The Chinese Collapse: A (MASSIVE) Housing Overbuild || Peter Zeihan

Trying to predict what the Chinese system will look like as it collapses would be a fool's errand, but exploring China's housing market in this context could be fruitful.

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#china #collapse #housing

[donovan]

I remember when I lived in Shanghai and I’d visit friends in the outskirts. It was a surreal sight, just rows after rows of monolithic apartments all the way to the horizon. It was like walking through an unfinished map in a video game.

[timbaker]

I was in China for a month the year before covid hit. I went from just outside of Hong Kong all the way to Beijing and literally saw canyons...I kid you not canyons of skyscrapers that all sitting empty. We started a game of trying to count and keep a tally of all the sky crane construction cranes and finally gave up. There were just too many to keep track of...in the various parts of the country. And it was everywhere...not just here or there. We would be in what appeared to be the middle of nowhere and up would pop a hundred cranes...and high rises that were under construction. It was crazy. 

We saw major...multilane highways that just went nowhere. One deadened just outside of our hotel on like the 20th floor. They would have had to knock down the hotel...a Hard Rock...and couple housing high-rises to complete it or continue it. It was total building mayhem.

We caught a train in Schenzen(sp) and it literally took hours...hours...on the bullet train to leave the urban sprawl. I had never seen anything like...nor anything comparable since.

I figured it was all a false propping up of their GDP...thus the Portland cement shortages of the past few years...but from your info it was driven by citizen investments, not a gov push to shore up GDP. Unreal.

[deja]

As a kayak guide for two decades on Maui I had the privilege of meeting many affluent Chinese. One time a large family came with an old patriarch. The weather got nasty before we could get to shore. When the old man had a problem in his single kayak, the entire family abandoned their grandfather to the stormy sea and the foreign guide, and he literally cried in shame. When we got to shore I scolded them for no team work and no loyalty, and he gave me a big tip. I remember thinking (as I towed him, politely ignoring his emotions), about the obvious disenfranchisement of the youth, and the women. I don't know why I remember him, but I aways have. Aloha 🌺

[mnkybndit]

Not only has it been overbuilt, much of the housing is crumbling because of corruption and cost cutting in the building industry.

[nekogato]

I once rented an office in a town called Huizhou. It was dirt cheap and I soon found out why. When I decided to explore the area around that building, I saw a huge number of relatively new apartment buildings on seashore that were completely abandoned and I doubt there ever was anyone who lived there. I stayed in a rental apartment and that apartment was the only one inhabited on the entire floor. That was a truly surreal experience.

[leondonald]

Some economists have projected that both the U.S. and parts of Europe could slip into a recession for a portion of 2023. A global recession, defined as a contraction in annual global per capita income, is more rare because China and emerging markets often grow faster than more developed economies. Essentially the world economy is considered to be in recession if economic growth falls behind population growth.

[markbailey]

What Peter doesn't mention here (unless I missed it), is that while there may be sufficient empty housing stock in China to house the entire population twice over, much of it is simply in the wrong place. In the major cities, especially Beijing and Shanghai, the cost of housing is astronomical and has become a major drag on the economy and a further contributor to China's onrushing demographic catastrophe. In other parts of the country, however, vast housing estates lie virtually empty because nobody wants to live there, but local authorities are dependent on land sales to developers for significant proportions of their revenue, meaning that the cycle of borrowing, building and bad debts keeps going round and round virtually unchecked. And everybody expects the government to step in and bail them out when things go bad. It's a completely rotten system that is only going to get worse as the Chinese economy continues to implode and the Party-state prefers internal repression and nationalistic tubthumping to meaningful structural reform - especially the boosting of internal demand through the construction of an effective and comprehensive social welfare system.

[AK-wnri]

I have lived in China and must say that their "prestigious" builders also make crappy apartments. My friend bought a new apartment and from outside it looked amazing, but quality was abysmal. Walls were made of concrete but you can remove it with your hand and little pressure. Apartment then started shaking as structural pillars developed cracks. You cannot sue builders in China as the company owners are CCP members. My friend had to leave the apartment and lost all his savings and has mortgage to pay for the apartment he cannot live.

[gingerkilkus]

Well it's time for the BRICS- New World Order to come up with a default reserve currency or simply go back to gold as the reserve. It will be too chaotic for each country to trade in their respective currencies with the daily change in exchange rates.

[ivanmihaylov]

Peter never fails to whisper sweet nothings into my left ear

[Michael_Lorenson]

_And, _ all of that may not even factor in the incredibly poor quality of so many of the structures (houses, buildings, etc) built during the boom years. Many are literally uninhabitable, and have been since they were built. I don't have specific data on this problem, but as someone who has done business in and has actually visited China, Taiwan, and Hong Kong, I expect that a shocking percentage of these structures will simply have to be knocked-down and carted off to the landfills. _Financial armageddon_ for everyone in China seems assured, to me.

[codyj]

Chinas home ownership in Canada has been absolutely brutal on the Canadian system -driving up costs leaving literally entire subdivisions with no one living in them.

[jasonbraun]

I remember traveling from the airport to downtown Beijing about 10 years ago. It was close to sunset and the air was thick with smog, thicker than New Delhi in the summer. It smelled like coal and dirt. Off the highway there were these huge apartment cities, they looked like Co-Op City in the Bronx only without people, cars, just completely vacant and newly built. I saw at least 4-5 of these small cities. I remember thinking what the hell is that all about?

[MikiCab]

In China the buyers will also borrow money from relatives for the down payment. I met lots of Chinese there and they would tell me their relatives loan them money to help them buy homes . I worked with 2 Chinese in the USA and they would tell me the same and that since they worked in the USA they were expected to loan money to relatives in China. They complained that when they went back to China they had to bring back $10k to give out as loans. $10k because that is the max cash you can take on a plane without declaring it. It is not just the people buying the house that is loosing their money. It is their entire family.

[alanalew]

10 years ago I asked friends in China how these high rise housing projects that are over 90% empty could be economically sustainable. Their answer was that they trusted the government (mean Beijing/CCP) to come up with appropriate policies should that becomes an issue. Good luck with that!

[StevenfromTX]

There is no personal bankruptcy in China. People will live the rest of their lives trying to pay off the mortgages on those properties. They may also spend that time paying for properties their parents bought. As their people fail their systems will fail. The number of things in our houses that say 'made in China' will start to disappear. Maybe other countries will step up before that toaster breaks, maybe not.

[Alphasig]

Don’t forget that bankruptcy in China is different in the fact you lose the asset but still owe the loan. Bankruptcy doesn’t get you out of debt.

[ramonschliszka]

We should start calling Peter “the teacher”. Such clear explanation, I wish I had a teacher like that growing up.

[DaleSteadman]

I've been consistently pointing out for years that China's rapid growth is unsustainable, and now it appears that the consequences are catching up with them.

[nightspore]

I’d be surprised if the value of real estate assets is even a quarter. A lot of projects remain unfinished, and then there’s the tofu-dreg quality issue. Moreover, Japan and South Korea had friends, notably us, where China is mostly hated, loathed, despised, and not liked. China is giving a whole new meaning to circling the drain.