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China: High GDP, 64 million empty apartments.

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Re: China: High GDP, 64 million empty apartments.

#31

Post by mousa »

iwwr wrote: post #25
fleitz wrote: post #23

Earlier quoted context omitted.

The losses aren't hidden, it's what one would call a long term investment. Because the Chinese government isn't beholden to a two year election cycle they're able to think over a much longer term horizon. Whether this is good/bad in the long term remains to be seen, as a more dynamic business environment might threaten their long term vision. 64 million surplus homes in China could be filled in a heartbeat. China is…

For every year they sit empty, they depreciate physically and they also need regular maintenance. Those are actual resources being used. And if the buildings are in the wrong location altogether, it may be cheaper to just tear them down than try to find a market for them.

Every year they need regular maintenance is a year a few more people have jobs within their capacity. In a lot of areas I think high level decisions are made to keep people busy. I'm fairly positive they give huge subsidies for hiring employees, because if you walk in a grocery store every aisle has a couple idle employees. By our standards that can't make sense but for them right now I think the main goal is keeping unemployment low.

Re: China: High GDP, 64 million empty apartments.

#32

Post by w1ntermute »

math wrote: post #14
whatwhatwhat wrote: post #9

How many apartments are vacant in the US, just as a comparison, does anyone know? That would make the number much more meaningful. Also, are these apartments dirt cheap and do they speak english in these areas at all? Maybe they could be a haven for startups, which are somewhat less bound by geography, if they were extremely cheap. I might just be dreaming though.

Try Phonm Penh (Cambodia). You can buy an apartment for $30k in a premium location. If you can't afford to buy, you can rent something decent for $60 a week or less. Food is about a third to half the price of what you're used to paying. Western standard places that are great to work in are springing up quickly now. Very friendly place. A lot of people speak English. Many of them have an entrepreneurial mindset (and r…

What kind of work do you do? I'm in college (CS major) now and am planning to start freelancing on the internet soon and continue that as my permanent job after I graduate. If I relocate abroad to a developing country but pretend to be located in America (just use my parents' address or something), I could make a killing off of this sort of thing and have a relatively high standard of living in a country like Cambodia.

Is the internet there fast/reliable (censorship isn't important because I can just use a US VPN)? How's the weather?

Re: China: High GDP, 64 million empty apartments.

#33

Post by j2d2j2d2 »

yaix wrote: post #15
trevelyan wrote: post #3

Nicely done video, but I think it gets the story wrong. The bubble is not illogical to start with. Thanks to currency controls most people have no way to invest outside China. The Shanghai stock market meanwhile has huge problems with adverse selection (bad companies pay to list -- successful companies list in Hong Kong or the United States). There are no property taxes in most of China, so people with money park it…

This is mostly what happens. Additionally, these new apartment complexes are often build in "new areas" of the bigger cities, to grow the city. China is trying hard to reach a level of urbanization comparable to the west, so they need to "grow their cities" somewhat aggressively. I have lived in two of those newly build complexes myself. First there is not much around, roads, maybe a supermarket and a few stores. The…

Everything you've said assumes these cities are going to explode with 1) enough people to buy the apartments and 2) enough people who can afford them.

Could you clarify your view on those two issues?

Re: China: High GDP, 64 million empty apartments.

#34

Post by wisty »

stretchwithme wrote: post #30
joe_the_user wrote: post #26

Earlier quoted context omitted.

The bubble is not illogical to start with. Thanks to currency controls most people have no way to invest outside China. Now wait a sec. The bubble is illogical. That it involves individuals making rational choices in a distorted market doesn't exempt it at all. In fact, it is a fine illustration of how distorted, artificial markets produce irrational results despite each person making choices that are logical for the…

Yep, its the artificial markets. People have no way of investing outside of Earth either, but that doesn't mean investment bubbles have to happen. Instead of building things people don't need, in a natural market, things are made that people are willing to pay for with their own money. The building boom in China has been directed by government. Banks were told to loan. The government also created the housing boom in…

I dunno. The government incentives aren't that big, and people do stupid stuff with and without government help.

There's no doubt that the government (and neo-liberal mainstream economists) failed to prevent the bubbles.

But there's other factors at play. Housing takes a long time to reach an equilibrium. It can take decades for people to move out of a house that's too big for them. The market just doesn't respond quickly, which is a recipe for instability and chaos (just ask anyone who's studied control theory, or chaos theory).

There might be a few players who are smart enough to see this, but the average real estate investor isn't a Wall Street quant, or even a trader. They are a 20-or-30-something year old, with no financial nous at all. They see 10 years of solid growth (due to demographic changes, income growth, and government intervention), jump on the wagon, and that creates a little more impetus.

