The bloated and seemingly unstoppable Chinese economy is not immune to downturn, after all.
Phoenix Island, the man-made utopia erected on the southern coast of Hainan province, is mostly comprised of deserted high-rises and empty poolside areas. The ramping-up of Chinese real estate has come to a screeching halt in the face of sluggish exports and off-loading of properties. The island was the result of government-generated credit boom for property investment.
Chinese manufacturers once snapped up its luxury apartments, but with profits falling as a result of the global downturn many owners need to offload properties urgently and raise cash to repay business loans, estate agents said.
Official figures showed an almost eight percent increase in China’s total exports last year, but sales to Europe fell by almost four percent with the continent mired in a debt crisis and recession.
At the same time rising wages in China mean that producers of clothes, toys and other low-end goods are seeing their margins squeezed as other emerging economies compete to become the world’s centre for cheap manufacturing.
For years Chinese business owners…have used property as a store of value, pushing prices up even higher in the good times but creating the risk of a crash in the bad.
Housing bubble? Rising wages? Government-run credit flow?
What could possibly go wrong?