China’s Building Boom May be Coming to Earth
Nov 2011 (Reuters) – The monumental, neo-Mongolian sculptures, empty plazas and hulking concrete shells of buildings in Ordos district, deep in the steppes of Inner Mongolia, are a potent symbol of how China’s property boom can turn to bust.
Off the back of a thriving coal industry, the local government has been building a new city for one million people called Kangbashi. It sits virtually empty and property prices are falling.
Even in the old city of Dongsheng where people live and work, some 45 minutes drive away, a wave of investment has backfired. Cranes sit idle over unfinished skyscrapers and migrant workers are fleeing.
The swing in fortune – residents and property agents say prices have dropped by up to a third – is a severe example of what is happening in cities across China, including Shanghai and Beijing
China’s Debt v European Debt
All attention currently is on Europe where pundits are speculating on how the European Debt Crisis can be resolved. Some feel that the Euro will disintegrate and the German currency will double in value compared to other weaker currencies.
In spite of the enormous cost of rejoining East and West Germany, Germany has managed to keep its debt under control and its debt to GNP is quite reasonable. Germany has vivid memories of the massive inflation from the 1920’s and refuses to create massive amounts of currency to rescue its European partners. While France is announcing agreement on measures to mitigate the crisis, mostly due to the politics of an election for a new President coming in early 2012, Germany’s leader is quoted the same day as saying that the crisis will take many years to solve.
All the while, China’s massive state-owned enterprises continue mounting their debt, while is currently estimated as over 70% of China’s GNP.
That figure is so massive that it historically dwarfs all comparisons to countries moving from third world to current status countries.
The issue here, is that there could very well be large bumps in the road coming out of China.
All of which brings us to the USA, which is the subject of our next blog.
For safety, for security, invest in the USA. Europe will survive and the Euro will survive, but there will be pain along the way. China is now a leading economic power, but there will be problems. The USA is gradually re-establishing itself. Unemployment is dropping. Employment is increasing. Companies are well funded with lots of cash, and the drop in value of the US$ is helping.
The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds.
