China in Debt?

Here's a CNN/Fortune/Money article on fears over Chinese debt, by Katie Benner. 

I think it's interesting how the  article discusses the debt run up by China's LOCAL governments at the city and provincial level. Our collective imagination views china as a monolithic behemoth whose autocratic central government is in complete control. But nothing could be further from the case. Beijing can set the rules for who joins the party to become an official, and when. But it can't control what local officials do once they're in charge of their little territories. Indeed, local governments routinely ignore, for example, environmental and building safety directives handed down by the central government. Why should anyone, therefore, expect Beijing to be able to monitor and maintain their books?

For the last time, China is not defined by central state power and control.  It is better defined by surprisingly weak central state power over most things other than the abridgment of human rights.  

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It's all about the real-estate.  It's all about the buildings, so numerous in type, so often ridiculous in scale and design.  If the toilet paper industry were to somehow collapse, or should a particular brand of toilet paper do so poorly that investors scramble to pull their money out of the failed venture, you won't see uninhabited, multistory stacks of toilet paper lining the streets and roads as far as the eye can see.  No painful reminders you can walk into, no dusty outlines of furniture lining the inside of the toilet paper roll.  Boxes of unused toilet paper can be buried unseen in a landfill.  A house or an office building cannot.  

Buildings provide liquidity to their owners, so that in a good market with rising prices, the owner can put up a building as collateral for any borrowing they might need to do.  But buildings are also things you walk into, places you call home.  We sleep, wake up, buy and eat sandwiches, have sex or read to children inside buildings.  And when you build a building, you usually have to chop down some trees or demolish another building to do it.

China, in the past thirty years, has chopped down a lot of trees, and destroyed a lot of old buildings, to build new buildings -- specifically high rise apartment blocks and A-prime office space.  I was listening to Bloomberg Radio the other day, and Nick Lardy, professional China watcher extraordinaire, discussed with the host the possibility of a housing bubble and a broader "re-adjustment" (i.e. fucking catastrophe) he sees on the horizon.  One point he made that particularly struck me was the undeniable truth that if one were to visit a large Chinese city and see a new building under construction, and were to leave and then return five years later, there would be a good chance that the building would have already been completed, torn down and replaced in the intervening years.


This constant churning of earth, stone and metal means that the historical landscape of China - its old villages, hutongs, bell-towers, tea-houses and temples - are rapidly disappearing.  Chengdu, a city I've always wanted to visit, has painted blue whole neighborhoods that the city government intends to demolish and replace.  And the link provided is already two years old...


I guess New York City is sort of the same.  New York has some great landmarks, like Grand Central Station, or the Statue of Liberty, or the Empire State and Chrysler buildings.  But nothing is kept that serves no function, and even then it isn't kept as long as, say, some of the old colonial-era homes in Boston.   People come to New York City for the music, the art, and the culture, and the fact that no matter what they build, it still feels like New York.


Its only worth completely destroying and remaking your urban landscape as long as the economy improves, access to goods and services multiply, and people desire moving into the new buildings.  But if there is a slump, and the real-estate market in China is revealed to be a hollow and deflating bubble, than I could imagine the geo-cultural destruction becoming doubly insulting.  


There's nothing more depressing than an empty, modern-looking building.