Zhejiang 烂尾楼

This is Yiwu City in Zhejiang Province. Mr Shi saw a huge cluster of abandoned construction projects 烂尾楼 here. Judging from the thick vegetation, the project must have been abandoned for some time. You can see the abandoned buildings on either side of the road. Wild vegetation have been spilling out over the perimeter fence.

For the projects that have been completed, banners cried out desperately for tenants. Mr Shi managed to crawl under the barrier and found himself in a water-logged and crumbling site filled with 烂尾楼. Apparently, this was earmarked to be a premium housing estate featuring luxurious bungalows.

Mr Shi was not the only one who managed to find his way into the site. Villagers who probably had the land acquired from them to build this estate have returned to grow vegetables on the abandoned site.

To understand land development in China, one must never lose sight of idioms like 面子工程,龙头蛇尾 and of course, 烂尾楼. Overbuilding is a gross understatement where the purchasing power of 1.4 billion people is often grossly overestimated. I know of Singaporeans who have not only been bitten once but twice.

In the 1990s, they’ve placed deposits for residential projects in first tier cities which ended up as 烂尾楼. At that time, they swore that they would never buy another property in China. When they hear rumours of their friends of relatives making up to 500% profits from property in China in recent years, they jumped right in, thinking that this time, it’s going to be different. Little do they realise that China’s economic miracle is balancing on the apex of a pyramid of debt. It can be good for speculators, but never good for the long-term investor.