The entire Chinese economic miracle is a debt financed farce. Their GDP growth is a fraud. Their burgeoning middle class are nothing but delusional lemmings. The whole tettering facade is going to collapse in an epic implosion. How can anyone not watch this piece and conclude that China and the rest of the globe are in store for a world of hurt? Even the smart Chinese billionaires know they are in the midst of a bubble. There is one absolute about bubbles. They ALWAYS pop. They don’t deflate slowly. I believe China’s bubble is popping as we speak and they are covering it up with fraudulent economic reports.
He’s showing us around the new eastern district of Zhengzhou, in one of the most populated provinces in China – not that you’d know it. We found what they call a “ghost city” of new towers with no residents, desolate condos and vacant subdivisions uninhabited for miles, and miles, and miles, and miles of empty apartments.
Lesley Stahl: Why are they empty? I’ve heard that they have actually been sold.
Gillem Tulloch: They’ve all been sold. They’ve all been sold.
Lesley Stahl: They’ve all been sold? They’re owned.
Gillem Tulloch: Absolutely.
Owned by people in China’s emerging middle class, who now have enough money to invest but few ways to do it. They’re not allowed to invest abroad, banks offer paltry returns, and the stock market is a rollercoaster. But 15 years ago, the government changed its policy and allowed people to buy their own homes and the flood gates opened.
Gillem Tulloch: So what they do is they invest in property because property prices have always gone up by more than inflation.
Lesley Stahl: And they believe it will always go up?
Gillem Tulloch: Yeah, just like they believed in the U.S.
Lesley Stahl: Giant cities being built with people not coming to live here.
Gillem Tulloch: Yes. I think they’re building somewhere between 12 and 24 new cities every single year.
Unlike our market driven economy, in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing. The assumption is “if you build it, they’ll come.” But no one’s coming.
Lesley Stahl: And it’s all Potemkin.
Lesley Stahl: So if the bubble bursts, who’s left holding the bag?
Gillem Tulloch: There are multiple classes of people that are going to get wiped out by this. People who have invested three generations worth of savings — so grandparents, parents and children – into properties will see their savings evaporate. And then, of course, 50 million construction workers who are working on all these projects around China.