8 ms·

China's innovation economy a real estate bubble in disguise?

69 points by T-A 10y ago

elgabogringo 10y ago
"China's economy a debt bubble in disguise" <-- There, fixed it for you.
seanmcdirmid 10y ago
One of these innovation centers popped up recently next to our office. These are basically re-purposed "ghost malls" for malls that couldn't make it in retail, of which there are many. So call it "fall out" from the real estate bubble more than anything, and who wants to be stuck in a window-less subterranean labyrinth? Not the best place to be innovative. At least this is in Beijing Zhongguancun, which does have a startup scene...kind of. And such space might be appealing to lower cost startups who don't want to rent office space out in the suburbs.
- mjevans 10y ago
  How about an arcology overhaul route? Make more of the 'common' inner areas a combination of hydroponics (above) and greenway parks (beneath). Use skylights and/or artificial sun-lamps as necessary/effective.
- turnip1979 10y ago
  This seems to be a non-issue IMHO. If they try to attract foreigners ala Startup Chile, they could fill these things up in weeks. If 40% occupied innovation centers is the biggest thing wrong with China, they aren't in bad shape. Btw ... Ontario, Canada tried to do innovation from the top-down via the Mars building. The amount of money they spent in real-estate could have been used to give every person with a Masters/PhD in a STEM discipline from an Ontario University a bag of cash. But the buildings look prettier I guess than seed capital.
  - seanmcdirmid 10y ago
    Believe me, they have no interest in foreigners. All this is by Chinese for Chinese.
    - throwaway1979 10y ago
      Can you elaborate? Is this some kind of xenophohia like we see in other parts of the world? Or is it they want to learn how to do everything in the entire vertical chain (with a focus towards moving up the value chain)? Or something else entirely? I see Chinese tech companies open up R&D shops in North America, and I'm curious what they really want out of it.
      - seanmcdirmid 10y ago
        The markets they are going after is domestic, the primary language even at my branch of an American company (Microsoft China) is Chinese. It is not a place where multiculturalism is common or especially appreciated. A few foreigners get hired here and there, but it's not very common at all. If they really want foreign employees, they probably think setting up shop abroad is the only way to do it.
- soperj 10y ago
  Because most garages that start ups In Silicon Valley were originally in were windowed?
  - seanmcdirmid 10y ago
    Touche. Abandoned shopping malls might be a step up from garages.
    - mac01021 10y ago
      Not really. The point of startup in a garage is that it's your garage. No commute to get there, and no extra rent beyond what you were already paying.
      - seanmcdirmid 10y ago
        China lacks garages. I mean, they have underground tenant garages everywhere, but there is nothing like the western detached garage anywhere, even in the countryside. This might be the next best thing. However, 798 was an old factory complex that was taken over by artists for awhile before that success caused gentrification that then kicked them out. That...would be cool, but the Chinese government doesn't think so innovatively (they would never think a bunch old work shops would make a better startup workspace than an abondoned shopping mall - sigh).
  - matt4077 10y ago
    I'd guess they were mostly operated with the doors open, at least in the summer. From what I recall, most startups in the garage-stage also had no employees. I can see myself working without daylight, but I'd never consider subjecting employees to that (It's also illegal in my jurisdiction).
    - johncolanduoni 10y ago
      > I'd never consider subjecting employees to that (It's also illegal in my jurisdiction) I'm curious, what jurisdiction is this? I've never heard of such a restriction (though I have to say I'm a fan).
mrslave 10y ago
Tangentially: independent of the truth of this article, the volume of criticism of China's economy from Western media is hilarious in contrast to propaganda reported verbatim from the USA: the "slow recovery"; metrics that are hollow once the surface is scratched (e.g. jobs numbers comprising large below-full-time service sector, new housing starts with growing shared-residence numbers). Never mind bankrupt cities, territories, and soon states; inflation; and the national debt.
- ra1n85 10y ago
  Can you elaborate or provide sources? The language you use is incredibly dense, almost as if an online translation service was used.
