After the United States and for that matter the World real estate collapsed the Chinese kept building to keep their economy growing. The result was entire new cities where no body lived and empty apartments and retail space. Many, including me, knew this was not sustainable. Well now it’s happening:
Nothing is going right for Hangzhou at this moment. Walmart will be closing its Zhaohui store in that city on April 23 as a part of its overall plan to dump marginal locations—about 9% of the total—in China.
Thanks to the world’s largest retailer, another large block of space in Hangzhou, the capital of Zhejiang province, will go on the market at a time when there is generally too much supply. The problem is especially pronounced in the city’s premium office market. Hangzhou’s Grade A office buildings at the end of 2013 had, according to Jones Lang LaSalle, an average occupancy rate of 30%.
The real weakness, however, is Hangzhou’s residential sector. The cause is simple: massive overbuilding. Sara Hsu of the State University of New York at New Paltz writes that Hangzhou faces “burgeoning swaths of empty apartment units.
And it’s not unlike what happened years ago in the US and Europe:
The real estate market in Hangzhou looks like it has just passed an inflection point. It is not so much that fundamentals have deteriorated—they have been weak for some time—as that people’s mentality has changed.
China has many other problems they must address not the least of which is their lethal air pollution which is worse than anything we saw in Los Angeles at it’s worse. The Chinese also have much agriculture land that can no longer be used because of pollution. The increase in the cost of bunker oil continues to make Chinese products less competitive.
The Chinese economic miracle was always going to be a short term thing and it looks like the party is winding down.