A 40-second video made in August in the southern Chinese city of Kunming provides a graphic account of the country’s housing bubble. It shows controlled explosions turning 15 apartment towers into rubble. They were built seven years ago and never occupied.
Since then, China’s housing woes have been exposed by the liquidity crisis at Evergrande, the world’s most indebted housing developer. The company’s shares are in freefall – they are down more than 85 per cent in the past year – and S&P Global Ratings said a default on bond payments is “likely.”
While Evergrande indicated Wednesday that it had struck a deal with creditors to make a relatively small payment on domestic bonds, the collapse of the company, barring a government bailout, is not being ruled out as Beijing cracks down on the excessive leverage that fuelled the building orgy of Chinese developers.
It was China’s urbanization drive, coupled with a relentless demand for steel to cover the landscape with apartment and office towers and infrastructure, that turned the world’s iron ore producers into fabulous wealth-creation machines.