In China, a replica of Manhattan, the financial district of Yujiapu in the port city of Tianjin, loses its luster

In China, a replica of Manhattan loses its luster

by Rob Schmitz

Marketplace for Wednesday, July 3, 2013

The financial district of Yujiapu in the port city of Tianjin aims to be a rival to Manhattan within ten years. The government has spent billions building replicas of Rockefeller Center, Lincoln Center, and are building China’s largest high-speed rail station here. Economists question the district’s future. A construction worker rests underneath a bulldozer amidst the rubble of Yujiapu, one of the largest construction sites in the world, where the city of Tianjin is building dozens of skyscrapers in an effort to create one of the world’s largeste financial centers.

The buildings rising from a saltwater marsh in the port city of Tianjin looks an awful lot like New York City. But don’t be fooled, says Lin Lixue, a dapper young spokesman for a local developer. This Manhattan replica aims to be abigger Apple.

“Our goal is to create the world’s largest financial center, right here, within ten years,” says Lin. “We’re building skyscrapers, we’ve got China’s largest high-speed railway station coming soon, we’re building a tunnel under the sea, and we’ll soon build several subway lines.”Li sounds like a boy whimsically building sandcastles. And this is a very big sandbox. The city‘s called Yujiapu. It’s now one of the biggest construction sites on the planet. Workers are completing dozens of skyscrapers, many over 50 stories tall.

Zhang Xiaoying is a real estate analyst for Tianjin Centaline Property Consulting. Her job is to advise those who are interested in investing in this area. What is she telling them about China’s next Manhattan?

“Don’t invest here!” Zhang says loudly, “It’s way too risky. Some developers have re-sold entire buildings at a loss just so they can pull out of here as soon as possible. For the projects that are finished, the investors are now pulling out.”

The way Zhang sees it, Yujiapu is more Detroit than Manhattan, and it hasn’t even been built yet. So I ask her: why IS it being built?

“Hu Jintao,” Zhang says with a nervous giggle.

Under Hu’s presidency, China’s economy grew at an unprecedented rate. The formula for much of that growth has been pretty straight-forward, says economist Anne Stevenson-Yang.

“All the land belongs to the government. The government has the right to clear the land. Take it over, and then to either build stuff on it themselves, sell it to a developer or use it as collateral for loans. They do all three, and they’ve made a killing doing it.”

Stevenson stands in the ravine-like surroundings of a narrow avenue between giant half-finished skyscrapers in Yujiapu. She says the Tianjin government took this land, assessed it at many times its current value, and then used it as collateral for loans. She says Tianjin has borrowed nearly as much as its entire annual GDP to pay for Yujiapu. With China’s economy now in slowdown mode, Stevenson-Yang says the region’s future is bleak.

“Think of it: every single dollar made in Tianjin, one for one, is lent to this particular district which will be written off to no more than a tenth of its value. Where does that money go? It just doesn’t disappear. It becomes everybody’s debt.”

She predicts that ten years from now, China’s property bubble will have burst, land will be worth around half of what it is now, and squatters will inhabit Yujiapu’s half-built skyscrapers, like something out of a “Mad Max” movie.

“This is going to be ‘Apocolypse Then.’ It’s sad. I’ve lived in china for 23 years. I have a huge batch of Chinese in-laws. I like China. I wish things were different. But I don’t see how they can be.” In the meantime, China’s Manhattan project marches forward, thanks, in part, to support at the highest levels of government.

An ambitious former Tianjin mayor, Zhang Gaoli, helped secure funding for this district. He now works in Beijing as China’s Vice Premier. After hearing Stevenson-Yang’s grisly predictions for Yujiapu, I return to the dapper young developer’s office to ask a few more questions.

Inside, the only sign of life is a receptionist. She’s sleeping at the front desk. A tense-sounding piano tune plays over the PA system, echoing through the marble halls. In front of her desk are framed advertisements for the future city. One proclaims in English: “Concentrate world capital and set China’s ambition.”

Outside, a city is being built. And the receptionist continues to sleep.