Bloomberg’s Paul Allen reports from Dongguan, China on the New South China Mall, which has remained mostly vacant since it opened in 2005. Jim Chanos, the hedge-fund manager who was one of the first investors to foresee the 2001 collapse of Enron Corp., reiterated last month China is on a “treadmill to hell” because of a reliance on property development for economic growth.

(Source: Bloomberg)

Category: Real Estate, Video

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

27 Responses to “Dongguan Ghost Mall Haunts China’s Property Boom”

  1. [...] Dongguan Ghost Mall Haunts China’s Property Boom [...]

  2. doug says:

    Did he really say what I thought he said at the end? “We will be OK once we add more space”
    With a straight face? Was something lost in translation?

  3. rktbrkr says:

    Hugh Hendry has some video walking tours among empty China high rise condos and offices, they have been on Youtube for a while.

    China followed our example of how to overbuild. Construction work is about the only work we haven’t exported – if you ignore the large number of Mexicans doing construction work here, still hear lots of Spanish at the remaining residential construction sites here, guess the higher paid Americans are the marginal workers in our brave new world.

  4. steveh18 says:

    Reminds me of Patriot Place, outside of Boston . Space is leased, but other than game days (all ten of them), the tenants have to be dying.

  5. SCIA says:

    I couldn’t believe he said that either Doug…200,000 more sq ft??? Crazy.

  6. Peter Pan says:

    This problem can be easy solved. Imagine a black market supermall. Just invite in organized crime to put up faux retail store fronts but actually sell black market items such as weapons, drugs, prostitution services, sex slaves (buy or rent to own), near extinct animals & organs, human organs, etc.

  7. farmera1 says:

    Crazy? Just think of what was going on in the US in 2004-2007 or so. Couldn’t build houses and malls and pharmacies fast enough. Getting loans certainly wasn’t a problem after all the banks could securitize any loan and get it a AAA rating. The FED made it easy. Any jack ass could get all the money they wanted to construct houses. Vacancies, no problem the houses would always be worth more tomorrow than they are today. Who cared if a few houses were MT and people couldn’t afford to make the payments. No problem.
    Need money to support consumption, just take out a second.

    The Chinese are just following our tried and true methods of creating wealth.

  8. louiswi says:

    It’s obvious the Chinese citizen is not fulfilling its obligation. For capitalism to work, the obligation is to be a CONSUMER. That means, he must buy stuff even if he can’t afford it or need it. Until the Chinese citizen gets it, their new system isn’t going to work.

  9. Sunny129 says:

    the last remark (adding 200,000 sq ft) reminds me:

    ‘Extend and pretend’ going on everywhere!

  10. AHodge says:

    chanos views have made me money
    not buying this yet as something that will hit either china’s overall growth or finance.
    somewhat like US in 80s
    china built 10 times as many condos for millionaires as could be sold– and luxury malls.
    but i have every confidence they will find people before long to live and shop in them
    they just have to get pricing to reasonale
    and give the funders a giant haircut first.
    oh i forgot those are mostly not chinese.
    so if you read chanos carefully he has a couple rather specialized bets i dont disagree with,
    but they will — in my view
    handle their bubble and overbuilding far far better than we did

  11. Sechel says:

    GMO Capital just put out a great piece contrasting the differences between China & India. The philosophy summing up the philosphy is that in China you are betting that the Gov’t gets everything right, and that in India you are betting that they stay out of the way and business gets everything right. In the case of China you get over-building/over-supply of things not necessarily needed or justified by market returns, which brings too many malls, often in the wrong location, top notch high speed trains providing great but money losing service. He argues that the over-capacity will be very bad for Chinese producers but very good for Chinese consumers. The article starts off saying…

    China: If you build it, they will come…
    India: You’re not going to build it, but they’ll come anyway…

    The other interesting question is how long can the powers that be keep directing production and allocating capital. The Soviet Union grew for I believe 20 years at very high rates, but nothing worked. It seems that China has done something similar, achieved very high rates, but producing things not consumed. If the trains and malls are of value in the future ok, otherwise I people like Jim Chanos and Hugh Hendry get proved right.

  12. sinomania says:

    Jim Chanos is the new Gordan Chang. His prediction of a Chinese RE asset bubble bursting is already almost a year old.

    The Pearl River Delta region is very overbuilt it is true. Worse than empty shopping malls there are unused airports in the region! But as Rktbrkr points out China is not alone in overbuilding. Remember that whole neighborhood of McMansions plowed under in Victorville, California? Or all the photos BR showed of failed housing communities in the sun belt? I recently was up in Riverside, CA area and stopped into a strip mall that apart from a Home Depot where I was one of about 3 customers every other shop was for lease. China does not rely on property development anymore the USA does – in both countries it is around 6% of GDP. Yes it may seem staggering for people like Paul Allen to see an empty mall in a place like China but when was the last time he walked around an empty convention center in any large American city? talk about wasted space…

  13. perra says:

    @sinomania real estate construction accounts for >50% of China’s GDP.

