No one goes there anymore, it’s too crowded
Tyler Cowen directed me to a Daily Mail article on Shenzhen’s snazzy new airport (I did a post a few weeks ago.) Here’s the intro:
It’s been hailed as an architectural masterstroke and symbol of China’s explosion onto the world stage of global travel.
But Shenzhen International Airport’s brand-new terminal has a problem: nobody seems to want to go there.
The £612 million travel hub opened at 6am yesterday with much fanfare as a Shenzhen Airlines flight took off to next-door Mongolia.
Smiling staff handed out commemorative model planes to passengers on the flight as dozens of golf carts circulated the lounge to give free rides for anyone in need.
But despite claims on its website that tourists can be spirited away to far-flung locations including Sydney, Dubai and Cologne, no airlines actually appear to offer services to or from any of these cities, The Independent reported.
Ha! Another Chinese white elephant. Actually it’s one of the busiest airports in China, serving China’s richest city:
The airport was opened on 12 October 1991. It occupies an area of 10.8 km2. Its runway is 3400 m long and 45 m wide, and it has 53 parking spaces on its apron. The airport also has ferry routes to Hong Kong International Airport, where passengers can transit without going through immigration and custom checks, akin to transit between two flights. Its current terminal covers an area of 152,000 sq meters and consist of 24 jetways.[3]
Shenzhen airport handled 26,713,610 passengers in 2010, according to Civil Aviation Administration of China, making it the fifth busiest in China. The airport was also China’s 4th busiest and world’s 24th busiest airport in terms of cargo traffic, registering 809,363 tonnes of freight. In terms of traffic movements, Shenzhen airport was the 5th busiest airport in China in 2009.
The most recent data I could find was for 2012, when it served 29.4 million, up 10% in just two years. The airport is built to handle 45 million. Given the explosive growth of Chinese aviation, does that seem like a white elephant to you? I predict they’ll start an expansion project within 10 years.
Eight years ago I visited the second largest shopping mall in the world, in the suburbs of Beijing. It was almost empty. Yesterday I talked to a Chinese student who told me that their family recently stopped going there because the parking lot is usually full, although the mall is so large that it is still not particularly crowded. But then the Chinese define “crowded” in a somewhat different way from Americans.
(It’s number 6 on this list. I’ve gone to 9 of the 10 on the list—they are generally very busy. China has lots of problems; empty malls are not high on the list.)
HT: I thank my daughter for the title of this post.
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1. December 2013 at 13:46
“Shenzhen airport handled 26,713,610 passengers in 2010, according to Civil Aviation Administration of China”
You mean we’re supposed to believe the Chinese government when it comes to the success of Chinese government boondoggles?
The naivete is palpable on this blog.
1. December 2013 at 13:54
It’s interesting. The same sort of thing happened during the 1970s and 1980s vis a vis the USSR. Many western intellectuals used the data reported by the Soviet government because the data painted the kind of rosy picture that the intellectuals believed the USSR to really be behind the secrecy.
There were newspaper and magazine articles, even academic journal papers, that extolled the “powerhouse” of productivity that was the Soviet Union. During the late 1970s and early 1980s, there were estimates that they would outgrow us within a decade. Some even claimed they were already larger.
Then of course the wall came down, and the truth was eventually finally revealed. The country was nowhere close to what the Soviet Communist bureaus claimed, nor was it anywhere close to most estimates from the enamoured westerners.
Do we really have to repeat the same history?
1. December 2013 at 13:57
This has been my experience as well. I cannot count the number of times I have visited vast, empty newly constructed places in China only to return a year or two later and find them packed with people and activity.
1. December 2013 at 14:32
@Geoff,
By implying that any numbers from Chinese government source is false, you pretty much “poisoned the well of discourse” in your first post. I guess you will counter most arguments about China with “But it is false.” from now on.
Comparing USSR with current China just does not make sense. When was the last time the Soviet Union the world’s largest manufacturing and trading nation? When was the last time millions of Soviet citizens traveled or studied in the Western world? When was the last time Soviet Union had hundreds of Western companies hiring hundreds of thousands Soviet citizens as employees? The difference is like day and night.
1. December 2013 at 14:42
“But then the Chinese define “crowded” in a somewhat different way from Americans.”
This statement piqued my curiosity. What factors lead to the Chinese to consider a place as being crowded?
1. December 2013 at 17:17
You should thank Yogi Berra for your title.
1. December 2013 at 17:23
dbu:
“By implying that any numbers from Chinese government source is false, you pretty much “poisoned the well of discourse” in your first post. I guess you will counter most arguments about China with “But it is false.” from now on.”
I have always been skeptical of Chinese statistics reported by Chinese government bureaus. I don’t think that’s “poisoning of the well” so much as telling everyone the well has already been poisoned so be careful before deciding to drink it up.
