China's Manhattan Project Marred by Ghost Buildings

Ray

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China's Manhattan Project Marred by Ghost Buildings


China's own Big Apple may be rotting from the core. A new central business district modeled after New York City is going up in Tianjin...but the nation's slowing economy is exacerbating the risks from its unprecedented credit binge...and that's putting China's Manhattan project in jeopardy.

China's project to build a replica Manhattan is taking shape against a backdrop of vacant office towers and unfinished hotels, underscoring the risks to a slowing economy from the nation's unprecedented investment boom.

The skyscraper-filled skyline of the Conch Bay district in the northern port city of Tianjin has none of a metropolis's bustle up close, with dirt-covered glass doors and construction on some edifices halted. The area's failure to attract tenants since the first building was finished in 2010 bodes ill across the Hai River for the separate Yujiapu development, which is modeled on New York's Manhattan and remains in progress.

"Investing here won't be better than throwing money into the water," Zhang Zhihe, 60, said during a visit to the area last week from neighboring Hebei province to look at potential commercial-property investments. "There will be no way out -- it will be very difficult to find the next buyer."

The deserted area underscores the challenge facing China's leaders in dealing with the fallout from a record credit-fueled investment spree while sustaining growth and jobs in the world's second-biggest economy. A Tianjin local-government financing vehicle connected to the developments said revenue fell 68 percent in 2013 to an amount that's less than one-third of debt due this year.



"There will have to be a reckoning," said Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong. Sales of bonds by local-government vehicles to repay bank loans are just "buying time," he said. "The people will pay" for it through bank bailouts, recapitalization with public money or inflation.

Soured Assets

While a debt crisis is unlikely and major cities like Tianjin can fill vacancies, some credit and assets will go sour, leading to a drag on growth, Green said.

Tianjin, a city of 14.7 million people whose center is about 125 kilometers (78 miles) southeast of Beijing's, saw its economic growth cool to 10.6 percent in the first quarter of 2014 from a year earlier, from 17.4 percent in full-year 2010, compared with a moderation in national expansion over the same period to 7.4 percent from 10.4 percent. An annual pace of 10.6 percent would be the weakest for Tianjin since 1999.


The government financing vehicle, Tianjin Binhai New Area Construction & Investment Group Co., reported revenue fell to 5.9 billion yuan ($950 million) in 2013, and profit dropped about 37 percent to 246.6 million yuan, according to its annual report.

Repay Loans

The company has 20.7 billion yuan of debt due in 2014, including loans, corporate bonds and commercial paper, almost triple 2013's amount. Another 13.9 billion yuan is due next year. It sold 2.5 billion yuan of seven-year notes in May at a 6.5 percent coupon to repay bank loans and interest, according to a prospectus.

The Tianjin government didn't respond to faxed questions yesterday.

"Both the central and local governments clearly know that a big slump in the property market will significantly magnify financial system risks, and they know it's a delicate balance," said Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. The government will try to do everything to ensure an "orderly de-leveraging," Liu said.

China's leaders have pledged to control risks in local-government debt, with the central bank saying in May that it would strengthen monitoring of credit extended to the financing vehicles. The nation's chief auditor said this week that growth in regional authorities' debt has slowed.

Hotel Shell

Conch Bay showed few signs of life during a June 19 visit by Bloomberg reporters. Work on Glorious Oriental, a two-tower residential and office complex, had stopped, and at the north end of Conch Bay, the main building of the Country Garden Phoenix Hotel, billed as Asia's largest hotel, was a deserted shell with no signs of any work under way.


The deserted 5-star Country Garden Phoenix Hotel stands in Conch Bay in Tianjin, China.

Developer Country Garden Holdings Co. (2007) is "steadily building the walls and roofing" and working on mechanical and electronic systems after completing the main construction of the hotel, Lin Weiying, a deputy general manager of Country Garden's strategic development department, said in an e-mail.

Calls to Glorious Oriental's Beijing and Tianjin offices went unanswered.

Conch Bay's ghost-town appearance isn't necessarily an indication the area will fail. Shanghai's Pudong district overcame struggles in the mid-1990s to thrive as the nation's financial center. Zhengzhou, capital of central Henan province, now suffers from traffic jams in its new-city district instead of the vacancies from a few years ago, said Nicole Wong, Hong Kong-based head of property research at CLSA Ltd.

Fill Buildings

Michael Hart, managing director at real-estate brokerage Jones Lang LaSalle Inc. in Tianjin, said the hope is that the local government will help fill buildings, possibly with anchor tenants such as state-owned enterprises. "Yujiapu is too iconic and too well-known in association for Tianjin for the government not to do their best to make it successful," he said.


Buildings stand in the Conch Bay district of Tianjin, China.

In fact, the government is already occupying some office space in Conch Bay, where shipping-company employee Chen Wenjie, 31, came to renew a license at the Hai River transportation administration bureau. "The construction now is nothing compared to the days in 2008 and 2009," Chen said.

Wang Wei, a 34-year-old Tianjin resident, was driving through the area to check out property prices, finding them six times higher than what he'd be willing to pay. "I've seen a lot of reports about the area, but apparently it's not a place fit for home -- at least for now," said Wang. "No shops, no schools, no hospitals and no neighbors."


