The largest real estate bubble (and maybe any other kind of bubble) in the history of the world. 60 Minutes examines the Chinese ghost cities.

Chinese ghost city

This is a great example of why the government should never manage the economy. The more government manages, the more it will mess things up. Over time this is nearly always true. It is absolutely true in China.

In China, the government has forced real estate development because real estate development drives GDP. An order comes from Beijing to the regional bosses and banks to build and lend, the regional bosses order the city bosses to build, and on down. The building looks great on paper, but there’s no real market underneath the construction. It’s a lie on a massive scale.

China is the ultimate crony capitalist state and it will keep this charade going as long as it can. And China has lots of guns and ways of keeping its people in line. However, the country has a lot of people and even the Communist Party might not be able to lock down all the anger when reality sets in.

As we wrote months ago these angry real estate investors and ex-construction workers may spark serious unrest in the country. Some have even warned of a possible “Cultural Revolution II” if things get too out of hand.

It is worth noting as we watch the unwinding in China that both Andy Stern, the former head of the SEIU and Jeffery Imelt, the current CEO of GE have recently sung the praises of “state capitalism” in China.

33 comments
Aidan Haggerty
Aidan Haggerty

China's state capitalism is holding them back. Unfortunately the United States is developing a version of crony capitalism that's significantly damaging our economy today.

Tom Canaday
Tom Canaday

"Tater and Mooch" I'm laughing here!

Mike Shakur
Mike Shakur

Why is is such a big fuss on banning guns all of a sudden here in America??? Hmmmmmm, I think someone knows they have gone too far on screwing people and they are pushed to the edge.

Arthur A. Yatsko
Arthur A. Yatsko

This is what happens when governments "builds" without the support and demand. These ghost cities look like ours after the core businesses leave. I hope Senator Warren is watching.

Bruce Campbell
Bruce Campbell

2019...The Debt repayment is due...we cannot pay the interest...if Tater and Mooch keep up the vacation extravaganzas...we won't see above water for three hundred years...

Bruce Campbell
Bruce Campbell

WHEN THE SHIT HITS THE FAN...CHINA WILL DEMAND PAYMENT OF LOANS TO AMERICA OR CONCESSION ON LAND PURCHASE RESTRICTION...PROOF IN POINT THE PURCHASE OF 60,000 ACRES IN TEXAS THIS YEAR...FACTORIES TO BE BUILT WITH DORMITORIES IN AMERICA AND CHINESE WORKERS AT CHINESE WAGES IMPORTED...anyone doubt this?...look it up...the Chinese have been going to various industrial areas inquiring about Dormitory laws...ask any Chinese Restaurant how they do it...

Matt Haag
Matt Haag

yea, THAT shit could get ugly. Only bad thing is if they decide to call in the portion of the debt.

Matt Haag
Matt Haag

wow.....their bubble might pop faster than ours did.

alpha1222
alpha1222

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Mike McKibben
Mike McKibben

And when America can no longer buy stuff made in China because they have taken all of our jobs.........well, pop goes another real estate bubble !

Marc Pretscher
Marc Pretscher

Yes that's correct Max Myers and I have been to that city, not only is it fully populated but it looks worn out already. The Chinese need to stop worrying about the dollar and Let their currency rise. The Chinese need to keep their money at home and stop importing dollars to pay for their exports. With a stronger yuan more Chinese will be able to afford the products they now export to the USA.

Michael Morand
Michael Morand

This concern has been raised for years now. Ordos has been on YouTube for several years. I still can't figure out why the bubble hasn't popped yet.

James Maloney
James Maloney

yeah george, I'm sure this was a "set" put up by 60 minutes.

Lois Horn Smith
Lois Horn Smith

Perhaps since the USA owes China, they will ship us over there to live in empty Ghost towns why they come over here and live since we are rich in natural resources and we grow food of every kind but won't let us do anything because of laws. And just think our towns are already built and supplied. farfetched u might say but then again is it?

Max Myers
Max Myers

P.S. No question govt officials got rich from this in the process, of course off the backs of the real producers in the country.

Max Myers
Max Myers

While the article is correct in it's assertions about crony capitalism which is a horrid use of its resources. Real estate has been, and is a bubble and will have to melt, crash, pop or slow in some way (govt already has been recalling real estate loans early) but the city they feature ZhengZhou is full of people. It was actually a new city built between the real ZhengZhou and another city called Kai Feng in order to connect he cities (still in the works) and move people from the old worn out downtowns, to the new area and then in another move of central govt planning and "GDP boosting", to eventually rebuild the old downtowns. I have been there several times since the feature on CBS and people are now there like most normal cities. Marc Pretscher visited this city with me.

MaxMyers
MaxMyers

While the article is correct in it's assertions about crony capitalism which is a horrid use of its resources. Real estate has been, and is a bubble and will have to melt, crash, pop or slow in some way (govt already has been recalling real estate loans early) but the city they feature ZhengZhou is full of people. It was actually a new city built between the real ZhengZhou and another city called Kai Feng in order to connect he cities (still in the works) and move people from the old worn out downtowns, to the new area and then in another move of central govt planning and "GDP boosting", to eventually rebuild the old downtowns.  I have been there several times since the feature on CBS and people are now there like most normal cities. 

Keith Weiner
Keith Weiner

David: have you perhaps heard of Frederic Bastiat? He debunked the fallacy you are promoting. You are talking about the "seen". The unseen is that the temporary employment is paid for by consuming the savings of three generations. When the savings runs out, there will be only pain for the now-unemployed workers and the families who wiped out their savings.

George Powell
George Powell

Those who really know say 60 minutes is wrong on this.

Chris Amore
Chris Amore

saw this on tv last night---I was :O

Karen Chadde
Karen Chadde

It could cause a cultural revolution in China? Wow ...let the people be free, I hope they can be.

Stan Dahl
Stan Dahl

Government is not the solution to the problem, government is the problem - Ronald Reagan

Nickolas Anzelmo
Nickolas Anzelmo

If people can't afford to live in them it's just a dream. Middle class investors expecting poor to all of a sudden pay for their retirement by living in homes they cannot afford. Like they said if you do not have people live there the work stops furthering more stagnation. Money and energy is lost.

Michael Moore
Michael Moore

I wouldn't want to be there when it all goes sideways....

David Donahue
David Donahue

I don't really think it is so bad. It keeps a massive amount of people employed in good paying jobs and eventually, people will live in those house and apartments.

pandoranage
pandoranage

 @MaxMyers don't let the facts get in the way of some hysterical fear mongering journalist, lol... "but the city they feature ZhengZhou is full of people" I love it.

alpha1222
alpha1222

"Jim Hodge - Allied Home Mortgage have been attacked by lawyers and the liberal press. A self made man of humble means is working hard to restore the jobs lost by these baseless attacks"