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China: High GDP, 64 million empty apartments.

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

#71

Post by westiseast »

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…

oh, and another thing - people have no way to invest outside of China? What?

Any quick google search will tell you about the hundreds of millions of government money being embezzled by officials outside of China, not to mention rich Chinese citizens legitimately taking American citizenship and investing their money overseas...

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

#73

Post by VMG »

w1ntermute wrote: post #64
whatwhatwhat wrote: post #63

Earlier quoted context omitted.

Because you aren't actually in America.

Yes, I already gleaned that much. My question is how a client I would only communicate with over the internet and/or phone could possibly know this.

You have to appear in person to get certain paperwork done.

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

#74

Post by joe_the_user »

jhancock wrote: post #39
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…

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…

Do you have any references to corroborate your statement that "The housing and public market bubbles, prior to them occurring, were understood effects to China's growth plans."?

I would be very interested how much discussion China's policy makers have had on this question.

I don't think it is a given at all there has been a lot of discussion around this making it to highest levels - the consequences of the US housing bubble clearly weren't expected by US leaders despite the US having many, many intelligent policy makers (some proportion of whom could certainly see the crash coming).

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

#75

Post by [deleted] »

joe_the_user wrote: post #74
jhancock wrote: post #39

Earlier quoted context omitted.

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…

Do you have any references to corroborate your statement that "The housing and public market bubbles, prior to them occurring, were understood effects to China's growth plans."? I would be very interested how much discussion China's policy makers have had on this question. I don't think it is a given at all there has been a lot of discussion around this making it to highest levels - the consequences of the US housing…

[deleted]

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

#76

Post by webXL »

As long as these empty buildings don't fall down from neglect, and the money couldn't have been spent more wisely (i.e. these will serve a valuable service some time soon), then I don't see this as a big deal. But more than likely, the glut of resources devoted to housing means neglect in some other place of the economy.

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design -F.A. Hayek, The Fatal Conceit

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

#77

Post by jackityquack »

They do have 1,000 million people and counting. 64million is only 6.4% That isn't that high in reality. Give China a break. USA has a rental vacancy rate of 9.7% and an owner vacancy rate of 2.6%. So combined vacancy rate of 12.3%. So yeah, US's is higher. http://www.census.gov/hhes/www/housing/hvs/hvs.html

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

#78

Post by stretchwithme »

wisty wrote: post #58
stretchwithme wrote: post #46

Earlier quoted context omitted.

Government incentives aren't that big? In the US or in China? You think empty cities crop up all on their own? With no rents being collected, you think people will just keep building and tying up their capital for no reason? If you mean the US, the incentives are not trivial. Interest rates are a big one and they are kept artificially low. You can write off your interest. You don't have to pay capital gains taxes on…

First off, bubbles can have many causes. Cheap, stupid credit, feeding off itself can be the main one. The government regulates credit; so ultimately it failed its duty if credit blows up. I'm just not sure if this is your point, or if you think prescribe to the "the market knows best, any problems are caused by the mere presence of the government, and wouldn't be caused in a free-market utopia" philosophy of Alan Gr…

I'm not claiming non-empty cities are built by crazy investors.

I don't know whether particular empty cities are caused by local or national government in China, or both. I was merely arguing that government was distorting things with incentives or coercion.

Cheap stupid credit's the cause? I agree. But in a free market, government does NOT regulate the cost of borrowing money. That's governed by supply and demand in a free market. The US is not a free market in this respect. Neither is China.

The gold standard was not the cause of the Great Depression; the collapse of the investment bubble created by the Federal Reserve, along with the interruption of international trade by the Smoot-Hawley Tariff Act caused the initial problem. Subsequent interference in the economy by both Hoover and FDR extended the problems.

The gold standard merely prevented the government from inflating away the dollar and using inflation to hide the consequences of other bad policies. Its a form of discipline that the founders wisely put in place to prevent the disastrous policies that many other governments have perpetrated throughout history.

But now the constraint of the gold standard is off and much larger bubbles can be created.

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

#79

Post by yaix »

whatwhatwhat wrote: post #65
yaix wrote: post #49

Earlier quoted context omitted.

Why is this downvoted? It is a valid point. Especially in 2008/09 they were rebuilding every second road in the Chinese city I life in, even though the roads where perfectly fine and had just been finished a few years earlier. Same for apartment buildings. They can not just stop building them, because there are literally tens of millions of people getting their income from constructing those buildings.

>They can not just stop building them, because there are literally tens of millions of people getting their income from constructing those buildings. Don't you see why this is obviously disastrous? There are so many analogies that can be drawn -- that I'm not even going to try. If you don't see why this is obviously ridiculous then read some stuff about the invisible hand of the market ( http://en.wikipedia.org/wiki/…

Of course I "see" this. But I also see short to medium term considerations by the CN gov't of political stability in the country. Especially at a time of imminent power transition to the next political generation.

Its called "political reality".

But yeah, I read about the theory you linked to, about 10 years ago, when I studied it.

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

#80

Post by joss82 »

wisty wrote: post #22
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.

Hurdles? 1) Language, especially when getting stuff like visas, work permits, incorporation, etc. You can stay on non-work (or business) visas, but it's not terribly legal. As for the English standard, imagine you have a country with 1 point something billion people, and speaking English was discouraged until about 20 years ago (except if you were in intelligence). How do you teach it? Only young people tend to be fl…

So, except for point 2, it's a matter of learning the language and culture thoroughly.
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