I was looking at this photo the other day, and
honestly, I thought my brain was glitching. It's
a picture of the Eiffel Tower. Okay. It's got
the iron lattice, the observation deck, the whole
thing. It looks exactly like Paris, but then
you zoom out. And you realize the context is
all wrong. Completely wrong. Instead of the Champ
de Mars or, you know, these beautiful Haussmannian
boulevards, it's surrounded by what look like
cabbage patches and misty farmland. Right. And
there's nobody there. It's not Paris. It's Tian
Du Cheng. in china ah yes the fake paris that's
one of the most famous examples of that copycat
architecture era but it's not just the architecture
that's so weird it's the silence for years photos
of this place went viral because it was for all
intents and purposes a ghost town right a complete
replica of a european capital built for thousands
of people sitting almost entirely empty And it
brings up this image that I think a lot of us
have when we think about the Chinese economy
over the last decade, massive gleaming infrastructure
and nobody home. It's the defining image of the
early 2010s, isn't it? The ghost city. You had
the New South China Mall in Dongguan. I mean,
this place had leasable space for thousands of
stores, an indoor roller coaster. You're the
Phoenician in Vegas. Exactly. But for years,
the only thing in the corridors was dust. Or,
you know, the most famous one, Ordos Kangbashi
in Inner Mongolia, which looked like a sci -fi
metropolis but had virtually zero residents for
a long time. And the narrative back then was
pretty straightforward, right? It was, look at
this massive bubble. Look at this waste. It felt
like a house of cards just waiting for a slight
breeze. A spectacular misallocation of capital
was the line. Exactly. But here we are over a
decade later, and we need to figure out if that
was actually the whole story. Because the headlines
today... Evergrande collapsing, Country Garden,
all these mortgage boycotts, the debt crisis.
They feel like the sequel to that Ghost City
movie. Well, I'd argue it's not really a sequel.
It's the third act of the very same movie. And
that's what makes this so difficult to unpack.
Because you have these two completely contradictory
ideas that are both true at the same time. Was
that era the greatest housing bubble in human
history? Probably. Yes. OK. But was it also somehow
a successful urbanization strategy that moved
hundreds of millions of people out of poverty
and built a modern nation? Also, yes. That's
the tension we're digging into today. This is
the central paradox. We have a massive stack
of sources here, history, economic data, boots
on the ground reporting. And we're going to trace
the arc of Chinese real estate from, well, the
1840s all the way to the debt crisis of the 2020s.
And the stakes are just incredibly high. We aren't
just talking about empty malls or weird Eiffel
Tower replicas. We are talking about where Chinese
citizens have parked 60 percent of their household
assets. 60 percent? Wait, say that again? Six.
Zero. 50%. That's staggering. For comparison,
in the U .S., what is it? It's closer to 25 %
or 30%, depending on how you measure it. In China,
the home isn't just a place to live. For two
generations, it has been the primary savings
account for over a billion people. So if that
market cracks, it's not just a bad day on the
stock market. It's a fundamental catastrophe
for, you know, Main Street. For almost every
single family. Precisely. So to understand why
the world is watching Evergrande so nervously,
you have to understand how we got here. You have
to understand why a factory worker in a second
-tier city would sink every single penny they
have and their parents' pennies into an unbuilt
concrete box. Okay, let's rewind then, because
to get to the bubble, we have to start where
there was no bubble. In fact, there was no market
at all. Well, that's exactly right. We need to
go back to the pre -1998 era. From the founding
of the People's Republic in 1949 up until the
late 90s, the concept of real estate, as we know
it, it just didn't exist in China. So if I'm
living in Beijing in, say, 1980, and I want to
move out of my parents' house, I don't go on
Zillow. I don't call a realtor. You definitely
don't call a realtor. There's literally nothing
to sell. The entire country was in a system of
welfare housing allocation. Housing wasn't a
commodity you bought and sold. It was a benefit,
a benefit provided by your employer. My employer.
