TIME China

China’s Real Estate Downturn Spells Trouble for Global Economy

A sales assistant talks to visitors in front of models of apartments at a real estate exhibition in Shenyang
Sheng Li—Reuters A sales assistant talks to visitors in front of models of apartments at a real estate exhibition in Shenyang, Liaoning province April 17, 2014.

The world's largest trading nation's economic growth remains heavily dependent on property, meaning a sharp downturn in that sector would be felt across Asia and beyond

“Will the government save the market if housing prices fall?” That was the question being asked in China this week — not by stressed-out mortgage holders, but by the country’s most famous (and wealthy) property mogul, Pan Shiyi.

Pan, the chairman of giant real estate developer SOHO China, has made a series of pronouncements in recent weeks that reflect an increasingly bearish long-term outlook for China’s property sector.

At an industry forum in late May, Pan compared the nation’s real estate prospects to the Titanic. “It [the real estate industry] will soon hit the iceberg in front of it,” he declared.

Pan’s outlook may be bleak, but is borne out by statistics. According to Standard & Poor’s, residential housing prices in China will drop by 5% this year — a dramatic reversal from last year’s rise of 11.5%.

That’s bad news for China’s property holders, but potentially also a worrying sign for global investors. With Chinese economic growth heavily dependent on the real estate sector, which accounts for 20% of GDP by some estimates, a sharp slowdown in the property market would be felt far beyond China’s borders. (China is, after all, the world’s largest trading nation.)

After more than a decade of sizzling double-digit growth, the government is targeting 7% growth this year. But the potential for a real estate correction means that the actual number could be much lower.

There are already some signs that imports are being affected as consumer confidence weakens. The General Administration of Customs announced Sunday that imports in May declined 1.6% year on year — a drop that surprised industry analysts. That compared to an increase of 0.9% year on year in April.

With prices trending sharply downward, the president of the country’s largest residential real estate developer, Vanke, has declared that the “golden age” for property is over. “The period when everyone made money from property is gone,” Yu Liang was quoted as saying recently.

A conflagration of factors is driving the decrease in prices, not least repressive market policies that restrict the number of properties city dwellers can own. Markets in larger cities are also being flooded with knockdown properties being dumped by overextended investors or government officials looking to rid themselves of any undeclared assets in light of a recent and severe government crackdown on corruption.

Chinese media reported Monday that one coal-mining magnate was attempting to offload 100 apartments in a coveted location along Beijing’s Second Ring Road.

Little wonder, then, that the property mogul Pan is on the lookout for the visible hand of the government. But, for now at least, state intervention seems unlikely. In a report late last month, the Ministry of Housing and Urban-Rural Development declared that it would stay on the sidelines and “respect the adjustment role of the laws of the market in the real estate sector.”


China’s Great Property Boom May Be Coming to a Desperate End

Kim Kyung-Hoon—Reuters A laborer works on the scaffolding of a construction site for a new residential building in Beijing on May 8, 2014

Analysts have warned for years that China is in the midst of a gargantuan property bubble and the inevitable reckoning may have finally arrived as massive oversupply and a tightening of credit appears to be crushing the market—with consequences for the global economy

You know a property market is in trouble when developers stage long-jump contests to attract buyers. That’s what happened earlier this month in the eastern city of Nanjing. Looking to sell apartments in a new residential complex, a local newspaper reported that agents from the developer, Rongsheng Group, lined up potential customers behind a queue and asked them to leap forward. Those who jumped the farthest got the biggest rebates — up to $1,600.

Chinese newspapers these days are riddled with such tales of desperation. On May 9 in the central Chinese city of Changsha, pretty girls were enlisted to hand out 50,000 tea eggs to lure people into a housing fair. Developers in Shenzhen and Fuzhou are offering to sell apartments with no down payment. In Hangzhou in April, two real estate agents competing for buyers got into such a vicious fistfight that the police had to intervene.

Are we witnessing the end of China’s great property boom? For years now, some analysts have warned China was in the midst of a gargantuan property bubble, ready to burst at any moment, with dire consequences. But Chinese real estate defied the naysayers and continued to soar. Both developers and customers, bypassing restrictions imposed by policymakers to constrain the industry, continued to build, invest and propel prices higher.

Now, though, the inevitable reckoning may have finally arrived. Massive oversupply combined with a tightening of credit orchestrated by the government appears to be crushing the market. Government statistics show that the amount of unsold commercial and residential property hit an all-time record in March. “We are convinced that the property sector has passed a turning point and that there is a rising risk of a sharp correction,” analysts at investment bank Nomura commented in a May report.

