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HEARING THE FIRST BIRDSONG OF RANGZEN SPRING
By Email[Saturday, August 15, 2015 10:22]
By Jamyang Norbu



Recent re-enactment of Henri Cartier Bresson’s famous photograph of the 1948 financial collapse in Shanghai. Raqs Media Collective.
Recent re-enactment of Henri Cartier Bresson’s famous photograph of the 1948 financial collapse in Shanghai. Raqs Media Collective.
World attention has been riveted on the Greek economic turmoil in the last few weeks, but some Tibetans have probably been paying more attention to a comparatively larger but less discussed crisis – the stock market collapse in China. The New York Times reported last Monday that “about $2.7 trillion (latest figure $3.2 trillion) in value has evaporated since the Chinese stock market peaked on June 12th. That is six times Greece’s entire foreign debt, or 11 years of Greece’s economic output.”

But Chinese speculators have been making a mockery of the government’s desperate efforts to halt the steep slide in share prices, essentially defying President Xi Jinping, and betting that the market would keep on falling still further.

The effects are already being felt in homes across China. 80% of all China’s stocks are owned by individual share-holders, a far higher percentage than in Western markets where institutional investments predominate. To make matters worse many families have borrowed money from banks, finance companies, neighbors and others to play the market. Often with interest rates as high as 20%. This raises the question of how China’s financial system can absorb another round of bad loans when it is already burdened with a huge amount of lending to state-owned enterprises and local governments than can barely meet monthly interest payments.

Cartier-Bresson's original photograph of financial collapse in Shanghai, 1948.
Cartier-Bresson's original photograph of financial collapse in Shanghai, 1948.
Yet most articles and financial reports made no mention of another looming financial catastrophe inextricably tied to the stock-market collapse, which has been on-going for many years and where far greater government lending has been involved. Mind-boggling sums of money and resources have been squandered on the construction boom of recent decades, to build unneeded housing, shopping malls, industrial parks, office buildings, power plants, futuristic airports, high speed trains, multiple lane highways, and other infrastructure in a country already bursting with overpopulated, polluted mega-cities. Cities and provinces compete to build cloud-piercing skyscrapers even if they have no prospective tenants for them.

Since the 1980s, China has built enough new housing to re-house the entire population but the construction boom has become a self-sustaining, perpetual engine of construction for the sake of construction – supply with no demand. And there are not just miles of empty apartment blocks but entire “ghost cities” complete with office towers, hospitals, schools, futuristic airports, museums, universities, libraries, theaters, sports fields, and miles and miles of apartment towers and subdivisions of McMansions — but almost no people. (And “they are building 12 to 24 such cities every single year” according to HK financial analyst, Gillem Tulloch.) Economists have warned that what China is really building is the biggest real estate bubble in history.

The few residents of Tianducheng, an abandoned ghost city "Paris in China", performing their morning ablutions.
The few residents of Tianducheng, an abandoned ghost city "Paris in China", performing their morning ablutions.
The above observations on China’s real-estate crisis have been excerpted from a much longer analysis of China’s multiple, wide-ranging and entirely self-inflicted disasters. An academic friend who recently passed this report “China’s Communist-Capitalist Ecological Apocalypse,” on to me, added a brief message: “You’ll love this. A real tour de force, very much worth reading all the way to the end.” It is a long article but Tibetans should study it a few times to fully absorb the irrevocability of the prognosis on China’s future.

For those not inclined to poring over long scholarly treatises there is a convenient video tutorial on China’s property crisis, CBS 60 Minutes “China’s Real Estate Bubble” (March 03, 2013) hosted by Lesley Stahl. In the program she interviews Wang Shi, CEO of China Vanke, China’s biggest homebuilder. Wang Shi is an interesting guy. He’s open, vocal and wryly self-depreciating. When Stahl asks “Are you the biggest homebuilder in the world, he replies “Maybe” and laughingly adds “ … but only in quantity, not in quality.” He also tells Lesley Stahl that the building boom could not last. “This is a bubble, for sure.” When it bursts, “it will be a disaster, a disaster.”