You mean like the factory owns my house? The
work unit, or Danway. Whether you worked for
a state -owned steel mill, a government bureau,
or a university, the Danway was responsible for
your entire existence, from cradle to grave.
Wow. They provided your salary, your health care,
your pension, your kids' schooling, and yes,
your apartment. That sounds, I mean, on one hand,
remarkably stress -free. No mortgage, no rent
hikes. On paper, sure. It sounds a bit like a
socialist utopia. But the reality was a severe
shortage economy. Because the housing was free,
or at least cost a nominal fee, there was zero
incentive for the state to build anything comfortable
or, frankly, adequate. It was a cost center for
the state, not a profit center. So what did that
look like for the average person? What did it
feel like? It felt cramped. The sources point
to these surveys from the late 1970s that are
just mind -boggling. The average urban living
space per person was less than four square meters.
Four square meters. Hold on. A standard king
-size bed is about three and a half square meters.
So you're telling me my entire personal existence,
my sleeping, eating, living area was the size
of a mattress? Basically, I mean, you'd have
entire families, multiple generations squeezed
into one room. You'd share a kitchen down the
hall with five other families. You'd share a
bathroom. One of the sources calls it a dwelling
narrowness that is hard for us to even imagine
today. So the demand, the pent up desire for
space was clearly there. People must have been
desperate, but they couldn't buy it. Not until
1998. That's the year everything changed. It's
really the big bang of the Chinese property market.
Why 1998 specifically? What happened? Well, the
Asian financial crisis was raging and China's
old economic model was sputtering. They needed
a new engine for growth and fast. The state council,
led by Zhu Rongji, issued a directive effectively
ending the in -kind housing system. So they just
pulled the plug. They pulled the plug. They told
the work units, stop building houses for your
people. Let them buy their own. That sounds like
a terrifying shock to the system. Hey, you know
that free apartment you have. Good luck. It was
a shock. But they softened the blow with a massive
one -time privatization scheme. They allowed
people to buy their current work unit apartments
at incredibly steep discounts. Oh, interesting.
These were heavily subsidized prices based on
seniority, years of service, things like that.
So if you were a loyal party member who'd worked
at the steel mill for 30 years, you got a great
deal. So it's like the right to buy scheme that
Thasher did in the UK, but on a continental,
almost unimaginable scale. Exactly. That's the
perfect analogy. Overnight, millions of people
went from being tenants of the state to being
property owners. And suddenly, for the very first
time, they had equity. They had an asset that
could theoretically appreciate in value. And
I imagine that just flipped a switch in the collective
psyche. It absolutely did. It moved housing from
welfare to wealth, from right to a commodity.
And you have to layer on the cultural drivers
here, which are just so powerful. It's not just
about money. The sources talk extensively about
what they call bachelor's angst. I saw that term.
And the mother -in -law requirement, which I
have to say sounds formidable. It is the ultimate
barrier to entry in the marriage market. You
have to remember. In China, due to the one -child
policy and a lingering cultural preference for
sons, there is a significant gender imbalance.
There are millions more men of marriageable age
than women. So the dating market is competitive.
Competitive puts it very mildly. It's a battlefield.
And in that battle, a house is the price of admission.
It's the ultimate signal of stability and success.
So the saying goes the mother -in -law won't
even let you in the door if you don't have a
deed to show her. That's not even an exaggeration.
If you are a young man and you don't own property,
you are effectively invisible to many prospective
brides, and more importantly to their mothers,
who often have the final say. The apartment is
for her daughter's security. So you have this
intense social pressure you must buy to get married.
But then there's the investment angle. You mentioned
earlier that 60 % of assets are in housing. Why
not buy stocks? Why not bonds or mutual funds?
Because for most of this period, those markets
were either underdeveloped or seen as incredibly
risky. The Chinese back market, especially in
the 90s and 2000s, has historically been treated
like a casino. Not a place for your life savings.