“Comparing USSR with current China just does not make sense. When was the last time the Soviet Union the world’s largest manufacturing and trading nation? When was the last time millions of Soviet citizens traveled or studied in the Western world? When was the last time Soviet Union had hundreds of Western companies hiring hundreds of thousands Soviet citizens as employees? The difference is like day and night.”
I didn’t say they were identical, and yet that is what you are implying I did say.
All I implied is that we can compare the two nations in terms of the limited point on the reliability of reported data. That’s all I said.
1. December 2013 at 17:44
@Geoff, your criticism is a form of ad hominem. If you have data to support your opinion that the number cited is grossly inaccurate, then provide that. We’re all ears here.
Claiming the number is obviously false due to the source utilized hardly helps the discourse.
1. December 2013 at 18:16
Philip:
“@Geoff, your criticism is a form of ad hominem. If you have data to support your opinion that the number cited is grossly inaccurate, then provide that. We’re all ears here.”
It’s not ad hominem to argue the Chinese government’s statistics are unreliable.
It’s interesting isn’t it. Sumner has on many occasions also argued that Chinese reported statistics are unreliable. Where was your “That’s ad hominem!” then?
I trust the Chinese people themselves, and by some estimates, upwards of 90% of the population believe their own government are gooseing the numbers.
Even Li Keqiang said (in 2007) that Chinese stats are bogus.
“Claiming the number is obviously false due to the source utilized hardly helps the discourse.”
Sure it does. It makes you at least understand that there are those who question this data. If that encourages you to not solely rely on the government’s numbers, then all the better. I don’t care if you attack me personally. I only care that you and others don’t just lap up the Chinese government’s statements as gospel.
1. December 2013 at 18:17
doggie, That’s right. Unlike Geoff I’ve actually been in many Chinese airports and train stations, so I have some sense of reality, not just the paranoid theories of a deranged mind.
Gordon, It has to be extremely crowded by American standards to be considered crowded by Chinese standards.
1. December 2013 at 18:30
Sumner:
Do you honestly believe that a few visits to China can substitute for living all around China? OK, delude yourself then, just like the true believers did with the Soviet Union.
I’ll go back to reality based thinking based on non-governmental studies and surveys.
1. December 2013 at 19:31
Geoff said: “I’ll go back to reality based thinking”
Having watched you comment on this blog for months — perhaps years — I think it’s pretty clear by now that your train left that station long, long ago…
1. December 2013 at 21:12
China seems to have a lot of available funds for infrastructure. But overall not that much government spending as a portion of GDP. According to the Heritage Foundation their tax burden is about 18% of GDP and overall spending at about 23% (http://www.heritage.org/index/country/china). This compares favorably to the US’s nearly 25% tax burden and 42% spending (http://www.heritage.org/index/country/unitedstates). Now part of this is military spending (According to the CIA, China only spends about as big a portion of their GDP on the military as France https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html), but that difference doesn’t seem big enough to explain why China seems able to have tons of infrastructure projects while the US seems hard pressed to get money for them. So I have two questions about this. First, is infrastructure primarily a central-government responsibility in China or a provincial level responsibility (I would imagine some things, like the high speed rail network, are definitely central government given that they go between provinces)? Second, what does China’s welfare system look like? Whatever it is, it doesn’t seem to be producing that bad of results given that according to that World Factbook entry I linked, China’s official poverty rate is close to $10 a day (or 5 times higher than the upper end of the UN’s absolute poverty statistics) and still only covers less than 14% of the population.
2. December 2013 at 05:24
Beijing and Shenzen are two of China’s largest cities, where population is actually still growing.
However, in the majority of China’s 200+ cities of a million or more, population is stagnant or declining. Yet each of these 200+ fashions themsemslves the next thriving center of excellence in logistics, ASEAN trade, finance, technology, toursim, yada yada yada. They all have a “story” to justify the insane real estate bubbles.
If you’re going to make sweeping generalizations about how the largest centrally-planned, debt funded, infrastructure binge in recorded histoty is working out just fine, PLEASE get out of Beijing / Shenzen / Shanghai.
New credit in China in 2013 will likely total in excess of $3T. To keep the boom going, we’ll be looking at in excess of $3.5T. This is measured credit by the PBoC – on top of which is a significan chunk of “underground” credit, which is pervasive in China, particularly in the 3rd and 4th tier cities you should be visting before jumping to the conclusion that everything in China is just hunky dory.
2. December 2013 at 08:33
I second Brian’s comment. The problem is not with any particular project built in China, it’s with the entire political system used to justify and proceed with these projects.