Do you really think that the government is entirely pro-cyclical? That they choke supply, and give out free money while prices are rising; and increase supply and curtail loans while prices are falling? I doubt it. And if the Chinese government is to blame, why is it so damn regional? The Shenzhen bubble is nothing like the Beijing one, which is nothing like the Shanghai one, which is nothing like the Inner Mongolia one. Some of that is local government actions, but I dont't think it is in most places.

Re: China: High GDP, 64 million empty apartments.

#35

Post by ams6110 »

w1ntermute wrote: post #32
math wrote: post #14

Earlier quoted context omitted.

Try Phonm Penh (Cambodia). You can buy an apartment for $30k in a premium location. If you can't afford to buy, you can rent something decent for $60 a week or less. Food is about a third to half the price of what you're used to paying. Western standard places that are great to work in are springing up quickly now. Very friendly place. A lot of people speak English. Many of them have an entrepreneurial mindset (and r…

What kind of work do you do? I'm in college (CS major) now and am planning to start freelancing on the internet soon and continue that as my permanent job after I graduate. If I relocate abroad to a developing country but pretend to be located in America (just use my parents' address or something), I could make a killing off of this sort of thing and have a relatively high standard of living in a country like Cambodi…

Starting off your professional life by being deceptive is not something I'd recommend.

Re: China: High GDP, 64 million empty apartments.

#36

Post by matwood »

joss82 wrote: post #13
whatwhatwhat wrote: post #9

How many apartments are vacant in the US, just as a comparison, does anyone know? That would make the number much more meaningful. Also, are these apartments dirt cheap and do they speak english in these areas at all? Maybe they could be a haven for startups, which are somewhat less bound by geography, if they were extremely cheap. I might just be dreaming though.

You may be dreaming, but you're not the only one. What would be the hurdles to get a startup running in China? The Great Firewall? It's a big country so it's always possible to find a place that fits your personal taste. For example Sanya is a tropical island. Not much infrastructure there yet though.

What is corruption like in China? IMHO, that would likely be the largest hurdle to starting a business outside the US.

Re: China: High GDP, 64 million empty apartments.

#37

Post by jhancock »

j2d2j2d2 wrote: post #33
yaix wrote: post #15

Earlier quoted context omitted.

This is mostly what happens. Additionally, these new apartment complexes are often build in "new areas" of the bigger cities, to grow the city. China is trying hard to reach a level of urbanization comparable to the west, so they need to "grow their cities" somewhat aggressively. I have lived in two of those newly build complexes myself. First there is not much around, roads, maybe a supermarket and a few stores. The…

Everything you've said assumes these cities are going to explode with 1) enough people to buy the apartments and 2) enough people who can afford them. Could you clarify your view on those two issues?

Why does the price on failed buildings have to stay high? Why couldn't the government (through a bank, likely) reclaim a bankrupt project, restructure its books and basically "give away" the units?

China certainly has its share of problems. Having lots of extra housing for people to eventually move into is far from the top 10. Something related that is a bigger deal is the energy of heating and cooling housing built without 21st century insulation.

I think its useful to _not_ compare how the U.S. and EU have handled bailing out its financial institutions. China does not have to bail out its financial institutions in the same way if and when it comes to that. They could simply just let the rich take a haircut and give away a bunch of empty apartments to cool the angry masses.

Re: China: High GDP, 64 million empty apartments.

#39

Post by jhancock »

joe_the_user wrote: post #26
trevelyan wrote: post #3

Nicely done video, but I think it gets the story wrong. The bubble is not illogical to start with. Thanks to currency controls most people have no way to invest outside China. The Shanghai stock market meanwhile has huge problems with adverse selection (bad companies pay to list -- successful companies list in Hong Kong or the United States). There are no property taxes in most of China, so people with money park it…

The bubble is not illogical to start with. Thanks to currency controls most people have no way to invest outside China. Now wait a sec. The bubble is illogical. That it involves individuals making rational choices in a distorted market doesn't exempt it at all. In fact, it is a fine illustration of how distorted, artificial markets produce irrational results despite each person making choices that are logical for the…

I'm not sure exactly what 'trevelyan means when he says its not illogical. Though I would use the same term. The housing and public market bubbles, prior to them occurring, were understood effects to China's growth plans. When I say it was not illogical, I am telling you that China's economists and other planners carefully considered this part and parcel to bootstrapping the economy.

How they handle things from here is going to be interesting and a test of the government's ability to reign in corruption and clean up financial loses where needed...and about a thousand other things.

Re: China: High GDP, 64 million empty apartments.

#40

Post by [deleted] »

matwood wrote: post #36
joss82 wrote: post #13

Earlier quoted context omitted.

You may be dreaming, but you're not the only one. What would be the hurdles to get a startup running in China? The Great Firewall? It's a big country so it's always possible to find a place that fits your personal taste. For example Sanya is a tropical island. Not much infrastructure there yet though.

What is corruption like in China? IMHO, that would likely be the largest hurdle to starting a business outside the US.

[deleted]
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