Absolutely not. It's incredibly volatile, was
rife with insider trading, and retail investors,
the so -called leaks who get harvested, often
get burned badly. And what about investing overseas?
Capital controls. You can't just take your life
savings in yuan and go buy Apple stock or U .S.
Treasury bonds easily. There are strict limits
on how much money you can move out of the country.
So your money is effectively trapped in the country.
The banks pay terrible interest rates, often
below inflation. The stock market is a gambling
den. So what's left? Where do you put your money
to save for retirement or your child's future?
Concrete. Concrete. For 20 years, from roughly
2000 to 2020, property was the can't lose piggy
bank. It was the only major asset class that
seemed to go up year after year without fail.
And that belief that property only goes up is
a hell of a drug. Which brings us, I think, to
the bubble era, roughly 2005 to 2011. This is
when things went completely parabolic. The sources
indicate that average housing prices across the
country tripled between 2005 and 2009. Tripled?
In four years? That's Bitcoin -level growth for
a physical illiquid asset? That's insane. And
you have to remember the global context. 2008
was the global financial crisis. The rest of
the world was melting down. Lehman Brothers collapsed.
Right. The world was ending. But China, in an
effort to insulate itself, responded with a massive
stimulus package, a $4 trillion RMB package,
plus a huge expansion of bank lending. They flooded
the economy with cheap credit to keep growth
alive. And all that money had to go somewhere.
And it went directly into real estate. State
-owned enterprises, local governments, private
developers, everyone gorged on cheap credit to
build, build, build, and regular people borrowed
whatever they could to buy. But wait, here's
the part my brain gets stuck on. If prices are
tripling and wages are clearly not tripling,
how are people paying for this? The math just
doesn't seem to work. The math gets very, very
scary when you look at the price -to -income
ratios. In international economics, there's a
general benchmark. A ratio of 5 to 1, meaning
the median house costs 5 times the median annual
household income, is considered severely unaffordable.
Okay, 5 to 1 is the red zone. Where was Beijing?
Or Shanghai? At the peak of the bubble, in the
Tier 1 cities like Beijing, the ratio hit 27
to 1. 27. 27 years of a household's entire income.
That's essentially a lifetime of labor for a
two -bedroom condo. How is that even possible?
Who is buying these places? Well, this is where
we have to talk about something the official
data doesn't capture. We have to talk about gray
income. This is the theory from the economist
Andy Hsieh, right? He was a bit of a contrarian
voice at the time. A very loud and often correct
one, yes. Andy Hsieh is this brilliant independent
economist who looked at the official data and
basically said, this is nonsense. What was his
argument? He said, look, the official income
stats say people can't afford these homes, but
the homes are selling. often for cash. So the
money must be coming from somewhere else. And
somewhere else was. Off the books. Undisclosed
income. This could be corruption, kickbacks,
undeclared business profits, consulting fees
paid in cash, red envelopes filled with money.
Xie Gas estimated that this gray income could
account for as much as 10 % of China's entire
GDP. A tenth of the economy was just... Potentially.
He famously would do these very unconventional
analyses. He'd sit in hotel lobbies in the Yangtze
Delta and just count the traffic or look at electricity
usage versus reported factory output. And he
concluded there was a massive shadow economy
flooding cash into real estate in the big cities.
So the guy buying the $2 million apartment in
Shanghai officially makes, say, $50 ,000 a year
as a civil servant. But under the mattress, he's
sitting on a pile of cash from, let's call it,
informal business activities. That's the theory.
Yeah. And that cash needed to be laundered or
at least stored somewhere safe where the taxman
couldn't see it. Real estate was the perfect
bolt. It was tangible. And the speculation got
so crazy that even non -real estate companies
started pivoting, didn't they? I remember reading
in the sources about shoe companies getting into
the game. Oh, that is the classic textbook bubble
signal. You had manufacturers of shoes, cigarette
lighters, chemicals, you know, boring low -margin
industrial businesses suddenly opening property
divisions. Why would they do that? Because why
would you grind out a 3 % profit margin making
sneakers when you can borrow cheap money from
a state bank? buy a plot of land, build a tower,
and make a 30 % or 40 % return in two years.