  14. Rescission says:

    I was in China two years ago. We visited all the Olympic Games area. It is now a ghost town. The “Birds Nest” sits empty and is hardly ever used. The swimming “Cube” has been turned into simply a tourist site and they have built a stage for orchestra concerts where the pool used to be. All the apartments and housing they built all sits empty and run down.

  15. HonestJohn says:

    Not to mention all of the pollution they are creating while they build these ghost malls and ghost cities

  16. hunjwaslike says:

    Heres a good Al Jazeera piece about one of China’s ghost cities. The city is called Ordos.

  17. JSchmid says:

    the last remark (adding 200,000 sq ft) reminds me of when Obama commented that we need to spend more money to avoid bankrupting the US.

  18. GeorgeBurnsWasRight says:

    Al Jazeera piece reminds me of what good reporting used to look like. Even BBC could get some pointers from it.

  19. egghead168 says:

    Dongguan is a very small tier 4/5 city in China. Ordos is even smaller. They don’t represent China. Take a walk in Beijing, Shanghai or other major cities and you will see people everywhere.

  20. ricecake says:

    But those are the old old ones. Already seen that years ago. Do you have new ones?

  21. sinomania says:

    @perra “real estate construction accounts for >50% of China’s GDP”

    Can you substantiate or document this claim? If so, please share.

    The largest component of Chinese GDP is investment (around 30% average); for USA it is consumption (70% or more) – these are known facts. Construction industry in both countries account for around 5-6% of GDP this is officially reported by both the US and the Chinese government. Of course you could chose not to believe either number. First we are told exports to USA dominate 50% of China’s economy (wrong all round and the EU is China’s #1 export market); now Real Estate. The problem with China critics is the reliance on urban myths. And that’s why we don’t understand China in this country.

  22. CitizenWhy says:

    I don’t really understand the situation in China, but I also think other Americans do not either. Including this expert.

    Why no mention that real estate was one industry in China left to private enterprise? For these large scale property developments to be built it was necessary to assemble large tracts of land, often by cheating people out of their land through bribing corrupt officials and judges. Then capital had to be spent, presumably by borrowing from banks owned by the government/Party. No doubt involving large kick-backs.

    All the big corporations and banks are owned by the government, that is, by the Chinese Communist Party and the small elite who control it. So what did the government lose through this property speculation (which produced many billionaires)? Anything significant? Or was the government’s capital replenished through profits from the industries it owns (many export driven), and through foreigners buying up stock in these government owned companies and banks?

    Whatever the answers to these questions are, and whatever the situation in China really is, we do not know. Any analogy to what has happened in the US is totally deceptive. For instance, these large Chinese developments are ghost towns, which means that no ordinary people bought into them, wasting their life savings. In the US ordinary people bought into the real estate boom and bust, thus severely injuring the US middle class. But was the middle class injured in China, or is it continuing to grow and prosper based on China’s other industries?

    All I can say is that when I visited China, and spent time only with Chinese people, they lived in large apartment blocks, very well built, and attractive. Thousands of other Chinese lived there too. The neighborhood shopping street was fully rented, busy and prosperous looking. The restaurants – excellent food, no Westerners – were booked solid.

    Americans should be extremely cautious about reading situations abroad, especially in Asia, through an overly American filter.

  23. Winkwonk says:

    Comments are under stating the planned expansion: narrator said 200,000 sq METERS (not ft.), so it would be at least 9 times or 1,800,000 sq ft. whew!

  24. victor says:

    China has something we don’t have: 1) some 300 million people ready to move into the cities from their miserable plots of land as soon as the next Nike shoes plant opens up and moreover 2) China has PATIENCE, they can wait and wait and wait, it is in their genes….

  25. [...] Even More Reasons Why China Sucks… the Phantom Real Estate Boom (Is This a New World Power You… [...]

  26. Greg0658 says:

    PeterPan and AHodge – 2 ends of the spectrum – LOL onto harsh my mellow
    the double-pyramid diamond of cash flow and IQs
    (no inference on aboves IQs)

    seems we been had – what savings we had invested in corporation stocks have been somewhat invested abroad to counter trade surplus (or plain laborer arb lure dangle) – now the corporations that sent product in those ships to the land of opportunity – they did well and shared with the shareholders I hear

    now payback will come home when China stays in the game and plays by our rules – doesn’t pull a nationalize for some reason – and the world takes our side over Chinas (W vs E)

  27. Greg0658 says:

    have ya caught the GE/Comcast/NBC Universal elephant dancing thru the jungle another boot scoot line dance to superiority .. I gotta get a plan too & a firehouse – I like cognos see some fires to put out

    I spent some time looking thru the archives (via Google @TBP) for that interconnected corporate boards chart (couldn’t find) – another play is this conglomerate parent – sub corp – satelite supplier

    I guess in the balanced world view – things will work out after the waste is disposed off – I guess maybe I feel used – years and years of paying into the system to be squeezed out before natural death

    since 1 of the remaining non-blacked out channels is dissing my state for his – I guess its no more Carhartts for me – they were probably sowed in China anyway … time to push for nudism I guess