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Hugh Hendry: China – The Emperor has no clothes

This is an astonishing video in China with Hugh Hendry, the money manager who is bearish on China who I profiled earlier this month.  In it, he shows us building after building after building – all of them massive and all of them empty.  And you see yet dozens of others still in construction in the background. Who is going to pay for all of this stuff?

Breathtaking.  Hat tip Ravin.

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.

15 Comments

  1. Anonymous says:

    I live in China and what you see is astounding. You drive into condo and luxury condo complexes that are 2-4 years old and they are completely empty and completely sold out. The difference is that the Chinese savings rate is around 22%. And all of these condos, all the BMWs and Audis you see are bought with cash not credit. Additionally, there are no property taxes in China for residential real estate. So carrying costs are even lower. So, it is not uncommon for units to sit for years at little distress to anyone. Except for dumb Americans who are always looking to tear someone down in order to build themselves up

    • Jorma says:

      Your comment doesn’t address what the film shows re: commercial real estate. What’s the point of building all these complexes if there are no companies moving in? Even if a lot of cash went into the construction (relative what you’d see in the west for similar projects), whoever poured in the dough is looking for some kind of return – no? Unless of course it’s just government works programs designed purely to keep people working to fend off social unrest.

      As far as the condos you speak of, what is the point of buying and holding them if there is no return. They’re not being rented out (obviously), nor will they get any return at sale as the market is flooded with new condo projects. Astounding indeed.

      Yes, the Chinese save a lot thanks to Westerners buying the cheap goods they produce. That gravy train broken down on the tracks now.

      (There are plenty of cars and condos in the US bought and sold for cash btw.)

    • BackAtCha says:

      Another snot nose Chinese who can’t handle the truth. Grow up and stop lashing out at others because you have an inferiority complex.

  2. Wag the Dog says:

    Current TV Vanguard special called “Outsourcing Unemployment” covered this back in May. It is not just recent builds, but a lot of recently vacated factories:
    http://current.com/items/90043902_outsourcing-unemployment.htm

    See also Merryn Somerset Webb’s analysis of China:
    http://www.ft.com/cms/s/2/b5ed0ec0-72f4-11de-ad98-00144feabdc0.html

    • Anonymous says:

      So how much does the PRC pay you drones to surf the net and try to suppress any bad news about the PRC?

  3. Anonymous says:

    “And all of these condos, all the BMWs and Audis you see are bought with cash not credit. ”

    >>> what about the contruction companies? they built these monsters with cash? I find it VERY hard to believe.

  4. Monkeyman says:

    They are better off with empty buildings than our Treasury debt.

  5. Anon says:

    The majority of the buildings are paid with cash – to buy space in a building you often have to pay in full while the building is still a hole in the ground. Then the developer walks away with most of the cash, leaving the building only partially completed.

    But where is the problem? Investors lost their money but money is flowing into the country and new investors will replace the old ones. The workers got paid (hopefully) and will go buy stuff with it. And the developer will spend the money on new Audis and Gucci clothes.

    Obviously it’s not the most efficient way to build an economy, but it grows the economy nonetheless. The keyis that there are not a bunch of “zombie” corporations in China straddled with debt and unable to grow. Developers just take cash from the new rich, and leave empty buildings.

    I believe China’s growth prospects hinge squarely on investor sentiment, which can be a tricky thing to predict. If investors believe China is the place to be, this cycle will continue just fine and money flows all over the country. But if China falls out of favor, then there won’t be any more investors to replace the ones that were just swindled, and the developers dump their money in Swiss bank accounts while the economy collapses.