The incentives were completely skewed. It reminds
me of the dot -com bubble when every company
added dot -com to their name, or more recently
when everyone suddenly became an AI company.
When the shoe factory becomes a condo developer,
you should probably run for the hills. And to
be fair, the government tried to stop it. They
weren't completely blind to the risks. Around
2010 and 2011, they actively tried to deflate
the bubble, but gently. How? What did they do?
They started putting the brakes on. They raised
down payment requirements, especially for second
or third homes, up to 40 percent, 50 percent,
even 60 percent. That's a serious barrier. A
huge one. And they did things like banning non
-residents from buying property in Beijing unless
they'd paid taxes there for five consecutive
years. That's drastic. Imagine if New York City
said, unless you've lived and worked here for
five years, you literally cannot buy an apartment.
The market would seize up. And it did, temporarily.
It cooled the market. Prices dipped or flattened
in 2011. But the economy's dependence on real
estate was already too deep. The moment overall
GDP growth slowed down in 2012, the government
would panic and quietly loosen the rules again.
It was an addiction they couldn't kick. And while
this absolute frenzy was happening in the major
cities, out in the provinces, we started seeing
the phenomenon we opened with. The ghost cities.
Yes. And this is genuinely one of the most misunderstood
parts of the entire story. Misunderstood how?
I mean, we've all seen the videos. Miles of empty
six -lane highways, gleaming skyscrapers with
no lights on. That seems pretty clear -cut, doesn't
it? It seems that way on the surface. But we
have to look at the timeline. Take Ordos Kangbashi,
the poster child. When Al Jazeera's Melissa Chan
went there in 2009, and made it world famous
as a ghost town, the city was practically a newborn.
It was only five years old. Construction had
just started. So you're saying we're essentially
judging a construction site and calling it a
failure. We were judging a different model of
urbanization. In the West, we generally build
demand -led. People move to a suburb, traffic
gets bad. Then maybe 10 years later, we get around
to widening the road. We build the school after
the classrooms are already overflowing. Which
is incredibly annoying, by the way. It is. It's
inefficient. China operates on a supply -led
model. They build the infrastructure, the six
-lane highways, the grand government centers,
the universities, the high -speed rail station
first. Then they expect the population to fill
it in over the next 10 to 20 years. The field
of dreams model. Build it and they will come.
And you know what? In many of these famous cases,
they did come. Really? Ordos isn't empty anymore.
Not at all. Ordos -Kangbashi now has a population
of over 150 ,000. It turns out they built some
of the best schools in the province there, which
acted as a magnet for middle -class parents.
Housing crisis rebounded. It's a functioning,
vibrant city. OK, what about the Zendong New
Area? That was the one that the show 60 Minutes
just roasted in 2013. They had that classic segment
with the empty towers and deserted plazas. I
remember it well. But if you go there today or
look at the 2023 data, that ghost city has 1
.3 million residents. It's a major financial
and logistics hub for central China. It's bustling.
So the Western media was just wrong. I think
we were impatient. We looked at a 20 -year plan
in year three and called it a failure. Wade Shepard,
an author who wrote extensively on this, has
a great line. He calls it calling the game at
halftime. However, I mean, surely they can't
all be success stories. You don't build an estimated
65 million empty homes, which is the number from
a 2020 study, without some significant waste.
That's enough to house the entire population
of France. Oh, absolutely. And this is where
we need to make a critical distinction. There's
a difference between a city that is growing into
its skin and a development that is just structurally
useless. There are plenty of remote, poorly planned
developments that never filled up and probably
never will. But even in the successful cities,
you have this other phenomenon of millions of
sold but empty units. This is the weird part
to me. I buy a house, but I don't live in it.
