Why are the Chinese building huge cities of apartment towers? This Video by ADVCHina has all the explanation plus real on the ground footage.
So the Chinese invest and invest into more and more empty flats hoping to sell them on later with a profit. Why don’t they invest in stocks? Well they do, this led to the recent Shanghai stock bubble and subsequent burst. So why don’t they invest abroad?
They can’t legally. Their government prohibits them from doing so. So the ghost cities are a government-induced phenomenon: The citizens do not find another way of investing their capital.
When making an investment you should ask yourself, what is the marginal utility of the thing I invest in? Example: The first bed you buy for yourself has a very high utility to you. A second bed might be useful if you plan to have some guests in your home – but the expected utility is far less: The second bed is in this example more of a luxury than an investment.
The Chinese of course know this, that’s why they try to smuggle money abroad, buying houses e.g. in Vancouver – again houses, why? Because houses can often be bought in all cash exchanges, making it harder for the ChiCom government to track down illegal money export.
The restrictions on money flow by the Chinese government are legitimate insofar as I hold that a national government CAN do this. The real question is, is this policy USEFUL to China? Given the real estate overbuild, it does not seem like it. The ChiComs must provide an investment opportunity to their citizens that provides a higher utility.
Driven by this real estate bubble, the Chinese have also built the largest building by floor space: New Century Global Center in Chengdu.(fotos)
Which I do find impressive – like an entire artificial world or a Mars colony.