Gary Shapiro: Is China Showing Cracks?

Any Westerner visiting China leaves in awe of its new airports, buildings and hotels. Its cities bustle and its people hustle.

As head of the Consumer Electronics Association, I travel to China at least annually. But after several awe-inspiring trips, I returned from China this month less in awe. China may have “jumped the shark,” veering from amazing to troubled.

For one, the building boom appears to be over. There are still plenty high-rise construction sites marked by cranes, but many, if not most, of the projects showed no evidence of any activity. They were simply stopped.

In one area, we drove past scores of quiet high-rise sites in various phases of completion. We were told that in this one small and amazingly beautiful coastline area, construction had begun and was halted on 100,000 housing units. Chinese banks are holding some serious uncollectible debt.

While this may have been an extreme example, the reversal in construction stems in large part from the government’s new rules aimed at cutting speculation by restricting second home ownership. Buyers must put down 50 percent in cash, and interest rates are less than favorable.

Of course, this may just be a temporary blip. It’s been estimated that 400 million people are moving from China’s villages to its cities. Indeed, there are more than 171 Chinese cities that now have more than one million people, compared to only nine cities in the U.S.

You wouldn’t worry about a construction slowdown if you read the China’s recently released Five Year Plan. By 2015, high-speed rail will cover 74,000 miles, up 30 percent. Another 64 airports are planned by 2020, adding to China’s 180-airport inventory. And 41 nuclear plants are planned or are under construction. Ambitious.

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