I don't even rent it out. Why? It goes back to
that investment mindset we talked about. If you
buy an apartment as a store of value, like it's
a gold bar with windows, you don't necessarily
want tenants in it. Why not? That's income. Tenants
wear things out. They scratch the floors. They
scuff the walls. They break things. In the Chinese
market, a lived -in secondhand apartment often
has a lower resale value than a pristine, untouched
shell. Wait, a rough shell? What does that mean?
Yes. In China, it's very common for apartments
to be sold as concrete shells. No floors, no
toilets, no drywall, no kitchen cabinets, just
the box. The buyer is expected to fit it out
themselves. So people buy the concrete box and
just let it sit there? For 10 years, yes. It's
literally a concrete safety deposit box in the
sky. It's a way to park your savings for your
child's future marriage or for your own retirement.
Occupying it would devalue the asset. That's
a completely alien way of thinking about housing
to me. And this led to some truly bizarre marketing
tactics to sell these remote, empty developments,
didn't it? We have to talk about the rent -a
-foreigner industry. I was hoping we'd get to
this. It sounds like a crazy urban legend. But
it was very, very real. So what was it? Well,
you have developers in these third or fourth
tier cities, basically in the middle of nowhere.
And they want to project an image of international
success. They want to tell the local farmers
and small -time investors, this isn't just a
building in a field, this is a global commerce
hub. Okay, a classic marketing pitch. So how
do you prove that? You import white people. Seriously.
If you were a Westerner in China in the early
2010s, a student, a teacher, a backpacker, you
could pick up these weekend gigs. You put on
a cheap suit, go out to some remote development,
and stand at a ribbon -cutting ceremony. The
developer would introduce you as a famous architect
from Canada or a diplomat from France or the
CEO of an American investment firm. They just
paid you to stand there and look foreign. Yes.
One of the sources describes it as creating an
erotic fantasy of internationalism and success.
It didn't matter if you were an unemployed English
teacher from Ohio. If you had the right look,
you were a prop in the sales pitch to convince
locals that this place was the next big thing.
That is hilarious and also incredibly cynical.
It's selling a dream that is literally built
on a lie. But that lie or maybe that belief that
growth is inevitable wasn't just marketing. It
was baked into the very structure of the government.
And this is the most critical part of the deep
dive, I think. We have to talk about the engine
under the hood, land finance. Okay, lay it on
me. I hear this term land finance all the time.
What does it actually mean in simple terms? It
answers the fundamental question. How do local
governments in China pay for anything? In the
U .S. or Europe, your town pays for schools and
police and roads mostly through property taxes,
right? You own a house. You pay the town a percentage
of its value every single year. Right. Everyone
hates it, but it pays the bills. Well, for this
whole period, China didn't have a recurring annual
property tax like that. And the central government
in Beijing takes the lion's share of other taxes,
like income tax and VAT. So the mayors of these
cities are, on paper, broke. But they have one
massive asset. They have the land. In China,
the state owns all urban land. So what a local
government can do is rezone agricultural land
on the edge of the city, evict the farmers, compensate
them, and then sell the long -term land use rights
to a developer like Evergrande. And because land
prices were skyrocketing for 20 years, this was
a goldmine. Here's a printing press. In some
peak years, selling land accounted for 50 % half
of all local government revenue. Now, just think
about that incentive structure for a minute.
If half my paycheck depends on selling land at
ever higher prices, what am I going to do? You're
going to do everything in your power to make
sure land prices stay high. You're going to encourage
developers to build as much as possible. And
you're going to borrow against that future land
revenue to build shiny new subways and parks
and convention centers to make the land even
more valuable. It's a self -reinforcing cycle,
a feedback loop. A very dangerous one. And it
gets even more complicated. The local government.
creates a shell company. It's called an LGFV,
or local government financing vehicle. This LGFV
borrows billions from state banks to clear the
land and build the infrastructure. Then the government
sells the land to Evergrande. Evergrande, in
turn, borrows billions to buy the land and build
the apartments. Everyone is borrowing. The whole
system is built on leverage. Everyone is borrowing.
