Summary: Facing a new powerful rival presents a hegemon with choices. We can improve our game, reform, revitalize to meet the challenge. Or take refuge in fantasy, ignoring our weaknesses and exaggerating those of our rival. America has chosen door #2. Here we peer through the propaganda fog, seeking a better perspective on one aspect of the China’s bust forecasts — China’s real estate bubble.
China’s real estate bubble, 60 Minutes, CBS News, 3 March 2013 — “If trouble comes in threes, then what’ll be the next global market to melt down after the U.S. and Europe? Some are looking nervously at China.”
In 2001 attorney Gordon Chang published The Coming Collapse of China. He listed China’s most serious problems, concluding
How much time does China have? No one knows for sure, but China cannot continue to spend at the current pace for much longer. Beijing has about five years to put things right. No government, not even China’s, can defy the laws of gravity forever.
In the 13 years following that prediction China’s rapid growth has continued. Since then many others have joined Chang’s chorus of doomsters (few or none acknowledging the failure of their forecasts). And China does have serious problems. Even its long period of rapid growth has become problematic, inducing stress requiring fundamental political, economic, and social reforms. But everybody, every nation, has problems. What differentiates the fates of nations? One factor is their ability to see their challenges and respond to them. China’s history since Mao’s death in 1976 shows such wisdom and adaptability, probably on to a greater degree than Japan, Europe, or America.
Another is their boldness and willingness to invest in their future. That was once a characteristic of America, with the government undertaking great projects before they were commercially viable, such as the Erie Canal and the Transcontinental Railroad. Contrast America’s mad low level of infrastructure investment (shown here). Now we mock China for doing something similar, building high speed railroads — while they can do so cheaply, to be used for the next dozen generations. Which decision will look wiser a century from now?
Today’s the doomsters focus upon China’s real estate boom, probably projecting America’s stupidity on China’s leaders. It’s mad imperial logic:
- We poorly handled our real estate bubble.
- We’re better than China.
- Therefore China will do even worse. QED.
But there’s always a remnant of the clear-sighted — those who see the world in terms of data and processes, not fears and linear extrapolations. For example, here are some excerpts from a Bank of America Merrill Lynch’s report “Demystifying China’s ‘ghost towns’”, by Ting Lu, Xiaojia Zhi and Larry Hu (13 March 2013).