Falling apartment prices spell bad news for China’s economy. Real estate is one of the main drivers of China’s growth, with property investment accounting for 16% of GDP by Nomura’s calculations. A downturn could dash hopes for a recovery of the world’s second largest economy, already suffering through its worst slowdown in more than a decade, and the impact would be felt across the world. Real estate investment in China affects global prices of commodities like iron ore, so a slowdown can send shockwaves from Australia to Brazil. Falling property prices could also subvert the wealth of the Chinese middle class, dampening consumption of everything from cars to coffee. That could hurt companies like General Motors, McDonald’s and Starbucks.

Beijing’s leaders got themselves into this mess with their go-slow approach to reform. In the country’s tightly controlled financial markets, the average Chinese citizen has few options when investing his or her newfound wealth. That has made property option No. 1 for investors, pushing up the market to dizzying heights. Now the declining market presents some tough choices for policymakers. A sharp downturn in property could lead to serious financial problems at the nation’s indebted developers, causing bad loans at the banks to rise. Developers that borrowed from the country’s poorly regulated shadow-banking industry could cause even worse problems for the financial industry. Depressed property could also present the government with a major social issue. With so many Chinese families having invested their savings in apartments, falling prices could lead to widespread discontent.

There is ample evidence to suggest that the deflating of Chinese property could turn very ugly. A Barclays economist warned that the “risks of a disorderly adjustment are real and rising.” Nomura points out that new housing starts, an important indicator of where the market is headed, plunged in the first quarter of 2014. Property sales declined too in 2013. “It is no longer a question of ‘if’ but rather ‘how severe’ the property market correction will be,” the investment bank asserted.

The question now is: What will Beijing do? So far, the country’s top leaders have been (wisely) allowing China’s overall growth to slow while they focus on controlling debt and reining in the out-of-control financial sector. A tumbling housing market, however, will put more pressure on the government to reverse course by loosening credit to pump up growth — a strategy that might alleviate pain in the short run, but only intensify the economy’s long-term problems of debt and excess capacity. The central bank this week already issued guidelines encouraging banks to speed up mortgage approvals and offer reasonable rates of interest for some home buyers.

China’s problems with property shine a spotlight on how the country’s continued foot-dragging in liberalizing and strengthening its financial sector and altering its investment-obsessed growth model are creating major threats to its stability. And it is yet more evidence of how China’s role in the world has jumped from being a critical support for growth amid a disastrous downturn in the West, to becoming a primary risk to the health of the global economy.

TIME China

China Slaps Bans on a Bunch of Totally Harmless U.S. TV Shows

The Big Bang Theory
CBS/Getty Images Since launching on the Chinese video-hosting website Sohu TV in 2009, The Big Bang Theory has racked up 1.3 billion views — equivalent to one view for every person in the country

Shows like NCIS, The Big Bang Theory, The Good Wife and The Practice have disappeared from sites like Sohu TV, iQiyi and Youku, indicating they are just too wild and crazy for impressionable Chinese youth to handle

You could call it the Big Ban Theory. Chinese fans of American TV series are up in arms after discovering that some of their favorite shows have been yanked from the country’s most popular streaming websites without explanation. On Saturday, The Big Bang Theory, The Good Wife, NCIS and The Practice all disappeared from sites like Sohu TV, iQiyi and Youku.

At this stage it’s unclear why the government has targeted The Big Bang Theory, a seemingly innocuous show about the personal relationships and travails of a group of science geeks, while far more contentious programs like Breaking Bad and House of Cards continue to be broadcast online.

One reason could be its popularity. Since launching on the video-hosting website Sohu TV in 2009, The Big Bang Theory has racked up 1.3 billion views — equivalent to one view for every person in the country.

There is little doubt that the edict pulling the shows seems intended as a shot across the boughs of China’s freewheeling online video sector by government regulators. Until now, video providers like Sohu TV and iQiyi have been free to negotiate content deals with overseas rights holders and broadcast the shows they like without having to get official approval.

As a result, young viewers have been deserting the sanitized soap operas and turgid dramas about the communist revolution that are a staple of mainstream, government-controlled TV and are flocking to the more uninhibited realms of online TV. But the government has long indicated that it would clamp down on this unusually open media sector. Last month, the State Administration of Press, Publication, Radio, Film and Television said that all American and British TV shows being broadcast in China would need to receive government approval — which would require them to come before the censors. The move to ban certain shows is, it would seem, the first move in rolling out this approval process.

The development comes as the Chinese government is strengthening its control over the Internet. Officials have repeatedly spoken of the importance of “seizing the commanding heights” of the web. The administration of Xi Jinping has already sanitized popular social-media platforms like microblogging site Weibo and strengthened control over online media organizations.