And the collateral for all of it is the single
foundational assumption that land prices will
keep going up forever. And what about the politicians,
the city mayors? Where do they fit in? Their
promotion within the Communist Party depends
almost entirely on hitting GDP growth targets
and what's the easiest way to generate massive
GDP. So if you want to get promoted from a provincial
city to a job in Beijing, you sell land, you
build a massive new district, you juice the GDP
numbers for a few years, and you move up the
ladder. long before the bill for all that debt
comes due. It's a giant game of musical chairs.
Precisely. And in August 2020, Beijing decided
the music had to stop. The three red lines. The
three red lines. This was not an accident. This
was not a market crash in the Western sense.
This was a deliberate policy decision by the
central government in Beijing to finally defuse
the bomb. They looked at the balance sheets of
developers like Evergrande, who had hundreds
of billions of dollars in debt, and said, this
is a systemic risk to our entire country. So
what did they actually do? What were the red
lines? In August 2020, they issued three strict
rules. If a developer wanted to borrow more money
from any bank, they had to meet three specific
financial health metrics. There were basically
limits on their debt -to -cash ratio, their debt
-to -assets ratio, and their debt -to -equity
ratio. And Evergrande. They failed all three.
Miserably. So they were cut off. The banks were
ordered to turn off the credit tap. Completely
cut off. And you have to understand, the business
model for Evergrande and many others was in some
ways like a Ponzi scheme. They needed to take
out new loans just to pay the interest on their
old loans and to start new projects. When that
liquidity tap was turned off, they suffocated
almost instantly. And this brings us to the most
tragic part of the collapse. The victims who
weren't bondholders or shareholders, but the
regular home buyers. The pre -sale model. This
is where the technical details really, really
matter. In the West, if you buy a condo that
isn't built yet, you typically put down a deposit,
maybe 10%, 20 % if it's a luxury building. You
pay the rest when the building is finished and
you move in. Right. That seems logical. In China,
the standard practice was to pay 100 % of the
purchase price up front. You take out a 30 -year
mortgage for the full amount before the ground
is even broken. Wait, hold on. Let me get this
straight. I'm paying a full mortgage principal
and interest every month for an apartment that
is just a drawing on a piece of paper. Yes, the
developer takes your money and supposedly uses
that money to build your house. But in reality,
what they often did was use your money to go
buy more land to start the next project to keep
the Ponzi scheme spinning ever faster. So when
the three red lines hit and the developer's cash
flow dried up, the construction stopped. All
across China, cranes just went still. And you
now have... millions of people, regular middle
-class families, paying mortgages on rotting
concrete skeletons that might never be finished.
That is horrifying. I can't even imagine. You're
trapped. You can't live in it. You can't sell
it. But the state -owned bank still wants its
monthly payment. And that's what triggered the
mortgage boycotts in 2022. It was a rare, widespread
act of civil disobedience. Groups of homebuyers
and hundreds of projects across the country banded
together online and said, we are stopping payments.
If you don't build the house, we don't pay the
loan. Which is a direct threat to the stability
of the entire banking system. It terrified the
government. Social stability is the number one
priority. If millions of people start defaulting
on their loans to the big state banks, the banks
could collapse. That's a true systemic crisis.
So where are we now? It's 2024 or 2026 as we
record this retrospective. The dust is still
settling. What is the state of the market? The
sector has shrunk dramatically. Real estate and
related industries used to be, by some estimates,
a quarter, 24 percent or 25 percent of China's
entire GDP. Now it's dragging significantly lower,
maybe 19 percent or even less. That is a massive
gaping hole in the economy that nothing has yet
been able to fill. And the wealth effect you
mentioned earlier. It's gone into reverse. It's
a negative wealth effect. People feel poor. If
your apartment, which is 60 percent of your family's
net worth, has lost 20 percent or 30 percent
of its value in the last two years, you aren't
going to buy a new car. You aren't going to go
on a fancy vacation. You're going to save every
penny you can. Consumption is very weak. Is the
government bailing them out? Are they coming
in with another huge stimulus? It's a very cautious,
very targeted bailout. Xi Jinping has the same
as mantra. Houses are for living, not for speculation.
