This is a street in the coal-rich city of Ordos, China where essentially no one lives. This is the sort of thing that bears cite as being the problem.The WSJ offered up a different take that is worth reading even if you don't draw the same conclusion.
Time has a photo essay that is interesting to look at. It does contribute and add visual context to the modernization theme that I have been writing about for a long time.
So the city is built, will people from more rural areas move there for coal jobs? Bulls would say yes bears would say no. I'm not sure whether Ordos will benefit from the migration or not but the city was built for 1 million people and as I understand it there are 200-300 million rural Chinese.
8 comments:
I find stuff like this fascinating, not just in a "wow, look at that" way, but also in a "ok man, you are REALLY looking for creative and wacky ways to make jobs" way.
The 2nd way is a bit worrisome.
I think that article ties into something we already know about China. People use property to park cash. You don't really have savings accounts in China, so if you look for something safer than the stock market, you're kind of stuck. One of the things fueling the property boom is that people park their cash in property/apartments, etc. So Ordos is just a bigger example of what already happens in the large coastal cities: tons of new buildings, etc. that are sold out but empty.
I had always through the city was built from scratch but it looks like it was built near an existing one.
Normally when expansion occurs in a city it happens as demand comes in and enough to fit the demand, or reasonably close.
Here though the chinese government is taking on extra risks...
1: If China relies upon construction for a large part of its GDP numbers then it has to keep building empty towns. Even if the previous empty towns fill up at a fast rate the government will be 'forced' to keep building. Sooner or later they will be left with empty buildings.
2: They run the risk that this new empty city takes too long to become populated with jobs and people. In 5 or 10 years will architecture styles and technology change enough that people do not want these buildings and want new ones built. That might be a non issue culturally as I do not know if China places a high value on those.
Reminds me, in a way, of the 'new towns' the British built after WWII.
Ugh.
Don't know if this says anything about the Chinese economy, but... ugh.
BillM
Speaking of jobs, this is a bit off-topic but I found it interesting. Study outlines a scenario of increasing demand for older workers in US w/in next 8 years, based on demographics, i.e. boomers retiring, fewer younger workers filling their spots.
http://tinyurl.com/2ehj2vr
While I'm skeptical this will happen to the extent described, it could offer some support for older workers who need to work longer, as you often suggest Roger.
This is somewhat old news as a video of this city ran through the internet in November '09. Here's a link to the video on my blog:
http://merrillovermatter.blogspot.com/2009/11/hey-buddy-can-you-spare-city.html
It is nice to see some actual pictures though. Damn thats freaky. Great spot for a movie set tho! :)
Are you sure this isn't a fake photo? I don't see a single chinese restaurant in the picture. No where on earth can you take a picture without capturing at least one in the background and afterall, it's supposed to be china...right?
The big question comes down to is this a mis-allocation of capital. Even if the homes are selling and even if Stephen Drone is right that this is a primary savings vehicle for citizens, it doesn't mean that the allocation is warranted or feasible.
Housing is a manufactured good. It is used for shelter. If the price of homes exceeds the average income, eventually prices will drop. Once that happens, development will slow.
The average income for a Chinese citizen is still around $4,000. Even at $21,000 for this area as the WSJ article presents, it is hard to justify the home prices in China (for many of the cities).
It seems to me that massive speculation exists right now. The government just banned the purchase of third homes for people. When this eventually blows up, I think it will be similar to our housing bust in that we will look back, and it will be painfully obvious that a bubble existed.
There is no doubt that China will experience higher growth rates than the rest of the world, but that doesn't mean they won't woefully mis-allocated capital during their rise.
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