China's Manhattan Project Marred by Ghost Buildings - Bloomberg
This will be a great dampener to the ego trips that the Chinese take of their copy cat capabilities and having the GREATEST, LONGEST, LARGEST, HIGHEST, BIGGEST, FASTEST etc of everything that is conceivable.

Not withstanding, it will appear great for the GDP statistics and so the hapless Chinese can take heart.
 

abhi_the _gr8_maratha

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when chinese will reach number one spot, they will start coming down cause there will be on one whom china can copy.
 

ITBP

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:fu: I thought by ghost building in title, he was referring to haunted house. :scared1:

Just building apartment is not enough, infrastructures should be also made.
 
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Srinivas_K

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They are building a new city from scrap called Wushsn which costs around 230 billion dollars and the city under construction is having huge debts and may not even generate enough revenues as expected.There are many infra projects which can be called whilte elephatns all over china.
 

shiphone

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LOL..

.The deserted 5-star Country Garden Phoenix Hotel stands in Conch Bay in Tianjin, China.? ???
isn't this one of property of "碧桂园" group? .if you want to book a room in this so called "deserted hotel " or "ghost hotel" ,you may try this web..

Ìì½ò±Ì¹ðÔ°·ï»Ë¾Æµê,Tianjin Country Garden Phoenix Hotel,¾ÆµêÔ¤¶©

the room price varies between 418-820 RMB (66-140 USD) per night for a Quasi- 5 Star hotel...

天津碧桂园凤凰酒店(准五星) Tianjin Country Garden Phoenix Hotel

 

shiphone

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LOL.. the "Conch Bay "(海螺湾) mentioned repeatedly in the news is a faked placedname with wrong pix...

the only "Conch Bay "(海螺湾) in Tianjin city is a name of restaurant in downtown...I was in Tianjin for almost one year, never heard of any so called " development zone" named after Conch Bay "(海螺湾)
 
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W.G.Ewald

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US "Manhattan Project" was the the development of the atomic bomb during WWII, just to get that straight. That Bloomberg used the term in this article is ... strange. But so is Bloomberg.
 

tarunraju

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I thought China was testing a breakthrough new weapon. Disappointed.
 

rock127

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Saw a small program some while back about the ghost cities of China.

So why are they not occupied by people? Any Chinese can answer?
 

no smoking

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Saw a small program some while back about the ghost cities of China.

So why are they not occupied by people? Any Chinese can answer?
Failed commercial project;
Broken cash flow;
wrong strategy;
worst of worse, expecting to sell at highest spot by holding it.

Just like anywhere else, companies make wrong decisions.
 

tarunraju

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Failed commercial project;
Broken cash flow;
wrong strategy;
worst of worse, expecting to sell at highest spot by holding it.

Just like anywhere else, companies make wrong decisions.
Is it because their credit lines are too easy to hold on to? Because ghost towns with skyscrapers (>100 m buildings) is only found in China. The reason why India doesn't have cities with sizable skylines is partly because no builder can sell the idea of spending >$100 million on a single structure to their financiers. The ones that do end up building tall structures do so literally against their current accounts.
 

jon88

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Property glut or oversupply happens everywhere. I have seen in Malaysia, Thailand and even USA. I even remember the property glut in South Korea of the mid 1990s. China is also not immune to this and China's scale is bigger, naturally... whats the fuss?
 

no smoking

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Is it because their credit lines are too easy to hold on to? Because ghost towns with skyscrapers (>100 m buildings) is only found in China. The reason why India doesn't have cities with sizable skylines is partly because no builder can sell the idea of spending >$100 million on a single structure to their financiers. The ones that do end up building tall structures do so literally against their current accounts.
In just 30 years, there were more 500 millions Chinese moving their home into cities, which means a huge boost to the profit of builders and their bankers. In next 20 years, there will be another 200-300 millions waiting to come in. With such a market boom record and prospect, it is quite natural that you can have easy credit line from the bank.
 

abhi_the _gr8_maratha

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Property glut or oversupply happens everywhere. I have seen in Malaysia, Thailand and even USA. I even remember the property glut in South Korea of the mid 1990s. China is also not immune to this and China's scale is bigger, naturally... whats the fuss?
Are you a chinese or malaysian under indian flag?
 

jon88

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hmmm. So that's why your views toward india resembles with condition of india which was 25 years ago.
Not really, I am in India once or twice a year for about a month mostly. And I travel to most Southeast Asian and East Asian countries every few years. My comments are based on my observations and comparison. That is why I am so critical of India sometimes because India have so much potential but yet nothing changes. Yes there are changes in developments but not as comprehensive as the other countries I visited. Comprehensive in the sense that development to rural areas and the poor part of society. I do hope that India becomes a much better place.
 

Ray

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Not really, I am in India once or twice a year for about a month mostly. And I travel to most Southeast Asian and East Asian countries every few years. My comments are based on my observations and comparison. That is why I am so critical of India sometimes because India have so much potential but yet nothing changes. Yes there are changes in developments but not as comprehensive as the other countries I visited. Comprehensive in the sense that development to rural areas and the poor part of society. I do hope that India becomes a much better place.
Do tell us more!

Good to know that in one month that you visit, you scour the rural areas and come to know how India has degenerated since your last visit.

So, may I take it that you come to India to inspect the 'ruins' of India?

Jon, you love looking at Johns, right?

You must be a great globetrotter visiting nations all the time!

Lucky you!
 
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