  - adrenalinelol 10y ago
    1. U.S. Natl. Debt: $18.8 Trillion [1] 2. ~ 20 states face some form a fiscal problem/crisis [2] 3. I assume he's talking about the alternative means of measuring unemployment? The worst case scenario that is accepted by mainstream economics is ~10% [3] None of what he said was wrong, but China is in serious trouble. The real-estate bubble is hiding a credit bubble. As the government attempts to scale back stimulus programs, the % of the economy which is dependent on such activity will start to feel the pinch. No one really knows how much pain the average Chinese citizen is going to feel, but the situation has no parallel in history, the amount of money the Chinese government has spent is astronomical. Some economists have stated they expect the debt to peak 283% of GDP... [4] 1. https://www.nationalpriorities.org/campaigns/us-federal-debt-what/?gclid=CjwKEAjw2PK7BRDPz5nDh9GjoGcSJAAybcS3NpF90rW7AdZ3WqxiM7x5ynKwI8HwDnQBIf8MMDvO8RoCYrDw_wcB https://www.nationalpriorities.org/campaigns/us-federal-debt... 2. http://mercatus.org/statefiscalrankings http://mercatus.org/statefiscalrankings 3. http://www.bls.gov/lau/stalt.htm http://www.bls.gov/lau/stalt.htm 4. http://www.bloomberg.com/news/articles/2016-02-21/china-s-debt-seen-rising-through-2019-peaking-at-283-of-gdp http://www.bloomberg.com/news/articles/2016-02-21/china-s-de...
  - paulsutter 10y ago
    The labor force participation rate kept declining throughout the supposed recovery. http://static4.businessinsider.com/image/563caf319dd7ccfc418bcbfb-1200-900/october-2015-labor-force-participation-rate.png http://static4.businessinsider.com/image/563caf319dd7ccfc418... The "unemployment" rate doesn't include people who gave up looking for work among other adjustments, it doesn't tell you how many people are actually working. That's what the labor force participation rate measures. The rise of nontraditional candidates is less surprising in light of this.
jonathankoren 10y ago
I came from Dalian last month and the entire city seems to be under construction. Just in 5 years, the city has changed. There's a new subway, that wasn't even under construction then, and everywhere you look there's a new high rise condominium being built, often times just a couple of blocks away from another either under construction, or worse yet, a finished, but completely empty building. The city is trying to get people move into the reclaimed land in East Harbor, and bizarrely even a 19th century Parisian neighborhood... which is empty for 2 years except for an "American-style" kindergarten and a wedding photographer.[0] It's clearly a bubble. It's hard to understand how any of these are going to be filled. There's no real place to invest except real estate in China, and even there it's full corruption. It's apparently not unusual to "own" (well, have a 70 year government lease on) on a property but not actually have the deed, because the deed has been lost somehow. It's very weird. [0] http://english.sina.com/culture/p/2014/1024/748460.html http://english.sina.com/culture/p/2014/1024/748460.html
- zhte415 10y ago
  Fantastic. I live in Dalian, and have done for around 10 years. The city has changed - that's why I dropped an alternate career - to see what newspapers were writing about in the mid-2000s, about China's rise. Dalian is not unique in this respect. Cities across the seaboard and a select few more inland are all doing the same thing. But is it a bubble? Yes, it is, but in a strange kind of way. 10 years ago there was one software park with around 12 buildings and a local college. Now, that software park has 30+ buildings, and there are an additional 3 software parks located further from the city center all larger than it. The industrial development zone was a road with a bar district and a few 24 hour restaurants (many nearby factories operate round-the-clock shifts), a couple of hotels, and several large lots filled by largely Japanese corporations. Now it is a city of 1 million+ itself, a city on the edge of the city. 10 years ago there were also a lot of empty buildings, all of which are now full. When you visited you probably noticed a lot of high-density housing near the newer office and industrial districts. The local government makes around 1/2 of its revenue (highly trusted word of mouth) from land sales to developers, who in-turn make their profit from the workers that fill these hugely subsided commercial buildings, including the cost of the subway and subsidising busses. What's the core driver for this? Jobs for educated people from rural areas who have no hope nor desire to work on the farm or in the rural town. Their family will invest all they have on ensuring their child 'makes it' with a stable job at a big-name company in a clean city. As long as the jobs are coming, the city is sustainable. For Dalian, a lot of jobs have stopped coming over the past 1-2 years (4-5 years ago was boom-time, especially in BPO and ITO) and construction considerably slowed, but these are cyclical. Somewhere else a city is allowing companies to enjoy lower taxes (a lot of incentives in Xi'an, Chengdu, Chongqing for 'soft' jobs where the export is electronic in the form of email and SVN and not hindered by these cities' physical locations), and the boom is happening there, and the city is making money despite the tax breaks it's offering. It's a bubble, for sure, but it's being juggled.
