If you read the foreign headlines about China, you’d think the whole country was about to pack up and leave. If you read the Chinese headlines on Xinhua, you’d think the country was about to quietly manage some long-overdue but expensive housekeeping.
What’s actually happening is that China is taking on the rather thankless task of disentangling a very high-capital market from its own blunders. New moves are necessary and unavoidable.
Western media has a habit of isolating China’s various issues one at a time as if that’s all that’s happening. The Chinese property market is very much a case in point. A lot of money went into the construction of vast amounts of new properties. China is now well and truly saturated with commercially dubious properties.
It’s not like China isn’t well aware of the many shortcomings of this gigantic cash cow from 20 years ago. Evergrande, the Titanic of the Chinese property market, is an embarrassment with a lot of debt. The residential market is flatlining from what looks like an oversupply and stagnant prices.
There are also issues with building quality and standards future planning now making the headlines in China in a very unambiguous way at the top level. In a two-paragraph article, Xi Jinping is talking about development in the sense of longer-term planning.
In the Chinese economy, that translates into a semi-tactful reference to wide-ranging changes. Beijing is apparently and coincidentally the focus of a new drive to quality. Beijing is a showcase for modernization and green development.
What is not said but unavoidable in inferences is that Beijing, the former smog capital of the world, is the standard to be met. Hong Kong is also an area for upgrades and new development.
Before we go any further, there’s a back story here. Remember that China’s vast modernization program was based on huge construction volumes across China. They virtually rebuilt the entire country and removed the anachronisms in the economy.
The result was a massive manufacturing and distribution network. The residential property market was effectively redesigned from the ground up. This process was carried out at an incredible speed.
Speed isn’t a synonym for efficiency. The market is ovesupplied, powered by vast amounts of capital. There are actual empty cities in China, symptomatic of the sheer scale of overbuilding and lack of proper controls. These cities were created by an unrealistic expectation of the future commercial and residential property markets. Sound familiar?
Meaning there’s plenty of scope for rationalization and quality control in any possible fix for the property sector. The “inferences” from short official statements are pretty clear.
It looks like China is now dodging multiple obvious and expensive bullets. Repositioning planning to eliminate the deadwood on the market while moving forward is the right move. It’s also the only move that can work.
The West has managed quite a double standard in its criticisms. While nobody would say that China’s property market is a picture of unrelieved bliss, the West has an ironically similar problem.
With an equally dead debt-laden commercial property market and a lethally expensive residential market, the West should be paying attention. How do you turn around so much capital investment and make it viable?
How do you plan for a future that is going to be so different? The future has to be viable, and it has to be built. Let’s see how China does it.
_____________________________________________________________
Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
