in the Yangtze River Delta is a symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades.
Huaxi township in the Yangtze River Delta is a symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades.
Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan (HK$90,940) - almost four times the national average - allows Huaxi to claim itself as China’s richest village.
Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-metre tower. The revolving restaurant atop the “New Village in the Sky” offers sweeping views.
Marc Faber, publisher of The Gloom, Boom & Doom Report, said China was overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you have overcapacity,” Faber said earlier this month. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.”
Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-metre skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai.
Such undertakings figured in warnings hedge fund manager Jim Chanos delivered last month that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls, and in underused infrastructure would weigh on China, Chanos, president of New York-based Kynikos Associates, said at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.”
China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 per cent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off.
Last month, banks lent a further 1.39 trillion yuan - almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 per cent to US$8.13 billion.
While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets.
In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On February 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 per cent year-to-date, after gaining 80 per cent last year.
“If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees US$300 million at Hong Kong-based Marc Faber Ltd.
Some beneficiaries of the government efforts have ploughed their loans into real estate and stocks. Property prices in 70 cities jumped 9.5 per cent last month from a year earlier, government data show.
Instead of concentrating on core businesses, giant state-owned enterprises have bet on real estate, said Zhang Xin, a former Goldman Sachs Group analyst who is chief executive of Soho China, the biggest property developer in Beijing.
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A building boom of towering heights
Bloomberg
23 February 2010
Huaxi township in the Yangtze River Delta is a symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades.
Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan (HK$90,940) - almost four times the national average - allows Huaxi to claim itself as China’s richest village.
Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-metre tower. The revolving restaurant atop the “New Village in the Sky” offers sweeping views.
Marc Faber, publisher of The Gloom, Boom & Doom Report, said China was overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you have overcapacity,” Faber said earlier this month. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.”
Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-metre skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai.
Such undertakings figured in warnings hedge fund manager Jim Chanos delivered last month that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls, and in underused infrastructure would weigh on China, Chanos, president of New York-based Kynikos Associates, said at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.”
China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 per cent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off.
Last month, banks lent a further 1.39 trillion yuan - almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 per cent to US$8.13 billion.
While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets.
In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On February 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 per cent year-to-date, after gaining 80 per cent last year.
“If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees US$300 million at Hong Kong-based Marc Faber Ltd.
Some beneficiaries of the government efforts have ploughed their loans into real estate and stocks. Property prices in 70 cities jumped 9.5 per cent last month from a year earlier, government data show.
Instead of concentrating on core businesses, giant state-owned enterprises have bet on real estate, said Zhang Xin, a former Goldman Sachs Group analyst who is chief executive of Soho China, the biggest property developer in Beijing.
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