Monday, May 03, 2004

On The Corner, Peter Robinson made the following rather alarming claim:

It's one matter to be vaguely aware that the Chinese economy is expanding. It's another to come across a statistic such as this: With just over fifth of the world's population, China last year consumed 55 percent of the world's total output of concrete.

Luckily, the actual figure (and circumstances) seem to be quite different. In this article in the Chicago Tribune it states that "by one account" China consumed 40% of the world's concrete in 2003. By the way it was written it leads me to believe that this estimate was the largest found. Still a huge amount, but considerably less than 55%.

In addition to the uncertainty as to how much concrete China is actually consuming, the article also goes on to consider the possibility that all this concrete may be due to a "bubble" economy, in which unneeded buildings are being thrown up with abandon, only to sit empty and abandoned:

Government officials estimate 1 million construction workers are on the job in Beijing, spread across thousands of projects. Condominiums, office blocks, luxury hotels, shopping malls: All are going up in the frenzied rush of a giddy economic boom, fueling fears that this is the most indulgent, overly optimistic speculative fever since the U.S. dot-com debacle or the great real estate crash of Japan.

Beijing already has one new ghost town, a redeveloped street of shopping malls that stands empty and unwanted just south of Tiananmen Square.

And to bolster the possibility that this is at least partially the result of a huge property bubble that could collapse like a dotcom stock:

China ordered its banks to restrict real estate industry lending that totaled US$222 billion at the end of April in a move to reduce loan risk, avoid fraud and cool an overheated property market.

The People's Bank of China, in a statement on its Web site, said banks will be prohibited from making loans to developers for land purchases and from lending more than 70 percent of the value of property projects.

It also said loans for luxury villas and expensive apartments, which are in oversupply, will be curtailed.

The order is part of a government crackdown on property-related lending after former Premier Zhu Rongji warned last October that an expanding property bubble threatens the nation's economy and financial industry.