The Global Times, a normally staunchly nationalistic publication, published Monday a piece written by leading film critic Tan Fei, who argued that “the machetes the monitoring departments waved to the U.S. dramas are not only aimed at protecting teenagers’ physical and mental health but, on a deeper level, are aimed at protecting our weak domestic film industry.”

The decision to pull The Big Bang Theory, a hugely popular comedy, has rankled the show’s army of fans in China, where the story of nerdy graduates struggling to find their way in the world has struck a chord with millions of young people. With the job market in China becoming fiercely competitive and living costs soaring across major cities, graduates are now finding that their dreams of a career and high income don’t necessarily translate into reality.

Fans have taken to online forums to voice their approval for the show and to offer creative arguments for its return.

Wrote one user sardonically: “The Big Bang Theory described four young scientists who can’t find wives because they’re devoted to science, they can’t buy a house so they shared a small apartment and live on junk food, and the Indian immigrant with speech problems has to sit on the floor to eat. All these miserable phenomena highlight the racism, the unfairness and decadence of Western society. It’s an extremely strong educational tool for those in China who wish to emigrate.”

The pleas may be working, however. According to fresh reports in Chinese media, the state broadcaster CCTV has bought the rights and will broadcast The Big Bang Theory in the near future — but in how sanitized a form it remains to be seen.


A Burial Plot In Beijing Now Costs as Much as a House in Parts of the U.S.

ChinaFotoPress / Getty Images A lady cleans a gravestone two days before Tomb-Sweeping Day at Babaoshan Cemetery on April 3, 2011 in Beijing, China

With prices in Beijing cemeteries increasing more than 30% per year, the Chinese capital is a place where many simply can't afford to die

Beijing residents have long complained that sky-high property prices and soaring cost of living make it too expensive to live in China’s capital city.

But now even dying there may be beyond reach.

According to the Legal Weekly, a state-run newspaper, asking prices for plots in Beijing cemeteries are increasing by more than 30% per year.

(PHOTOS: City on Fire: A Look Inside Changsha in China)

Burials have been outlawed in China since 1997, in an effort to conserve space in the nation’s towns and cities. But even finding a spot to inter ashes can prove costly.

Plots in more popular cemeteries can go for as much as $60,000 or $70,000 per square meter, the paper noted, a sum that would buy a small house in some areas of the U.S.

Resting in peace alongside the numerous political leaders and officials interred in the famous Babaoshan Cemetery would set you back a whopping $165,000.

The rapid inflation reflects the limited space available for burials in the already crowded metropolis. But experts say a lack of funeral industry regulation is also to blame. Some reports have accused local governments of driving up the price of plots in order to increase their own revenues.

While it has done little to crack down on spiraling costs, the government has instead tried to encourage Chinese people to adopt new forms of funereal ceremony. Last year, a spokesperson at the Civil Affairs Bureau in Beijing told local media that citizens should consider burial at sea.

The pricing issue has been one of the hottest topics on Weibo, China’s Twitter-like microblog, this week, where put-upon city-dwellers have been venting about the rising cost of living. Chen Mingsheng, a netizen from Guangdong province commented on his weibo, “Can’t afford to give birth; can’t afford to live; can’t afford to die, I feel so sorry.”

MORE: Chinese Envoy Calls Japanese PM Abe the ‘Biggest Troublemaker in Asia’

TIME Profile

Zhang Yaxin: Photographing Chairman Mao’s Model Operas

In 1967, Zhang Yaxin was 34 and working as a photojournalist at China’s state-controlled Xinhua News Agency when he was assigned to a top-secret government project: to be the official photographer of a new arts program led by Chairman Mao and his wife.

In 1967, Zhang Yaxin was 34 and working as a photojournalist at China’s state-controlled Xinhua News Agency when he was assigned to a top-secret government project. He was to be the official photographer of a new arts program led by Chairman Mao and his wife – the Model Operas. Though he was not to know it then, Zhang would spend the next seven years documenting the evolution of one of the most dramatic and elaborate attempts to redefine artistic sensibilities in modern art history.

Zhang Yaxin—Courtesy See+ Gallery, Beijing, and Stephen Bulger Gallery,Toronto
Zhang Yaxin at work in 1973

A year before, Chairman Mao had unleashed the fury of the Cultural Revolution on China, a grassroots rebellion through which he aimed to sweep away all influences of both capitalism and traditional Chinese culture from the country and rebuild its society from scratch around purely socialist ideals. The performing arts were to be a key tool in the process of re-educating the masses – and Mao intended to completely redraw artistic and aesthetic norms in China in order to achieve his goal.

