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Comment by izend | Hacker News Reader

There are cases of overbuilt areas but I think these stories are the West's insecurities on display about China's success.

In the US (Nevada) and Canada, there are areas where the developers have overbuilt, perhaps not on the scale of these Chinese development projects.

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I thought it means that the Chinese are in for potentially even bigger trouble than the west.

It's unlikely, as mortgages (and debt in general) are very unpopular in China. It's currently not possible to even get a mortgage. Chinese ghost towns are, for the vast majority, bought and paid for by rich speculators in cash.

Not to say speculation isn't trouble, but theirs isn't built on debt (as was ours).

I agree with you - debt is a big big no no - and having been here for some time now, I think China functions in an very very different way than the west, which is also why we see these conflicting reports telling us China is going down or up and so on. I am having a hard time understanding it often myself, but I try and sometimes, when I need to get stuff done (and I mean, just get stuff done!), it really helps to think like a Chinese..

Let me give you a simple maybe non-related example.. I tried to get a visa for China and it wasn't possible at all through official channels.. No matter what I did (embassy, visa offices and whatnot), they simply wouldn't grant me a visa which would allow me to enter and leave China as I wanted (only single/double entry, which is no good).. In the end after some help from a Chinese friend, I managed to get a visa because he knew somebody who knew somebody at the local police station, who could print a visa for me..

This is how you get stuff done in China - you know somebody - I now owe my friend a favor and as I understand it is unforgivable, if I do not pay him back some day in some way. China is driven by guanxi (http://en.wikipedia.org/wiki/Guanxi) ..

I am totally speculating here - just a laowai trying to figure out what the hell is going on. Someone Chinese please enlighten me!..

The fact that your friend can ask you for a favor in return is Guanxi, and is certainly a characteristic of Chinese culture that provides accountability and also is factor in whom one befriends.

The fact that a favor was required to get a visa that presumably you qualified for (or if it was used to get one that you didn't qualify for as well) is borderline corruption, even if no currency or goods were exchanged, since Guanxi dictates that at very least a favor is now owed. I have friends from China that talk about situations like this that include obtaining marriage licenses and dealing with fees associated with second and third children.

I think the problem isn't the population being in debt, because, as you mention, in China, most people pay cash as debt is anathema for most indivs. On the other hand, one or the main forces behind the construction is local government revenue. Local govt's raise funds through land leasing and selling. In order to remain solvent they enter into these real estate deals, if they are successful, they do well, if things go south, they are in debt --so there is the danger lots of local (CN) gov'ts being insolvent.

Here are details regarding how the ghost towns are funded and why China keeps building them so far from present city centers.

"It is hoped that these new towns will, in addition to alleviate urban congestion, spark further in-fill development in the expanse of farmland that sets the new town apart from the city center – a kind of pre-planned suburban sprawl. Funding for these new towns comes from the difference paid to compensate farmers to relocate (a calculation based on potential agricultural yields) and the substantially higher revenue generated from leasing the same land to developers." http://blogs.worldbank.org/transport/rise-of-the-chinese-gho...

In the comments the author also mentions that many of these buildings are offered at below cost to government employees.

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