And unlike in the past, they're actually sticking
to that. They are not flooding the market with
cheap cash like they did in 2008 or 2015. So
no bazooka stimulus this time? No. They're doing
very specific things. There's a white list of
certain development projects that they've deemed
worthy of saving. They're telling banks to lend
to those projects, but only so they can get the
homes finished and give the keys to the people
who already paid. It's about preventing riots,
not reinflating the bubble. They are lowering
mortgage rates and down payments a bit, right?
Yes. They're trying to entice new buyers back
into the market, but it's a slow grind. They're
trying to let the air out of the bubble without
popping it completely and causing a full -blown
financial collapse. It's an incredibly painful
multi -year process. And what about the local
governments, the ones who are addicted to selling
land? They are in a deep crisis. Developers aren't
buying land anymore because they're bankrupt
or scared. So local government revenue has absolutely
plummeted. We're seeing these bizarre reports
of LGFEs buying their own government's land,
literally moving money from one government pocket
to another just to make the numbers look like
the market is still moving. That's just fake
revenue. It's an accounting trick. It's an act
of desperation. Yeah. But the biggest damage,
I think, is psychological. The iron law of Chinese
real estate, the unshakable belief that prices
always go up, is broken. Once you shatter that
faith, it is incredibly hard to rebuild it. People
are now looking at housing as a risky asset,
not a safe haven. That's a fundamental shift.
So as we wrap up this deep dive, how do we synthesize
this whole incredible story? It feels like a
story of just immense ambition that flew too
close to the sun. I think that's a good way to
put it. It really is the story of modern China
in a microcosm. It's a story of incredible, breathtaking
transformation. We have to give credit where
it's due. This system urbanized a country at
a speed never before seen in human history. It
raised the urbanization rate from 18 % in 1978
to over 64 % today. They built world -class infrastructure.
The ghost cities did eventually house millions
and millions of people. But the bill has arrived.
The model is unsustainable. The bill has absolutely
arrived. The model of growth at any cost of building
just to hit a GDP target, regardless of real
demand or financial risk, has hit a hard wall.
You know, there was a point in the research that
really, really stuck with me. It wasn't about
the economics. It was about the physical quality
of the construction. Ah, yes. The so -called
tofu drag construction. Right. But not just the
shoddy stuff. It was the idea of planned obsolescence.
Some of the architects quoted in the sources
say that many residential towers in China are
designed and built to last maybe 20 or 30 years.
That's right. In Europe, you build a cathedral
or a stone house to last for centuries. In the
boom years of China, you built it to get it sold
and to hit this year's GDP target. Long -term
quality was a secondary concern. And he's the
provocative thought I want to leave you, the
listener, with. In our current global economic
system, if you build a tower, that activity adds
to GDP. 20 years later, if that tower is crumbling,
you have to tear it down. The demolition also
adds to GDP. And then if you build a new one
in its place, that adds to GDP again. It's the
broken window fallacy on a macroeconomic scale.
You're just churning activity for the sake of
a number. Exactly. So if a huge chunk of this
miracle growth was based on... churning concrete
building things that are destined to be rubble
in a single generation, how much that wealth
was actually real. It forces us to ask, what
is the purpose of an economy? Is it to generate
a number on a spreadsheet that makes politicians
look good? Or is it to create lasting, durable
value for human beings? Is the ghost city a bug
in the system, a mistake? Or is it actually a
feature, the perfect symbol of an economy that
became obsessed with the wrong metrics? That
is the multi -trillion dollar question that China
and maybe the rest of the world is going to have
to grapple with for the next decade. Something
to chew on. That's it for this deep dive. Thanks
for listening.