Letter - China growth not all it seems

I HAVE been a huge buyer of the China story since 1995 when I ventured to the great steel city of Wuhan to study Mandarin at the appropriately named Iron and Steel University. I have lived on and off in China since and now live in Singapore but visit regularly.

Staff Reporter

I was in Hangzhou two weeks ago, a middling city of 5 million people about 200km inland from Shanghai. I arrived at the airport late at night and was surprised to see on the 20km journey between the airport and the city very few lights. Even in the city, many of the large buildings were merely ghostly shadows of a concrete outline.

During the day and on my return trip to the airport a few days later, it became clear what was going on.

The 20km trip to the airport was on a state of the art, elevated six-lane expressway surrounded by a flat alluvial plain for as far as the eye could see. To my utter amazement, on either side of the expressway, as far as the eye could see, were identical three-story bungalows, all empty. There must have been thousands of them, all the same, right next to each other with their eaves nearly touching.

They had clearly been there for sometime and were not being sold, most likely due to the fact that, apart from being hideously ugly, they were probably too expensive for the average Chinese punter (although Hangzhou has the highest disposable family income in China at CNY50,000 per annum).

Likewise in the city, there were scores of multi-tower apartment complexes, all empty. Certainly, you would have thought a Chinese curtain maker would be rubbing their hands in glee with that many bare windows to cover! Unfortunately, not a curtain maker in sight.

Therefore, to whoever is buying Rio shares at 100 bucks apiece, I would recommend that they take a little trip to view the biggest bubble of all time developing in China.

Get them to chat to the underemployed curtain maker. Either that or get them to have a chat to the Japanese and ask them how they valued assets in the late 1980s.


Hamish Mackley


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