Shanghai's Investments in Infrastructure development and Real-Estate

By | 13/09/2011

After over 3 weeks in Shanghai I feel ready to tell my uneducated, see for yourself, personal point of view.

I read many articles about China's RE bubble. During the passing three weeks I've bumped into a (awfully) silent reminders of it, standing here and there, reminding me of its existence. I've included some pictures and movies below to show you readers some tastes of it. )

This week I will be finishing my work related duties here and will have more time (and energy) to explore some more, I'll try to bring some more pictured evidence.

When I arrived to Shanghai, the first transportation vehicle I used was the Maglev:

As you can see – the speed limit is crazy:

Maglev Speed Limit - Crazy!

And all of this is for 50 RMB (7.8$) or 40 RMB (6.25$) if you have a flight ticket. Not cheap, but not expensive (at least for westerners). If you choose to go using the subway, you will pay 4 RMB (62 cents).

But there are other things I noticed – although the airport was packed with flights (I arrived close to the weekend), the Maglev train was almost empty. 95% of the seats were empty:

Long after I arrived I talked with friends here about the Maglev and they said that the Maglev is not comfortable and no one uses it. A bit shame for such a huge piece of  engineering. I also assume that since you have the Metro for 4 Yuan, why use something that costs 10-12 times more?

You don't have to take my word for it, you can just view other YouTube movies and other pictures over the net to see that the Maglev is mostly empty. This reminds me a lot of what Ido Meroz wrote on his blog post about trains.

Some time after I arrived I went with a friend to eat on the other side of the river. The side that I lived on was Pudong, and the other side is called Puxi. The place I lived in was very close to the center. The area of the river is the heart of Shanghai, it is also very close to the WFC (world financial center).

It was on Aug 23rd, Tuesday, between 20:30 and 21:30. Regular day's evening. The weather was perfect, cool and nice, encouraging everyone to open their windows. I took a few pictures of the gigantic apartment buildings around us, right in the middle of Shanghai. You can see how many lights are lit through the windows. In Israel, the same experiment would have yielded 80-100% of the windows were lit. See for yourself:

Empty Buildings

Coastline empty buildings

ShiMao complex has a "new" building completely empty over a year. You can see it in the center, it is 60 stories high

20% Occupancy??

No lights…

Almost zero occupancy

Someone lives here?

And again, this is not in the middle of nowhere, it is in the middle of one of the largest cities on the face of the earth, one of the busiest cities in the world.

So, see for yourself, do you think there is a RE bubble in China or not?

I talked with a few Chinese co-workers. I told them that I think home prices in China will go lower in the coming years. They all laughed at me and say that they don't think so. As they laughed I smiled my biggest smile back to them. It was not because I like being ridiculed, but because this was EXACTLY the best symptom of a bubble. By thinking that home prices will continue rising forever they just proved my point – there is a bubble. Now it is just a matter of time.

Now that's not all. I've spent some times on the weekends on malls and shopping places around. Till Yaniv mentioned it, I never noticed that the malls are virtually empty. There is no one there ! And it is a weekend ! In Petah-Tikva or Tel Aviv, if you go to a mall on weekend, lets say friday morning-noon and saturday, you are probably crazy – no parking, no place to move. But here – malls are EMPTY.

I went to visit Habbad on one of the Saturday's there. I was asked a very smart question by an American guy. He was surprised to hear that the Chinese government is printing money like crazy. He asked: "So, if they are printing money like you said, why do they cry all the time about the US policy of printing money and devaluing the Dollar?". Smart question. Double standard I guess.

The Chinese are printing money to keep the Yuan value low, fixed at 6.4 Yuan per US$. Since China has a trade surplus, to absorb the excess amount of forex and prevent appreciation of the Yuan, China must print Yuans to buy the forex and create an artificial supply of Yuans. You can read about it on wikipedia.

Money printing is felt everywhere. I remember that one time I went to the Petah-Tikva market to buy some fruits. The sales man showed me three bills of 100 shekels with their serial number ordered. I was so amazed, so nice to see freshly printed money! Well, here it is pretty common. I am here only 3 weeks but I have already saw this twice:

Ordered bills of 100 RMB freshly out of the ATM

Sometimes, you just need to stand on your head to prove everybody else that you are right…

Trying to prove the Chinese guy that there is a bubble by standing on my head

I was lazy lately and my writing "to-do" list has grown very long. After I'll come back from China I will probably flush the to-do list, so stay tuned.

