Part Two of "The Ghost Cities of China and Pasta"

Greetings, hello and welcome back to the FINAL Yellow River Chronicles of 2012.   However, to keep things in perspective and avoid panic in the financial markets, you should be informed that this is not the final YRC of the Lunar Year of the Dragon (which ends in February) but it may be the final YRC of the Mayan calendar.   Complicated, this temporal thing, yes?

The Great Helmsman KNOWS who has been naughty and even naughtier

Before we proceed further, we at the YRC would like to wish all our friends and readers a happy Celebration of the Winter Solstice and Subsequent Return of the Sun.  The YRC has readers of many nations, many religions and many holidays, and we wish you all a wonderful time, and thanks for tuning in.

Speaking of tuning in, last week many of you were stunned (or perhaps secretly pleased) when the YRC went “black”, as in, was totally not there.  The more conspiracy-minded of you suspected a raid by the Chinese authorities on the YRC offices high above the lovely Jing’An temple or some other malfeasance.   Would that it were true, it was simply stupidity on the part of the YRC technical staff, who have ALL been summarily SACKED for the mistake.  

This was all similar to the opening credits of “Monty Python and the Holy Grail” where:

“We apologize again for the fault in the subtitles. Those responsible for sacking the people who have just been sacked have been sacked”

And in case of technical difficulties, here is the link for those of you interested in the actual footage:   Monty Python Holy Grail Opening Credits Here!

Now That All that Fawning and Groveling About is Over...

This is the pasta, people, not the city

We were actually waiting for part Two of the “Build It and No One Will Come” series here at the YRC.  As you may recall, last week we were chatting about the lovely city of Ordo (no, not the pasta, that is Orzo) and it’s amazing sense of design and space and generally emptiness (once again, not the pasta).  

We are also standing at a conceptual intersection in the Yellow River Chronicles.  You may also recall we did a small series on amusement parks and then we sort of pasted in some random filler and then we did some more filler and then an article on empty cities.  (Thanks to Neil Thatcher for the edits!)

Well, it seems that in addition to strange and disputed theme parks and large empty cities, the People’s Republic also has….<dum….dummm>, empty theme parks!   Yes, truth!   It turns out that there are now many, many empty cities, shopping centers, apartment buildings, theaters, restaurants and airports.  Here is an excerpt from a highly authoritative BBC articles that you can read here: BBC Article

China's ghost towns and phantom malls

Weeds cover a deserted theme park north of Beijing
See, conceptual overlap...an empty....Chinese...theme park!  Thanks, Trey!

By Robin Banerji & Patrick Jackson

BBC News

As growth slows, China's huge investment in infrastructure is looking ever harder to sustain, leaving a string of ambitious projects - towns, shopping malls and even a theme park - empty and forlorn.

"We have spoken a lot about these ghost towns in Ireland and Spain recently [but China] is Ireland and Spain on steroids," says Kevin Doran, a senior investment fund manager at Brown Shipley in the UK.

Investment in infrastructure accounts for much of China's GDP - the country is said to have built the equivalent of Rome every two months in the past decade. And with such a large pool of labour, it is harder to put the brakes on when growth slows and supply outstrips demand.

"You have got seven to eight million people entering the workforce in China every single year, so you have to give them something to do in order to retain the legitimacy of the government," says Doran.

"Maybe 10 or 15 years ago they were doing things that made sense - roads, rail, power stations etc - but they have now got to the point where it's investment for investment's sake

Wonderland Amusement Park, Nankou Town, Changping

The Disneyesque castle and medieval ramparts of this theme park north of Beijing, conceived nearly 20 years ago, lie abandoned. Local farmers grow crops among the empty buildings.

In the mid-1990s, developers had promised to build the largest amusement park in Asia, but the project got mothballed over a land rights dispute.

The site does in fact attract visitors, according to locals quoted by Chinese media, but hardly the sort the developers had in mind - they are drawing students, photographers and artists from Beijing, apparently, in search of a "ruin culture".

Thames Town, Shanghai

Photographers who visit this imitation English town generally come not to capture decay but newlyweds, posing in front of mock-Tudor buildings and red phone boxes.

The Shanghai suburb boasts a market square, a castle, a neo-gothic church, cobbled streets, a pub, a chip shop, Georgian-style houses and statues of well-known English figures, such as Winston Churchill, James Bond and Harry Potter.

As a backdrop, Thames Town is a hit with the wedding industry, but that is about it.

"The city is a virtual ghost town, with empty shops and unused roads," according to an article in Business Insider.

Yet perhaps not all is lost. Apartments have reportedly been sold, to buyers who want them as investments and second homes.

The proof of the developers' pudding may lie in news that the construction of another mock English town is being planned near Beijing.

