Today’s China Readings June 19, 2012

Now that the Philippines has blinked first, China is also pulling its boats out of the disputed Huangyan Island/Scarborough Shoal in the South China Sea. But this dispute is deferred not resolved, as we can see from Chinese Foreign Ministry spokesman Hong Lei’s comments:

Philippine Foreign Affairs Secretary Albert del Rosario said Friday that Manila is waiting for Beijing to meet its commitment to remove its vessels that remain in the lagoon of Huangyan Island after the only Philippine ship there left this week…In response to Del Rosario’s remarks, Hong questioned where and when the Philippine side received such a commitment from China….He urged the Philippines to constrain its words and deeds and do more things that are conducive to the development of bilateral ties.

Does this mean that China will restart imports of Philippine mangoes and bananas and end the tourist boycott? The big winners are the US and weapons makers, as countries throughout the region were reminded of the need for US support, and for upgrades of their militaries.

Reuters reports that China home price declines slow, Beijing to keep curbs. Beijing real estate transactions in June are at the highest monthly pace of the year–6月北京楼市成交量或再创年内新高–as many people do not believe the government’s insistence that the real estate restrictions will remain firmly in place. The government is concerned about this shift in expectations, as Reuters explains:

The People’s Daily, the mouthpiece of China’s ruling Communist Party, said in an analytical report on Monday that many home buyers worry about a rebound in property prices, as China has relaxed monetary policies, which changed market sentiment and boosted property sales since March….”It seems home prices and tightening policies have reached their bottom so quite a few home buyers are starting to panic again,” it said….This is reminiscent of 2009 when prices doubled in several months after Beijing rolled out a 4 trillion yuan ($628.43 billion) stimulus package, the newspaper said.”

In May I discussed the current strength of the Beijing commercial real estate market and the failed 2009 predictions of its impeding implosion. There is certainly a boom in commercial development in China, in part due to the distortions introduced by government controls on residential real estate. Reuters reports that China mall space is closing in on European levels:

China will have more shopping centre space than Western Europe in 5 to 10 years, stoking fears of a property bubble as developers race to build glitzy malls for the country’s fast-growing middle classes, research shows….China has built at least 20 million square meters of shopping centers in 14 major cities over the past decade, with a further 14.8 million square meters under construction, property consultancy CBRE Group (CBG.N) said this week. Western European centers cover 55 million square meters.

I’d rather take a flyer on shopping malls for Chinese consumers than Western European ones. But with booms may come busts.

In an article that should tickle the loins of China bears, Caixin reports on the dangers growing in the commercial real estate boom. (The Caixin article is currently in Chinese only, I will post a link to the abridged English version when it is published.) In 商业地产高危 Caixin writes that Chengdu is building not one but two financial districts and currently has 30 buildings 200 meters or taller either in planning or under construction. Some of the problems highlighted include: no restrictions on commercial lending or development; local governments blindly encouraging projects as they need the revenue; no REITs in China so financing and exit options are limited, and a small pool of qualified commercial real estate management. It does sound like there will be big problems, but also big opportunities for those who know what they are doing.

Chengdu, with 15 million or so residents, is a key hub for Southwest China and much of China’s western development plans, but 30 200m+ skyscrapers seems a bit much. Then again, Shanghai’s Pudong was once a wasteland that many analysts said was a huge white elephant. We will revisit in a few years, to see which pundits got it right.

The new issue of Caixin also has an important article on Guangdong’s approach to “stability preservation”–维稳的广东弹性. The Caixin article highlights the measures Guangdong is taking to resolve conflicts before they reach the Wukan level, but emphasizes that absent true rule of law it is unlikely the new policies will do anything more than alleviate some of the symptoms, instead of addressing the root causes. (Abridged English translation here–In Search of Stability–that omits some of the interesting bits.)

The article also has some interesting disclosures about the Wukan incident. Several surrounding villages had similar problems, though not to the level of conflict as Wukan, that did not get the kind of resolution as Wukan, and some Wukan businessmen whose legitimate and legal business interests were harmed by the resolution and are now fighting for some kind of compensation. As for the part of the “Wukan Model” in which the province sends in a work team for a prolonged stay to resolve the problems, a Guangdong provincial leader told a Caixin reporter that there is “no possibility of reproducing it”.

It is interesting to revisit some of the Western coverage of Wukan. The Financial Times wrote in January that Wukan offers a democratic model for China. Willy Lam had a more realistic assessment in the the Jamestown Foundation’s The Grim Future of the Wukan Model for Managing Dissent. Lam wrote that Beijing has “not given up the CCP authorities’ time-tested strategy of tackling dissent: to switch between soft and tough tactics in accordance with the requirement of different circumstances.” And in the recent Mister Nice Guy Wang Yang shows his steely side the South China Morning Post wrote that:

…an order issued in recent months threatened that heads would roll if Guangdong witnessed a second Wukan or similar “unpredicted” mass incident before the 18th party congress. Local government officials and public security officers were told they would be held responsible if they failed to do their utmost to nip protests in the bud…While it cannot be confirmed that the order came from Wang himself, many find it highly believable…“This is a critical year for Wang Yang as he is hoping to get into the Politburo Standing Committee, so we’ve been seeing more measures to maintain social stability over the past few months,” said Ye Du, a Guangzhou-based media analyst. “This includes tighter control of the local media and more petitioners being arrested.”

Perhaps the real lesson for cadres from Wukan is not that this is a new model in dealing with unrest but that you better not let problems grow into something so large and so media-exposed?

The Guardian’s Jonathan Watts is leaving for a new assignment in Brazil. In China: witnessing the birth of a superpower he reflects on his almost 10 years reporting here.

Excuse the self-promotion, but yours truly made the Foreign Policy Twitterati 100.

The best way to read this blog is to subscribe by email, especially if you are in China, as Sinocism is still blocked here. The email signup page is here, outside the GFW. You can also follow me on @niubi or Sina Weibo @billbishop. Comments/tips/suggestions/donations are welcome, and feel free to forward to recommend to friends. Thanks for reading.

The best way to read this blog is to subscribe by email, especially if you are in China, as Sinocism is still blocked here. The email signup page is here, outside the GFW. You can also follow me on @niubi or Sina Weibo @billbishop. Comments/tips/suggestions/donations are welcome, and feel free to forward to recommend to friends. Thanks for reading.

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