I am no financial expert, but I can claim (for what its worth) to have lived in the center of one of the biggest real-estate bubbles, just before it popped. I worked in Tokyo in 1989 at the high water mark of Japan’s economic miracle. The Tokyo Securities and Stock Exchange was then the world’s greatest stock exchange, accounting for over 60% of the world’s stock market capitalization (by far the world’s largest). It was the only country in the world that had high-speed bullet trains. And Tokyo by night was this amazing science fiction city — “Blade Runner” territory. Anthony Bourdain claims that experiencing Tokyo was like an acid trip, it was so transformative.

Blade Runner cityscape by D.Q.Sanchez
Blade Runner cityscape by D.Q.Sanchez
Japanese companies were buying up the world’s great art treasures, especially impressionists. An insurance company bought Van Gogh’s “Sunflowers” then the most expensive artwork in the world. The biggest department store in Tokyo, Isetan, if I remember correctly, paid an impoverished China to haul out the “Treasures of the Potala” for a major exhibition in the city; the first time that such a thing had ever happened.

After Sony acquired Columbia Studios and Tri-Star, there was some knee-jerk backlash in the US. Michael Crichton came out with his novel, Rising Sun, essentially a diatribe on why America should wage economic war against Japan. The fact that Japanese buyers were snapping up property in Times Square might have contributed to the hysteria. One reason for Japan’s buying spree in America and elsewhere (whiskey distilleries in Scotland) might have had to do with real-estate in Japan, especially in Tokyo, being ridiculously overvalued. The world’s most expensive piece of property was the Ginza – US $1.5 million per square meter. Of course the whole thing was a bubble but no one saw it. Not a hint of it appeared in any paper or magazine. Japan, in everyone’s estimation, not least the Japanese themselves, was a country that didn’t make mistakes. It was “the wave of the future.”

The “Japanese Asset Price Bubble” (バブル景気 baburu keiki lit. “bubble economy”) came about because of the hyper inflation of stock market and real-estate prices, created by the easy credit extended by Japan’s banks which according to Paul Krugman  “… helped inflate the bubble economy to grotesque proportions.” When the bubble burst it took down Japan from its number one position in the world economy, and even after twenty years (“The Lost Decades”) it has never fully recovered.

Getting back to China and the stock market plunge. By the end of this week draconian Chinese government intervention prevented the stock market from collapsing altogether. A principal feature of this intervention was the injection of large sums of money into the market through margin lending. Quite a few financial experts in the West pointed out that such aggressive lending by the government had triggered the Stock Market frenzy (“bordering of the insane”) and collapse in the first place. So what might now appear to be a recovery is more likely just a phase in a volatile and vicious cycle; a cycle which must inevitably grind to a halt when the money runs out. The Financial Time quoted a Beijing-based diplomat on this point: “Their (the Chinese government) approach is more state control and to throw more money at the problem. But even in China funds are not unlimited.”

Speaking of “not unlimited” funds, lets take a final look at “the biggest real-estate bubble in history” where earlier, so much Chinese government lending had disappeared. The political consequences of this thing bursting was succinctly pointed out by property mogul, Wang Shi, at the conclusion of the 60 Minutes interview. Lesley Stahl, discussing the social unrest that had erupted after the collapse of real estate prices, asked what would happen when that bubble finally burst. Wang Shi replied, Who knows what will happen. Maybe, maybe ‘Arabic’ Spring.”

(Part 2. How potential social unrest and political disruption in China will likely play out in Tibet and East Turkestan, and what Tibetans must do to bring about a “Rangzen Spring” moment in their history. )



The views expressed in this piece are that of the author and the publication of the piece on this website does not necessarily reflect their endorsement by the website.
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