On this episode of China Uncensored,
China’s on the rise!
I mean, look at all the glittering skyscrapers!
There couldn’t possibly be some horrible,
horrible downside...
Hi. Welcome to China Uncensored.
I’m your host, Chris Chappell.
China loves building skyscrapers.
Because nothing screams communist utopia
like the giant gap between rich and poor.
China is now the world leader in skyscraper construction.
About fifteen years ago, China started
filling up with 10-to-30-story buildings—
mostly residential—
in first, second, and third-tier cities.
But in recent years, skyscraper construction
has gone through the roof,
or the clouds, or whatever.
According to the Council on Tall Buildings and Urban Habitat,
China has constructed more tall buildings than
any other country every year for nearly a decade.
They just can’t quit!
And as of 2018, among the 10 tallest buildings in the world,
half of them are in China.
In fact, that first one, the Shanghai Tower,
is second in height only to that
Mission Impossible building in Dubai.
It’s called the Shanghai Tower and it’s located in—
well the name kind of gives it away.
Any similarity to the Eye of Sauron is purely coincidental.
But there’s another similarity
between Sauron’s tower and the Shanghai Tower.
While both are impressive sights to behold at a distance—
not many people actually want to rent space there.
The Financial Review had called the Shanghai tower
a “ghost tower with 55 vacant floors”
...because less than two years after it was unveiled,
only about 60% of the office space had been rented out.
After four years, it’s now just 80% occupied—
and has still failed to attract multinational companies.
According to CNBC, the Shanghai Tower’s rental woes
reflect wider problems in China’s real estate market.
Just because you build it,
doesn’t mean they will come.
“With more and more skyscrapers in Shanghai,
in cities in China,
the vacancy will remain very high for some time,”
says Anny Zhang, who does office leasing
for one of the agents for Shanghai Tower.
But there’s more at stake than just the prospect
of a few real estate developers going belly up.
Vikram Mansharamani,
author of the book “Boombustology:
Spotting Financial Bubbles Before They Burst,”
says that building very tall skyscrapers
is strongly correlated with investment bubbles.
He analysed historical trends and concluded
that skyscraper-building is
“one of the most robust bubble indicators over long time periods.”
Especially the construction of supertall skyscrapers.
China already has half of the world’s tallest skyscrapers
and doesn’t look like it’s slowing down in its ambitions.
Construction has already begun
on Shimao Shenzhen-Hong Kong International Center,
which could upstage the Shanghai Tower.
The Boombustology author says
“you can think of the world's tallest skyscrapers
as indicators of lofty overconfidence”
and “a spectacular indicator of bubbly conditions.”
And not the good kind of bubbly conditions.
Dinny McMahon, author of “China’s Great Wall of Debt,”
says Chinese officials pumped the bubble
up to ginormous proportions—
that’s the technical term—
using money borrowed from state-owned banks.
“Local governments around the country tried to
juice and stimulate their economies
by building more infrastructure
and stimulating the property market,” he said.
But while the growth model may not be sustainable forever,
there are powerful incentives
to keep it going as long as possible.
Because this kind of construction is commonly
the result of cronyism in which investors,
builders, and other players are ‘insiders’ who profit from it.
And just like karaoke and Maotai liquor,
it’s a tough habit for corrupt Chinese officials to give up.
But even if you can overlook crony capitalism and bad investments,
there’s a whole other problem with China’s building boom:
Low quality construction.
It shouldn’t surprise you that the same environment
famous for cheap knockoffs like Crust toothpaste...
...Nintendo Polystation
and of course every child’s favorite toy, Robert Cop!
...is also home to cheap quality construction.
Like this building in Shenyang,
where part of a building just...peels off.Or this one in Shanghai that simply...fell over
one day.
I’m glad I didn’t buy a condo in that building.
Now this may not have happened so far
in any of China’s supertall skyscrapers,
but low-quality construction is a major problem all across China.
Developers cut corners, and a lack of proper oversight
means builders can often bribe their way
through official inspections.
Like this 65-story high-rise in Tianjin.
The developer had built it through bribes and corruption,
without getting proper permits.
He had illegally added 30 floors of apartment units
without factoring in important considerations, like,
you know, how to deal with the sewage.
But in a crackdown during Xi Jinping’s anti-corruption campaign,
authorities demolished it.
So ok, China is building too many skyscrapers
that are often unoccupied, potentially unsafe,
and frequently designed to line officials’ pockets.
But do they at least fuel innovation?
Officials in Beijing have talked a lot about
needing to move up the value chain
into more technologically advanced industries.
And they’ve said that the key to sustainable
realignment of the Chinese economy is innovation.
Does building technologically advanced skyscrapers help?
Not if you believe CityLab.
They write that “skyscraper ‘canyons’ found in Asia’s cities
can create a type of vertical sprawl
that suppresses the innovation
that comes from street-level interaction.”
CityLab says that the most innovative districts in the world
are older industrial neighborhoods,
like Cambridge—near M.I.T.—
and areas adjacent to downtown San Francisco,
where there’s an abundance of mid-rise,
historic buildings that create street-level human interaction.
Well, I guess it’s back to the drawing board.
Too bad Chinese cities destroyed
all their old neighborhoods to build new skyscrapers.
So what do you think about the dark side
of China’s skyscraper boom?
Leave your comments below.
And before you go,
it’s time for me to answer a question
from one of you who supports China Uncensored
through the crowdfunding website Patreon.
Timothy Paustian asks:
“Do the Chinese have a large debt bubble?
What do you think will happen
when that debt bubble bursts?”
Good question, Timothy.
Yes, China does have a little bit of debt.
Like, around 10 trillion dollars worth.
And that’s just national debt.
It doesn’t included an additional 6 trillion in local debt
that doesn’t usually get counted.
Which does make me feel
slightly better about my student loans.
A lot of local debt goes to finance things like,
I don’t know, skyscrapers!
But in modern economies,
debt doesn’t necessarily mean imminent economic collapse.
The US has even more national debt than China,
and our economy is probably not in any serious bubble.
Will China have a financial crisis?
Probably yes, at some point.
But it’s impossible to predict when,
or what event will knock over the first domino.
It could be the bursting of the real estate bubble.
And if that happens,
China’s economy might end up looking like this.
Or this.
Thanks for your question, Timothy.
And for all of you who love China Uncensored,
and want to see us make more episodes,
please consider contributing to our continued growth
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by going to Patreon.com/ChinaUncensored.
The link is below.
Once again, I’m Chris Chappell.
Thanks for watching China Uncensored.