?-Towns: China and the Austr[al]ian Business Cycle


If Omega Man had lived in this town he could have been happy.

Australian Dateline's Adrian Brown travels up to the middle kingdom to see what happens when a planned economy produces not only Ghost Towns, not only Ghost Malls, but Ghost Mixed-Use New Urbanisms. 

Unfortunately not embeddable (do they know about YouTube down under?), but watchable here. Land of the Dead fans will enjoy the many views from empty luxury apartments onto sweeping landscapes of dirty shacks. Supporters of the Common People will enjoy the erhu-scored visit to those dirty shacks – which features a couple who can't afford to have their daughter live with them, let alone purchase one of the condos that are priced from $75,000 AUD ($77,572.50 U.S.) to $100,000 AUD ($103,430 U.S.). And if you're in a Blue Christmas mood, dig the guy trying to sell toys from his store in the largest vacant mall on earth. (Link courtesy of Eric Hanneken.)

I'm not sure the numbers in this piece indicate that China's real estate bubble is headed for a deflation as precipitous as the continuing correction in the United States. One billion people against the 64 million vacant units in China estimated by real estate egghead Gillem Tulloch comes to one vacant unit for every 15.6 people. Three hundred million people against the 19 million vacant units in the U.S.A. estimated in this 2009 Bloomberg story comes to one vacant unit for every 15.7 people. And that's in the early stages of the American correction, which has continued since then and accelerated most recently. In fact if Brown really wants to see swanky streets full of empty houses, I invite him to visit a little place called Los Angeles. (You can stay in my car, Adrian.) 

But the show is a haunting look at misallocation on a vast scale. As Tulloch notes, all the new construction is boosting GDP, but "It's not the quantity of GDP that matters. It's the quality." I don't know whether it's all going to go south. To my eye it looks pretty far south already, but then I've felt the same way about my own country since two recessions ago. The one thing I do know is that if it all does go south, everybody will blame capitalism

P.S. to old China hands: I know guai doesn't translate exactly into "ghost." But it looks cool.