Friday, October 18, 2013

High Ranking China Official: "The Central Government Must Control Urbanization" (SBS Dateline on China's Empty Cities - Part 2)

Australia's SBS Dateline revisited China to see the progress of its urbanization plan (watch SBS Dateline's Adrian Brown tour through China's empty cities and malls in 2011), and it looks like nothing has changed. There are still ghost cities with empty apartment buildings, and the South China Mall they visited is now "crumbling." Most of China's empty urban developments and western city clones are being used as tourist attractions or for wedding photos. But the Chinese government is in the process of moving millions of people from their homes in the countryside to apartments in high rises, so it will be interesting to see what these cities look like in a few years. But, as noted previously on my blog (1, 2, 34), all of the debt being used to finance mega "mal-investments" in the country could cause a financial crisis if credit growth isn't managed. Like the U.S. in 2008, China's central government and the PBoC could end up bailing out all the toxic debt and the financial system to prevent a deflationary collapse and social unrest.

Here's what a high ranking official in China's government said about some of  "unreasonable urbanization measures" being implemented via the transcript (video below).

It’s a build, build mentality that has some high ranking officials concerned.

LI TIE (Translation):   The central government must control urbanisation, it must stop any fanatical actions by local authorities who blindly and hastily implement unreasonable urbanisation measures.

Li Tie heads the country’s top economic planning agency. For such an influential figure, his language is refreshingly frank.

LI TIE (Translation):   Urban planning in many cities is done at the will of the governor. A governor may be fond of a Western urbanisation model and may want to replicate it to prove that their city can out-perform the West. These urbanisation efforts are superficial.




Links on China's credit growth

  • Fitch on China: "There Has Been No Progress in Rebalancing the Economy Away From Investment Towards Consumption, Year to Date." (DV)
  • Moody's: Chinese Property Developer Margins Under Pressure (DV)
  • The Sum of Bad Debt Fears at China's banks - Reuters TV (DV)
  • Kynikos' Jim Chanos: Every Three to Four Years China Doubles its Debt Relative to its GDP, Still Short China (CNBC Video) (DV)
  • Is China Just Following the Fed? - Reuters TV (DV)
  • Chinese Banks: Indebtedness Continues to Rise, With No Deleveraging in Sight - Fitch Ratings (DV)
  • Inside China's Surreal Housing Bubble (60 Minutes) (DV)
  • China’s spending 39% of its GDP paying off debts (Quartz)
  • $3.9 Trillion Of Local Gov Debt In China . . . And Counting (Forbes)
  • New Warning Issued on China Local Government Debt (WSJ)
  • China's Local Government Financing Vehicles (LGFV): 7 Things You Should Know About China's Local Debt Bomb (IBT)
  • State Researcher Says China Local Debt May Top 20 Trillion Yuan (Bloomberg)
  • Researcher Puts China's Local Government Debt at $3.3 Trillion (WSJ)
  • Fitch's Charlene Chu: China Will Have Replicated the Entire U.S. Commercial Banking System in Five Years (Video) (DV)
  • China Economics Seminar: The Real Risk In China’s Local Government Debt (INET)

Links on China's urbanization and GDP growth

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