"Four miles of polluted rivers running through 1,000 acres of blighted semi-rural land will be restored and landscaped into scenic standards becoming of the English countryside," a Chinese official told the Daily Telegraph.

So, the question that remains (in addition to “WTF Chairman MAO!), is where is all this leading?

Photo courtesy of BMW

And here is the final, prophetic tale (with some interesting ideas on finance) from Shiji, in eastern China.

The rise and fall of a Chinese crab town turned "BMW town" and then back to crab town (sort of like a small Iceland, really) is chronicled in the Daily Telegraph (article follows).

To summarize, a small town in China with an average annual income of around $1,500 a year suddenly became fabulously wealthy…for a year or so.  At the center was “King Claw” (yes, that was his real nickname) who orchestrated a massive $50 million Ponzi scheme with the assistance of local party officials.

And in the end…

…there was little demand in the end for the huge apartment blocks, which today stand empty and half–finished. And when the borrowers started defaulting on King Claw's loans, the pyramid collapsed. Around 1,700 villagers have complained to the police, some having lost their entire life savings. Two villagers were killed in a mysterious car crash after trying to reclaim their money from one of the loan sharks.

The YRC Economic Staff Opines...

This ain't Dali, but it ROCKS!!

With all this emptiness in mind, It appears to the economic staff of the YRC that the People's Republic has created a potent mix of unregulated financial markets, real estate speculation and a naïve investor base combined with local government corruption that is fueling one hell of a party, somewhere, people!

Here is the article, which is worth reading in its entirety:

BMW town crashes in pyramid fraud

For a short while, life in Shiji, a small crab–farming village in eastern China, seemed too good to be true.

By Malcolm Moore, Shanghai

8:25AM BST 23 Sep 2011

For as long as anyone can remember, Shiji has been poor. The village is little more than a dusty grid of brick shacks and its residents live on an average of just 10,000 yuan (£1,000) a year.

But this spring, a miraculous transformation occurred. The locals suddenly noticed that they were rich.

"We have become a BMW town!" wrote one shocked villager on a local internet forum. "In our county, there are now 800 BMWs and 600 Mercedes, 500 Audis, 50 Porsches, 30 Jaguars, one Ferrari, one Lamborghini and one Maserati," he added.

A forest of cranes had also sprung up around the village, constructing large apartment blocks which advertised themselves with pictures of English butlers and sumptuous, chandelier–lit dining rooms.

Miracles abound in modern China, where countless families have become fabulously wealthy in a single generation. But the dramatic change in Shiji's fortunes raised eyebrows.

Chinese journalists soon arrived to count the number of BMWs on the roads (10 in 13 minutes, according to CCTV, the state broadcaster).

Then they started asking questions about where the money had come from.

Earlier this month, Shiji's boom ended as abruptly as it began.

The local Dragon Court BMW dealership has been shuttered; its owner is under house arrest. And as The Daily Telegraph arrived to investigate, jittery local officials were quick to detain us.

"It is not worth looking into too deeply," cautioned one of them, loading us into the back of a black sedan.

What happened in Shiji is a fraud that plays out every day in some corner of China's murky economy, as local Communist Party officials and greedy entrepreneurs collude in vast pyramid schemes.

"It all began when a man named Shi Guobao returned to Shiji after working in Beijing," said Zhu Yi, the head official in the village.

"He became a property developer, but he wanted to make a bigger fortune so he decided to also become a loan shark." Together with 17 of his friends, Shi began tapping the villagers for their savings, promising to pay them 10 per cent interest each month.

The gang quickly raised 350million yuan, (£35.5million) which they then lent out at rates of 30 per cent or more each month to borrowers including local property developers. Shi became known as "King Claw", the man at the head of the pyramid.

For a while, the scheme worked well. Other property developers borrowed from Shi in order to begin construction and the local government, which earned income from every acre sold to the developers, also prospered.

During the boom, the villagers reported fireworks being lit in celebration almost every night.

The owner of the BMW dealership, Zhang Shanyuan, flooded the streets of Shiji with cars when his friends came to celebrate the birth of his son.

But there was little demand in the end for the huge apartment blocks, which today stand empty and half–finished. And when the borrowers started defaulting on King Claw's loans, the pyramid collapsed. Around 1,700 villagers have complained to the police, some having lost their entire life savings. Two villagers were killed in a mysterious car crash after trying to reclaim their money from one of the loan sharks.

Today, the only luxurious cars left are parked outside the local county government offices and Shi and his 17 friends are either in prison or under house arrest.

"I am not sure if any government officials were involved. As far as I know, no local government officials have any luxury cars. The cars outside the government offices must belong to other people. And there were only 152 BMWs registered in the county," said Mr Zhu, who escorted us 200 miles away to Nanjing before releasing us so that we could not pry any further.

(end)