World Net Daily quoted Patrick Chovanec, an expatriate and business teacher at Tsinghua University in Beijing, saying, “Who wants to be the mayor who reports that he didn’t get 8 percent GDP growth this year? Nobody wants to come forward with that. Therefore, the incentives in the system are to build. And if that’s the easiest way to achieve growth, then you build.”
What Mr. Chovanec is referring to is China building empty cities by the dozens then connecting them with expressways.
Although Mr. Chovanec has an impressive resume, I’m sure China’s leaders did not confide in him, which explains why he may be wrong.
In fact, what World Net Daily doesn’t mention is in the last thirty years China had the largest migration in recorded history of almost 300 million people moving from rural to urban China as it became an export nation resulting in the expansion of China’s urban industries.
The People’s Daily wrote in 2003, China was encouraging the migration of between 300 to 500 million people from rural areas to towns and cities by 2020, a transformation that Beijing hopes will help drive growth but which will also fundamentally alter the economy of the world’s most populous nation.
“A country where most of the population is in poor or remote villages will not be a modern and developed nation,” said Wang Mengkui, minister at the State Council’s Development Research Centre. “Our urbanization rate [of 39 per cent now is equivalent only to that of the UK in the 1850s, that of the US in 1911 and that of Japan in 1950.”
Wang Mengkui says, “I think our urbanization rate should reach 55-60 per cent of the population by 2020.”
Where do Mr. Chovanec and World Net Daily think China is going to house all those people as they move from rural to urban China?
Unlike democracies, where chaos, lobbyists and political agendas lead to mostly short-term decisions without planning for the future as in America’s case regarding the HUGE federal deficit and what I wrote about in India Falling Short, China’s leaders tend to plan long-term goals that benefit the most people.
China’s leaders have demonstrated for millennia (not just China’s Communist Party) that China’s collective culture often plans decades and centuries into the future, which explains the success of projects such as the Great Wall and the Grand Canal, which took centuries to complete.
This same long-term thinking led to modern, empty towns being built in Tibet years ago that are now filling with Tibetan nomads (I wrote of this in an earlier post) that suddenly found the grass they depended on to feed their herds gone due to global warming ending a lifestyle that had survived for centuries.
China’s leaders — being scientists and engineers instead of economists such as Mr. Chovanec — studied the potential future and planned for it, which is a benefit of being an autocratic one-party republic instead of a chaotic democracy that depends on short-term goals and quarterly profits to guide the decisions of accountants and lawyers.
What China is doing by building these empty cities, roads and railways is getting ready for the future.
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Lloyd Lofthouse is the award-winning author of My Splendid Concubine [3rd edition]. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.
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All these internal immigrants aren’t going to be living in high priced condo’s that I CAN tell you. Real estate that sits unused goes to seed. They’ve got a real problem and my opinion is their “growth” is illusory. Their government exploits the environment and their people, and uses their cut of the profits to build speculative real estate. It’s crazy.
I have considered the same thing regarding empty buildings sitting for years going to seed. The long term goal is to get ready for the migration that China’s central planners expect to happen. Half of it has already happened. The CCP studied similar migration patterns in England, Europe and the US during the industrial revolution and built these cities expecting the same thing to happen in China in the next few decades. At the start of the industrial revolution in the US, 95% of Americans lived in rural areas. Today about 20% lives in rural America.
Yes, the real estate market in China is crazy and eventually I suspect there will be regional bubbles bursting at some point as they have in the US on a regular basis. We have lived through several real estate bubbles bursting in California and seen the value of the homes we owned drop drastically and then slowly crawl back up in price. I’ve lived through gluts of empty homes in California sitting empty and sometimes unfinished. After the 2007-08 real estate bubble burst in the US, millions of homes ended up abandoned and in some cities, after homes were foreclosed because no one was paying the property tax, they were bulldozed leaving empty lots.
At times, commercial real estate also sits empty. For example, in our local town, an upscale shopping hub for our region, many commercial shops have been sitting empty for years now since the 2007-08 global economic crash caused by greed on Wall Street and from US banks. This city thirty minutes walking distance from our home moves the surviving businesses around into empty buildings sometimes in better locations and sometimes to break up a row of empty shops with the windows painted over to hide the vacancy. The reason one business that survived was moved from its old location was so there would be someone in that stretch of one city block instead of a row of empty shops.
China has a capitalist, consumer driven private economic sector now that makes up maybe 60% of its economy and these sort of things are expected. I wonder if they studied this happening in the West too—the booms and busts and the over-development in the rush to make money. There are always winners and losers and these empty cities could become losers but then again, maybe they won’t.
The Chinese have demonstrated an ability to patch things together and make them work. If the migration happens and people eventually flood into these empty cities and the buildings and infrastructure deteriorated, I’m sure the people will somehow make it all work even if it doesn’t work the way it was meant to.
I forgot: Those high priced condos that you say most people can not afford. I’ll tell you what will happen. Some rich guy will buy it and rent it out and instead of one family living there, you will find many people living in the same space sharing the cost of rent. If the people migrate from rural China to urban China as expected, it doesn’t matter if they have the money to buy or not. They will join together and pool their money to rent those same high priced condos.