The Great Helmsman began by banning all forms of “bourgeois” and “feudal” art – to watch a Western film or perform a traditional Chinese opera was to risk imprisonment or death. To fill the void and support the spread of communist ideals, Mao’s wife, Jiang Qing, and her acolytes spent months developing a set of “proletarian” plays – eight in all, in the first stage – that were to be the only productions politically acceptable for public consumption. Mao and Jiang envisaged the carefully scripted performances that idolized revolutionary heroes being produced in every town and village across the country to inform the masses about revolutionary history and reinforce Mao’s unique brand of communist subjugation of the individual will to the greater good.

Zhang was instructed to produce images of the Model Operas that would highlight the most attractive aspects of the new art form and help spread its popularity. During a period when any non-revolutionary visual art was outlawed, his politically appropriate images quickly became ubiquitous – splashed across revolutionary posters, newspapers, cups, even matchboxes in every town and village across the country.

The photographs would become some of the most iconic and recognized pictures in modern Chinese history, defining a visual style that dominated China for years, and continues to exert a powerful influence to this day. It has been said that Zhang’s image of a gun-toting female revolutionary in front of a socialist flag exemplified beauty in China for a generation.

Seen through a modern eye, however, these images showcase a country that is unrecognizable to most modern Chinese. Dripping with socialist fervor and populated almost exclusively by stern-looking military heroes and determined peasants seemingly poised and ready for heroic action, the pictures evoke the same sense of pathetic, other-worldly isolation and unnecessary pomp as do modern images of North Korea’s mass games.

Hands and fists slash out at unnatural angles, sharp eyes peer out from underneath thick, drawn eyebrows, bodies leap in elegant forms that clearly recall traditional Chinese tai chi. For all Mao’s protestations, the heavily stylized images also owe a very visible debt to China’s rich theatrical past. The thick make-up, even on the male actors, and rigid poses are unmistakable legacies of the Peking Opera tradition.

One of the most astonishing aspects of the images are the vivid colors – and this is not an accident. The rich color palette was a revelation in China at a time when color printing technology was the preserve of a favored few, and helped to capture public attention in the late 1960s.

As a major retrospective of his work opens in Vancouver, Zhang – now 81 – tells TIME in Beijing that the importance of the project meant unrivaled access to new technologies. “There were only three Hasselblad cameras in China back then, and I was given one,” he remembers. “I had unlimited access to color films, while my colleagues only got three color films each for the entire year.”

Zhang moved into the film studio where Jiang and her crew were rehearsing and refining the eight operas, and was tasked with producing idyllic images of the productions. With only one color photo printing facility in the entire country, located in the Xinhua office in Beijing, it took him many months to perfect his technique. Delaying his progress still further was Jiang Qing’s obsession with detail. Zhang recalls how, after the first year of trials, Jiang decided to scrap the entire production and send her team back to the drawing board. She forced them to watch hours of color movies from the United States to encourage them to match the aesthetic style. Once the productions were finalized, she produced detailed manifestos that defined every detail of the performance, right down to the exact placement of badges on the performers’ sleeves.

The earliest images in Zhang’s exhibition dated back to 1967, just as the Cultural Revolution was reaching a crescendo. Open class warfare had been unleashed across China as Mao encouraged rural peasants to turn on landowners and intellectuals in an attempt to sweep China clean of feudal influences. The resulting chaos paralyzed China as students turned on teachers, children turned on parents, and thousands of artists and writers committed suicide or were hounded to death.

Zhang recalls that his humble family background was one of the major reasons he was chosen for the assignment – and was protected from the chaos of the revolution.

“I was a trained photographer who came from a farming family,” he recalls. “You know back then to be a poor farmer was considered the best possible political background. We were given special treatment – not only we were guaranteed enough food but we could eat meat every day when I was shooting in Changchun, which was very unusual during that period.”

By 1976, Mao was dead and Jiang Qing was in jail with the rest of the infamous ‘Gang of Four’, who communist elders decided were guilty of masterminding “the worst excesses” of the Cultural Revolution. Zhang’s pictures gradually fell into obsolescence as a generation of Chinese tried to forget the madness of the revolution behind them and move on. In 1978, Zhang himself moved on, stepping back into the shadows as a journalist on the photo desk of another state-run media, the People’s Daily.

TIME asked Zhang if he liked the Model Operas that he spent seven years meticulously documenting.

“No, I did not,” he says firmly. “It was a political task given by my superior – I had no choice.”

Zhang Yaxin: Model Opera is on view at the Presentation House Gallery in Vancouver, June 14 – July 26, 2013.

Chengcheng Jiang is a reporter in TIME’s Beijing bureau. Follow her on Twitter @jiangchengcheng.

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