The China story - property and mining boom

[bluestorm]

We often hear about China's continued growth helping to maintain the Australian economy.
But I really wonder how much of this growth and demand has been brought forward (to artificially boost GDP), and whether the resulting mining boom will last as long as most economists predict in Australia.

There has been massive building in China of both commercial and residential property, and infrastructure, with a lot of this used for investment purposes. But a significant portion of this sits empty. Much like some China property investors do in Australia (when houses sit empty, and all they care about it capital appreciation, rather than the hastle of tenants, etc).

The China government is starting to put in place measure to try and curb the rise in speculative property prices in China.

But you only need to look at cities like Ordos, and wonder, if property is brought under control and prices come back making investment less attractive, will the Chinese be in a position where there is already enough capacity, with growth having been brought forward due to stimulus and speculation, that their demand for resources drops off greatly for several years, sooner, rather than later.

Ordos - empty city for 1million people.
http://www.youtube.com/watch?v=0h7V3Twb-Qk

The effect on Australia of a slower growing China would be significant, affecting both the economy and house market.

 

[pennyk]

This was discussed fairly extensively in this thread....

http://www.somersoft.com/forums/showthread.php?t=61257

I was in Beijing earlier in the year, and my colleague is from Mongolia. According to her, there are plenty of people living in the area of Ordos..... just not in the housing that was built, because its far too expensive. So, there is a thriving "old town" near by, and that is where everyone lives. More on my "on the ground" feedback can be found in the thread above.

I've been travelling to China for 5 years now, pretty regularly. I work in the health area, and the biggest difference I've seen in that time is that they are moving extremely rapidly in the area of quality over quantity. They are beginning to understand that producing the cheapest product in great volume is not necessarily the best approach. We certainly don't see any sign of slowing down, except that they are spending more money to buy better quality products.

The people are generally buying better cars, getting better homes, spending money on discretionary spending. I think in most areas there will be plenty of domestic demand for some considerable years to come.

Pen

 

[intrigued]

We don't need there growth:

When Japan stopped growing in 1990 it had little impact on its imports of Australian resources. Japan has been Australia’s biggest export customer since the early 1960s and has remained the biggest
customer until it was just pipped by China last year. In an (almost) worst case scenario, if China stopped growing completely for the next 20 years (as Japan did), China would still have a very powerful incentive to continue buying resources from Australia – even more so than Japan had – not
only to keep the workers employed, but to try to mininise political and social unrest. Like Japan had in the 1990s, China has enormous reserves and might continue its vast infrastructure spending program for many years to come. Japan is still spending up big on Australian resources and energy even after
20 years of stagnation - it has now run up massive government debts (totaling nearly 200% of Japanese GDP) and still shows no signs of stopping! China has lost its trade surplus early in the game, but it still has very deep pockets and powerful political reasons to keep spending.

We often hear about China's continued growth helping to maintain the Australian economy.
But I really wonder how much of this growth and demand has been brought forward (to artificially boost GDP), and whether the resulting mining boom will last as long as most economists predict in Australia.

There has been massive building in China of both commercial and residential property, and infrastructure, with a lot of this used for investment purposes. But a significant portion of this sits empty. Much like some China property investors do in Australia (when houses sit empty, and all they care about it capital appreciation, rather than the hastle of tenants, etc).

The China government is starting to put in place measure to try and curb the rise in speculative property prices in China.

But you only need to look at cities like Ordos, and wonder, if property is brought under control and prices come back making investment less attractive, will the Chinese be in a position where there is already enough capacity, with growth having been brought forward due to stimulus and speculation, that their demand for resources drops off greatly for several years, sooner, rather than later.

Ordos - empty city for 1million people.
http://www.youtube.com/watch?v=0h7V3Twb-Qk

The effect on Australia of a slower growing China would be significant, affecting both the economy and house market.

 

[Ridin-High]

wow.... that city is impressive, they don't do stuff small in china eh

 

[Aaron Sice]

the chinese govt are seeking to house around 200mil of their fringe-urban population into megapoli. they are building it and FORCING their residents to live there by evicting them from 'government land" (although a govt of the people doesn't 'own' anything, technically).

that's the population of australia - every year - for the next 10 years runnning.

Chongqing is a perfect example of this - and the effects on their environment is never more obvious than along the Yangtze - their main river that has now been declared "dead".

Chongqing's maps are re-drawn every 3 months because the scale of building is so intense.

Have a look at Chengdu as well and a few others in the immediate region.

whether the 'peasants' live there or not is another matter for them to sort out, but for the next 10 years, China will be building it. they WANT to be a first world country and will shake any image and build out any neighbourhood to prove so.

1.3bil people don't just stop needing food, or building homes, or cars, or aspiring to be wealthier.