I’ve been in Shanghai and seen this happen. I’ve seen high priced, high rise condos turned into dormitories with bunk beds crammed in one bedroom that sleep six or more people where maybe one or two in American would sleep. Seven families share one kitchen and and share the bathrooms too.
In a country with more than 1.3 billion people that is a collective culture where the family is more important than an individual, this has been a way of life for centuries. In fact, my wife grew up in a house in Shanghai that was built for one French family, but today seven Chinese families live in that house–more than twenty people–and one of the bedrooms on the second floor was where my wife’s family of six lived and grew up. There was a basement and three floors and two (maybe three – I don’t remember) families lived on the second floor.
In fact, we visited an older uncle of my wife’s in another part of Shanghai, and at the time, he lived in a space that was once a closet. There was just enough room for his small, one person bed, a chest of drawers with a small TV on top and a small window. There was enough floor space to stand in and dress. He shared the kitchen and bathroom with several other families that lived in the same house that was built for one Western family during the colonial era.
But I have learned that most Westerners often judge China from a Western perspective based on growing up in an individualistic culture where almost every family has its own home and every child has his or her own bedroom and they do not share that space no matter how large it is with other families they are not related to as is common in China.
In California, our home has 2400 square feet and my wife has said more than once, if this house were in China, seven families could live in it.
There’s one more fact to consider. No one buys the land in China and owns it. They buy a lease that may run 70 years and then request an extension. That means the landlord that owns every building and square inch of land in China is the CCP, and it can take back buildings at any time and redistribute as it sees fit.
If a speculator buys condos and then stops making payments, the government just takes those units back and then, at its discretion, may move migrant workers into the same building and charge them a rent they can afford.
I do appreciate your effort to effort to diffuse many misconceptions about China. I am a Chinese Indonesian, and I lived in China for 5-6 years before moving to Singapore. I agree that there have been many misunderstandings about China and Chinese people.
However, I feel that your effort would be of greater effectiveness if you don’t put too much emotional bias towards China.
For e.g. it is true that in China there are many empty flasts/buildings, all built by Mayor’s or party secretary’s to achieve GDP targets set by Central Govt. Why empty? though demand is huge, but not many can afford due to economic mishandling. But if we put things into perspective, modern China is still a young country. Their achievement is indeed great. However, it doesn’t mean that what they do is always right/correct. 🙂 But just like you, I have faith in their leadership, as they keep on learningm even from people who critize them a lot.
Btw, for FYI about recent article in chemical blog:
http://www.icis.com/blogs/chemicals-and-the-economy/2011/04/chinas-empty-shopping-malls.html
Thank you. If you read enough posts here, you may see a few that are not all positive but point out some of the flaws in a noncritical way. Mistakes happen. Crimes happen. Corruption happens. Illegal drug use happens. People gamble. That happens all over the world and I write about these things happening in China too but put it in a context that shows China isn’t the only place this is happening as the Western media often does (without balance).
A few times, not often, the Chinese government admits they are not perfect and I have mentioned that in a few posts quoting the Chinese leaders that admit mistakes.
If you read the “about” page, you will see that my goal is not to demonize China since so many in the West do that 24/7. Studies show that about 40% of Americans are Sinophobic.
Yes, China has built many empty cities and the costs are too high for many to buy in those cities. However, (and this is a gamble on China’s part, which may succeed but may not) China’s central government has a goal to have the same ratio of population between urban and rural China that the British and the US have.
China’s central government planners see this ratio as a sign of a developed country.
To reach that ratio, another 200 million people in rural China must move to urban China. Not wanting that 200 million people to swell cities such as Shanghais and Beijing to the point of breaking them, the plan was to build smaller cities in remote areas of China and attract people in those regions to those cities. Originally, the plan was to first build small manufacturing industries in those areas and build the cities around that manufacturing base.
Then the 2008 global financial crises hit and changed everything. From Chinese that I’ve talked too, the central government was very angry at America for allowing that to happen.
Originally, the plan was the build the new cities at a slower pace as I said. Then in 2008, the global financial crises hit and about 20 million Chinese lost their jobs creating much unrest, which could have led to revolutions as we are seeing in the Middle East. To keep stability and harmony and put many of these people back to work, China spend a lot of its surplus money building empty cities at a faster rate (and linking them by rail and expressway), which increased the risk that China might not reach all of its goals to develop the country to be another Europe and/or America with the same ratio of urban and rural Chinese.
The original goal was to build as the middle class grew and people could afford the higher prices.
What the planners in China are doing is a gamble. It always has been a gamble. The plan was supposed to take about fifty years after 1980. The slower pace before the 2008 global financial crises caused by greed and corruption in the US happened China had a much better chance at success. Now, we will have to wait and see. If China fails in its goal to build an economy around a large consumer middle class, some of that blame rests in the US due to the 2008 global financial crises.
When jobs are available in the new and empty cities and people start to move there to earn more possibly the government will subsidize housing long enough for families to eventually reach the earning power of a middle class that will be able to buy a home or start a mom-pop business.
We will have to wait and see. There will be those that want China to succeed and many in the West (mostly Sinophobes) will want the opposite.