A Bust to Follow China's Building Boom?

The economic stimulus of China has focused billions of dollars on building skyscrapers. Some wonder whether a building bust may soon follow.
March 9, 2010, 6am PST | Nate Berg
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"Much of the $1.4 trillion in loans made by Chinese banks last year-with considerable encouragement from officials aiming to boost growth-was spent on skyscrapers and other commercial property. Now empty buildings are sprouting across the mainland. Beijing had an office vacancy rate of 22.4% in the third quarter, the ninth-highest of 103 markets tracked by broker CB Richard Ellis (CBRE) (CBG). That figure doesn't include projects about to open, such as the 74-story China World Tower 3, Beijing's tallest building. 'There's a monumental property bubble and fixed-asset investment bubble under way,' says James Chanos, founder of New York hedge fund Kynikos Associates. 'And deflating that gently will be difficult at best.'"

Officials are calling on banks to ease off lending for such large building projects, fearing a possible collapse of the overinflated building market.

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Published on Saturday, March 6, 2010 in Business Week
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