7 thoughts on “Shanghai's Investments in Infrastructure development and Real-Estate

  1. DanielM

    ניסית לדבר עם סינים למה יש להם בועה ולמה הם בטוחים שמחירי ימשיכו לעלות?
    האם הם מודעים על ל "ביניינים הריקים"?

    1. Assaf Nathan Post author

      אני חושב שהם מודעים, לפחות מי שקרוב אלי.
      זה לא משהו שאפשר לפספס.
      לשאול אותם למה יש בועה? שאל ישראלי למה יש בועה בנדלן בארץ… איזו תשובה תקבל? 🙂
      נראה לי שזה פשוט עניין של חברה קפיטליסטית צעירה, בורות בכלכלה של האוכלוסיה בשילוב עם צמיחה מטורפת. סה"כ, מי שקונה דירה בתשואה של 1.3% ברוטו, מהמר על עליית מחירי הנדלן ותו לא.

      עכשיו חזרתי מסשן של צילומים נוספים, של דברים הרבה יותר נוראיים, אבל זה לא במרכז שנחאי, אלא יותר בחלק מזרחי יותר.
      אני אפרסם פוסט בנושא היום או מחר.

  2. Assaf Nathan Post author

    זיו שאל אותי:
    מי אמר לך שהביניינים שצילמת הם לא בנייני משרדים שאמורים להיות ריקים בכאלה שעות או ביננינם לפני איכלוס (כלומר בשלבי בנייה סופיים). גם בארץ שכונות חדשות רק מי שחייב נכנס למרות שעדיין לא סיימו הבנייה.

    מתי בפעם האחרונה בנו שכונה חדשה במרכז תל אביב ? או במרכז רמת גן?
    מדובר בבניינים שכבר בנויים הרבה זמן. למשל זה שבשימאו, עומד ריק כבר מעל שנה. הבניין גמור לגמרי הרבה מעל שנה. בכל הבניינים הרבה דירות ריקות, אבל בניין מספר 5 הוא ממש בניין רפאים. זה לא סתם בניין, זה בניין בן 60 קומות. זה כמו לומר שעזריאלי יושב ריק.

    כל הבניינים שצילמתי הם בנייני מגורים. יש לידם בנייני משרדים (שגם הם לעיתים ריקים) אך כל המצולמים הם בנייני מגורים. גם די קל לראות שזה למגורים (רואים את המרפסות).

    בנוסף, תסתכל סביב, זה נראה לך כמו "שכונה חדשה"? זה באמצע העיר, לא בפרברים.
    זה כמו לראות מלא בניינים ענקיים ריקים באמצע מנהטן ולשאול אולי זו שכונה חדשה.

    אלו בניינים ישנים שכנראה קנו את כל הדירות בהם, אבל פשוט אף אחד לא גר בדירות האלה.
    כל מי שאני מדבר איתו פה יש לו לידו דירה ריקה שאינה מושכרת תקופה ארוכה.

  3. Sharon

    Loved this post!

    Regarding the empty train, it's funny… I just had today a similar conversation but regarding the trains in Madrid. They told me how here, out of pride, each tiny town has a train station with all the required infrastructure, but no one uses it! Of course the trip Madrid-Barcelona is very used, but they referred to smaller destinations. Just as a note, travelling from Barcelona to Madrid in train is more expensive than by plane.

    And about the buildings' lights… if you walk in the center of tel aviv you can see LOTS of buildigs with no occupants, but I guess it's a different story.

    In any case, everything is very interesting. Now get back already!!!!


    1. Assaf Nathan Post author

      Actually, I'd like to see those buildings with no occupants. I am not familiar with a problem like this in Tel Aviv.
      For instance, when we were looking for an apartment in Tel Aviv we had to run like crazy – there weren't many vacant apartments, and those that were vacant were taken in matters of days.
      Actually, when looking for apts. in TA, there is a LINE of people that come to see this apartment. So the situation is far from the situation in Shanghai. One of my friends here told me that the apt in front of his house is empty for 2 years now. 2 years !!! A young couple bought this apartment as an "investment". An investment that yields nothing but depreciation. So this is hardly the case in Tel Aviv.

      I know of a building in Bugrashov that some French people use it as summer house, but it is far from the situation in Shanghai. Those apartments are rented for the entire year or bought as a summer house and being used during summer, so it is actually a different situation. Shanghai is not the Humptons 🙂

  4. Sharon

    PS – the chinese guy in the metro doesn't seem very impressed with your pole dancing show 🙂

  5. Sharon

    I know it's not like Shanghai. Most likely that all the buildings I see empty are from French buyers or something. In any case, when you're back we'll go for a walk on Gordon st. from the beach to the east and you'll see.


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