In the early 1980s, Chinese leader Deng Xiaoping famously declared, “To get rich is glorious,” a statement that sparked a transformative shift in the nation’s approach to economics and labor.
With this proclamation, countless citizens stepped away from their agricultural duties and entered factories, uniting in a collective effort to produce goods. This unprecedented movement of around one billion people led to a global proliferation of products labeled “Made in China.” Within a generation, the world was awash in affordable plastic items.
For the first time in decades, many people were experiencing prosperity. Refrigerators adorned their homes, and red meat became a staple in their diets. Optimism flourished as everyone envisioned a bright future.
However, while the nation focused on manufacturing exports, it also embarked on an ambitious construction spree, erecting skyscrapers and entire cities, often without consideration for actual occupancy. By the beginning of the 2010s, this property boom morphed into a significant bubble. An analyst noted that China was “building somewhere between 12 and 24 new cities every year.”
This level of activity is clearly unsustainable. Eventually, excessive construction leads to an oversupply of properties, resulting in a surplus of underperforming loans.
The Mother of All Bells
Regrettably, it seems that China’s massive property bubble is on the verge of collapse—it may have already begun to burst. While there’s no definitive moment that signals a market peak, several signs indicate that circumstances have crossed a critical threshold.
Consider the infamous Pets.com sock puppet commercial aired during the 2000 Super Bowl; it served as a forewarning that the dot-com boom was nearing its end. In a similar vein, just this month, China unveiled the world’s largest building.
The New Century Global Center boasts extraordinary features, encompassing the equivalent of 329 football fields. As reported by the New York Daily News, its expansive space could contain three U.S. Pentagons, four Vatican Cities, or 20 Sydney Opera Houses.
Inside, visitors will find an indoor beach complete with a massive wave pool, illuminated tirelessly by an artificial sun, and surrounded by a horizon displayed on a 164-yard-long LED screen. Even the breeze felt while sliding at the Paradise Island water park, which accommodates 6,000 guests, is artificially generated.
For those who prefer cooler activities, they can skate on a regulation-sized rink or catch a movie in one of the 14 IMAX theaters. Furthermore, if visitors need a moment of relaxation, two five-star hotels on the premises offer 1,000 rooms each.
This spectacle certainly signifies the ringing of the bell marking a pivotal moment. But the story doesn’t end there; consumerism continues to reign supreme.
The High Point of China’s Economic Boom
Officials hope that the primary attraction of this colossal structure will be shopping, as retail space constitutes a significant portion of the building’s vast 420 acres of floor area.
Adjacent to the center, the 500,000-square-foot Chengdu Contemporary Arts Centre by British-Iraqi architect Zaha Hadid offers expansive galleries along with three performing arts theaters.
Without a doubt, the opening of the New Century Global Center is a monumental achievement, marking what many believe to be the pinnacle of China’s economic boom.
Interestingly, just as this grand facility opened its doors, China’s banking system began to show signs of significant distress. Speculations abound regarding the implications of this development, with some suggesting it could herald a situation akin to a Chinese Lehman moment.
What is evident is that China’s banking framework is severely overextended, having disbursed excessive loans that support an inflated real estate market. This precarious situation places both investors and banks in a risky position, the full ramifications of which remain to be seen.
At this juncture, one thing is undeniably clear: the future that awaits China is unlikely to be as glorious as many had hoped.
Sincerely,
MN Gordon
for Economic Prism
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