Monday, 18 October, 2021

Evergrande collapse highlights lost world China’s fast economy left behind


“In the village we could only eat what we grow and catch, but now everything can be sold and bought. Everything has become mechanised and easy now compared to my parents’ era,” said Wang.

“I often miss the cuttlefish. I imagine I would be very busy around this season if I was in the past. The cuttlefish was free and easily available back then, but now it is very expensive.”

Tourists walk around Houtouwan Village this week.

Tourists walk around Houtouwan Village this week.Credit:Sanghee Liu

Chinese cuttlefish prices saw double-digit growth in the 1990s as middle-income demand for seafood boomed, according to figures from the UN’s Food and Agriculture Organisation. It was not the only price surge driven by a nascent middle class. The prices of city properties bought by those that left the villages of Shengsi archipelago and other regions ballooned, reaching almost 13 per cent annual growth in 2016.

Millions of families piled their life savings into apartment towers stacked 12 blocks wide and 20 storeys high as the country opened up and investment flowed in during the 1990s and 2000s.

They left the villages in their droves and found better jobs for themselves and schools for their children. With them came property speculators that would ride the wave of worker optimism, driving prices ever higher, and developers who would take a bet on building small cities before people could fill them.

The implosion of property giant Evergrande is testing nerves.

The implosion of property giant Evergrande is testing nerves.Credit:Bloomberg

The runaway growth was not sustainable. The bubble burst when the Chinese government stepped in last year, tightening regulations on lending. Now, dozens more abandoned towns lie on the Chinese mainland. Few are as scenic as Houtouwan.

Unlike the village, they are victims not of economic promise but disappointment. China’s second-largest developer Evergrande is on the verge of bankruptcy. It sold more orders of the Chinese dream than it could fill. Evergrande found itself barred from taking on more debt because it had failed three key stress tests the government implemented last year. It now has $400 billion in debt that it will struggle to service in a falling market. Some 800 of its projects remain unfinished, those that have been built are struggling to find buyers in a market that has dropped 15 per cent in the past year.

Vines wrap the buildings of Houtouwan Village which was abandoned in the 1990s.

Vines wrap the buildings of Houtouwan Village which was abandoned in the 1990s. Credit:Sanghee Liu

Thousands of its own employees and investors are now protesting at its headquarters as the Chinese government weighs up whether to step in.

“In China, 90 per cent of people own their own home,” said Roland Houghton, an analyst at Milford Asset Management. “And 40-60 per cent of an individual or family’s balance sheet assets is made up of their homes. It’s incredibly important to ensure that there’s no material, contagion impacts, throughout the Chinese economy.”

China’s economy surged on the back of its property sector.

China’s economy surged on the back of its property sector. Credit:Reuters

Logan Wright, a director at Rhodium Group, told The Financial Times on Wednesday that there was enough empty property in China to accommodate more than 90 million people. That is the population of Australia housed four times over.

If they remain empty no vines will grow over the buildings left behind. Their fate is more likely to be that of the 15 highrises demolished in Kunming in August, reduced to rubble by thousands of controlled explosions.

Cai Yaqin, 69, was the last person to move out of Houtouwan. She said her family was reluctant to go but eventually with no school, limited transportation and everyone else gone, they were left with little choice.

Cai Yaqin, 69, the last villager who moved out Houtouwan Village.

Cai Yaqin, 69, the last villager who moved out Houtouwan Village. Credit:Sanghee Liu

“I lived in the village for almost 45 years,” she said. “We were the last family to move out because we built a nice three-storey house. It felt like a waste to abandon it.”

Today, local tourists come to the Shengsi Islands to see remnants of a simple life that has long since disappeared from Chinese metropolises.

Tang Yaxue, 65, and her husband are the only two villagers who have returned to work in Houtouwan.

She runs a small food and drinks stand for tourists at her former two-storey home, pointing to the building that has almost collapsed next to them. “Life was pretty good when we lived here,” she said.

Get a note direct from our foreign correspondents on what’s making headlines around the world. Sign up for the weekly What in the World newsletter here.

0 comments on “Evergrande collapse highlights lost world China’s fast economy left behind

Leave a Reply

Your email address will not be published. Required fields are marked *

Categories