So long as China continues to grow, the reckless “build more!” mentality will keep getting bailed out by growth. But before growth slows, as it must, the Chinese system must change modes. This seems unlikely to happen. Where in the world, even the “developed” world, do you see governments acting preventatively, instead of scrambling after the disaster hits?
I think China has 20 more years of growth ahead of it. This could either be enough time for a measure of flexibility and caution to develop; or, it could just be more time for self-serving and reckless interests to entrench themselves even more deeply.
2. December 2013 at 08:51
Chris, I think infrastructure is primarily provincial level. Those US figures seem suspect, as they imply the deficit is 17% of GDP. It’s actually 4%, so you should double check.
Brian, You said;
“If you’re going to make sweeping generalizations about how the largest centrally-planned, debt funded, infrastructure binge in recorded histoty is working out just fine, PLEASE get out of Beijing / Shenzen / Shanghai.”
If you’d paid attention you would have noticed that I did not make “sweeping generalizations” about infrastructure. I did not make any generalizations about infrastructure. In other posts I’ve talked about wasteful infrastructure projects in smaller cities.
BTW, I don’t believe your claim that most Chinese cities are losing population is accurate. Source? The total urban population is growing very fast, and Beijing/Shanghai/Shenzhen are a trivial share of China’s population. Where are most migrants going?
jj, See my reply to Brian, before you decide you agree with him.
You said:
“I think China has 20 more years of growth ahead of it.”
Given that a few decades back China was poorer than India and Africa, I’d say your prediction for China is amazingly optimistic. But I agree.
I would encourage you to read what I actually wrote, and not what you think I wrote. If we are going to have an intelligent discussion of these issues it’s important to deal with facts, and expose the media lies about China, even if they seem to fit into your broader narrative. The article Tyler linked to was basically a big lie. Period, end of story.
If I make sweeping generalizations in another post, then we can talk about their accuracy in another post. It’s true that there are white elephant airports in other smaller cities in China, but that’s not the subject of this post.
2. December 2013 at 12:05
The Daily Mail is more of a gossip magazine than a newspaper.. not something to be taken seriously
2. December 2013 at 12:28
Fair enough – your particular generalization in thia piece was admittedly specific, not sweeping: “China has lots of problems; empty malls are not high on the list.” Still, the piece seems to dismiss, as its seems you have in the past, the idea that China has a capital misallocation problem. My point, which still stands, is that this problem is much mroe stark in smaller cities, especially out West.
According to Chinese National Bureau of Statistics via CEIC, of 250+ cities with >1m in population, 100 saw a population decline over the past 5 years fro which data is available, the bulk saw gains of 0-5% over the period, while only 31 saw population increase by over 10%.
Urbanization is happening where the jobs are, in cities that are already reasonably well-developed. The worst of the white elephants will not be found in Beijing.
Perhaps the most telling sign of a credit problem in China is that. despite continued credit growth in excess of 20% per annum, the rate of nominal GDP growth has declined by some 800 basis points in since mid-2011. With credit tightening dramatically of late, despite the tapering-induced improvment in global liquidity conditions, the gap between credit growth and nominal GDP growth, which puts China’s credit/GDP on a parabolic path, is set to get worse, not better.
The white elephants are out there, and the carcasses are becoming impossbile for the financial system to carry.
2. December 2013 at 12:34
Brian, When you discuss my “past” posts, do you mean this one from 2 months ago:
http://www.themoneyillusion.com/?p=23817
“Again, the real problem is the smaller Chinese cities. The big cities can use almost everything being built, and more. The problem is that smaller cities are building subways, airports, city halls, etc that are far too lavish for their needs. It’s not clear than many people will want to live in these smaller cities. And the cause of the problem is exactly the same as with our smaller banks””moral hazard. Large banks have such diversified portfolios that the incentive to gamble is much lower. At a bigger bank a $1 billion gamble is more likely to come out of the hide of shareholders. At smaller banks a gamble that goes bad might well be picked up by taxpayers. In much the same way the smaller Chinese cities expect to get bailed out by Beijing.”
3. December 2013 at 09:27
Scott, my fault, I didn’t mean to second Brian’s criticism of your post; only the general point about what may happen to China some day. Your post seems correct in its specifics.
One day, China is going to end up with a lot of white elephants. At this stage there are no “facts” to support this because they’re not building white elephants, yet. But one day (maybe in 20 years?) their habit of build, build, build is going to catch up with them.
I say there are no “facts” because the nature of China’s political and financial system is such an unquantifiable, ephemeral thing it can hardly qualify as a fact. And yet, it will have such a huge impact on China’s future that it must be considered.
3. December 2013 at 15:59
JJ, There are already some white elephants, especially in the smaller cities. It’s not hard to figure out what’s going on in China, just go there and talk to non-government people. I’ve done it, it’s not hard at all.