Wikinvest Wire

First Ordos, now Huaxi

Monday, February 22, 2010

First there was the brand new Chinese ghost town of Ordos, popularized in a YouTube video last year, now comes word of a town in China where everyone appears to be rich, but they can't leave. Bloomberg files this report detailing one more reason why Jim Chanos thinks that China is the best short opportunity today.

The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades.

Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) -- almost four times the national average -- allows Huaxi to claim it’s China’s richest village.

Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue.
Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-meter skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai.
Let's do the math here...

A town of 30,000 residents with a 1,076 foot tall skyscraper under construction and a taller 1,700+ foot high building on the drawing board. Is that really enough office space?

It's all apparently part of the new Chinese economy.
China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 percent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off.

Last month, banks lent a further 1.39 trillion yuan -- almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 percent to $8.13 billion. Retail sales during last week’s Lunar New Year holiday rose 17.2 percent from the same period in 2009, according to the Ministry of Commerce.

While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets.
At this point, the Chinese government is kind of "damned if they do, damned if they don't" when it comes to reining in credit growth and other excesses like this - either they get an even bigger bubble or they get blamed for bursting it.

From about a year ago comes this video about the town that, to me, just seems creepy.

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Anonymous said...

The obsession that world central banks have with creating credit by printing sets up an unstable system. Alan printed a lot, but China printed even more. All printing does is to remove cash purchasing power from consumers, so that consumers can't buy all of the goods that they produce. Then the banks lend the confiscated purchasing power out in centrally planned ways.

Of course, central planning has not always worked out as well as the free market has. Better to just stop printing, and let cash consumers buy what they want to buy without debt. People will buy what they really want under these circumstances, and businesses will produce what people really want.

Printing distorts the market, and makes debt slaves of the population.

Anonymous said...

A commune in China that is the envy of other villages. Feel free to admire their success in relation to other villages, but remember, their success comes from free trade with the outsiders, and they are but well treated serfs/slaves of their lord/master. Free to leave, though, they may not take anything they have earned with them. They have security today, but if the company/factory fails, where will they be?

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