The world’s largest shopping mall/entertainment complex, in Guongzhou, China, is China’s version of “too big to fail.” The developer poured $365 million into this showcase project. It’s beautiful in an extravagant, Las Vegas kind of way. But the developers, inexperienced in running malls, gave little thought to who would shop there, and how they would get there. The place is almost a ghost town. With 7.1 million square feet, it has only 12 tenants. But the Chinese authorities keep the mall open at extraordinary expense. POV has the video story here.
It would be a mistake to underestimate the Chinese as an economic competitor to the United States. But it would be a mistake to assume, as we did with the Japanese 20 years ago, that they can continuing growing their economy at a world-beating without ever stumbling. China is one big Enron. The only thing saving hundreds of large, speculative investments across the country is the opacity of the financial system and the willingness of the government to keep the whole thing going. When confidence in the system collapses, it will be a nuclear meltdown spewing its financial fallout all over the world.
So, add one more unsustainable prop to the American economy. U.S. human settlement patterns are unsustainable due to peak oil. U.S. fiscal policies are unsustainable due to ever-expanding spending and entitlements. And continued bankrolling of U.S. deficits by China is unsustainable due to that own country’s misallocation of capital on a scale that rivals our residential real estate boom and bust.
At least people are living in most of the houses U.S. home builders erected. Many of those glitzy towers on big-city Chinese skylines are empty. How do you say “Potemkin Village” in Chinese?
