At ‘China’s Manhattan,’ construction slows due to debt and diminished demand

Thanks to diminished demand for real estate at a development known as “China’s Manhattan,” more than 80% of office space is gathering dust... and debt.


April 12, 2019

Construction at a massive Chinese development billed as “China’s Manhattan” has stalled as 80% of the complex’s office space collects cobwebs, reports The New York Times.

The gleaming ghost town highlights a new economic reality in China: After years of big-time borrowing, Chinese investors bit off more development than Chinese consumers can chew.

A whole lotta pianos… and no one to play them

Despite the empty buildings, the local government keeps borrowing. Last year, Tianjin and entities related to the local government raised $36 billion through new loans, according to data from the People’s Bank of China, the country’s central bank. Five years later, the city is still largely empty.

Juilliard, the prestigious NYC music school, became one of the district’s few tenants when it committed to open a 2nd campus in Yujiapu. But with growth at a crawl, 150 Steinway pianos sit at a German port waiting to be shipped to an empty city.

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In 2018 Tianjin lowered revenue estimates from $150B to $100B, doubling down on debt. The interest that Tianjin borrowers owe is now 12x higher than the region’s economic output. 

Big bets make big busts

Last year, the Chinese economy grew at its slowest rate in 28 years. But multibillion-dollar projects like Tianjin’s “Manhattan” already had so much momentum they couldn’t stop on short notice.

Now that Chinese investors are slowing down, they’re discovering the depth of the hole they’ve dug: The country is speckled with a growing number of empty malls and unfinished skyscrapers.

The diabolical debt dilemma isn’t unique to Tianjin: Debt has risen to $4.5T, according to the Chinese government. Other analysts say it could really be as high as $10T.

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