jdc 10y ago
Betteridge
Kgas84 10y ago
Not sure how often this is the case with innovation centres, but many real estate developments take advantage of specific policies to secure backing for their projects. By including 'Innovation centres' they might be able to get land use rights, secure debt financing etc. for their project even if 80+% of the m2 is actually office, residential, retail. Whether this creates a real estate bubble depends on how well the other parts of the project do in the market.
spoonie 10y ago
"In any sort of market, you want the experts making the decisions, not some technocrat or bureaucrat," Seems to me the use of "technocrat" here is contradictory? Or are business/marketing "experts" not called technocrats?
ommunist 10y ago
Never forget, that China is not Western democracy. So they are not driven with economic gain as such, or prosperity of "the one percent". Many awkward economical decisions only look awkward for outsiders. Within Chinese system these totally make sense. Beware of approaching any feature in China with a western mindset. So it is probably not what it looks like. It may be some kind of a social sieve purposed for entirely other goal.
- jomamaxx 10y ago
  " So they are not driven with economic gain as such, or prosperity of "the one percent"" Yes, they are. Inequality is worse in China than in most Western democracies. They have more billionaires in Shanghai than New York (rougly, I may not be perfectly correct) and yet still 100's of millions in abject poverty. Here's the Gini coefficient: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html https://www.cia.gov/library/publications/the-world-factbook/... But this only measures stated wealth, it's much easier to hide wealth as a Chinese citizens than as a US citizen. Ask someone living in Vancouver.
- jerf 10y ago
  Chinese are human too. This includes greed in all its forms, the will to power, the construction of awkward systems that get repurposed and only vaguely serve their original goal, and are subject to Pournelle's Iron Law of Bureaucracy [1], and everything else that goes with it. The differences between China and the West only seem so large because we are all so similar in the first place, being all humans. [1]: http://www.jerrypournelle.com/reports/jerryp/iron.html http://www.jerrypournelle.com/reports/jerryp/iron.html
- westiseast 10y ago
  What it looks like to me is this: Beijing decides that innovation needs to be a key focus for the economy (for face maybe). It announces funding, sets development goals for local politicians, and writes the buzzwords in all new economic plans and development documents. Local developers and politicians read that, and their instincts kick in - they know now that any development that can show "innovation" will get a green light and throw themselves into it head first. So now, any new development that goes on is not "grass roots" or "green" or "core" - it's innovative, creative. So a bunch of pretty standard, low quality office buildings go up, but now they're called 'Creative Parks'. Rent is low for any business that is 'creative'. So local entrepreneurs fill them with creative businesses - fashion studios, wedding photographers, ad agencies, designers. The businesses do well because they are effectively getting direct government support and investment, and because there's no other genuinely creative competition around to challenge them. Innovation all round! It's a blunt and wasteful approach. It won't necessarily encourage creativity, innovation, new approaches, risk taking. More likely at best it will create a superficial impression of innovative industries, and maybe, maybe that might result in some innovation. This is the China way, and the reason China isn't a global creative or innovative superpower. <Mic drop>
liamconnell 10y ago
I think its about putting the next generation to work. The Chinese model of manufacturing, which has really been the world's model for two decades, is that cheap labor is more economical than technologically advanced industrial robots. That is eventually going to change, and maybe sooner than later [1]. Then what do you do with half a billion unemployed people? Even doing nothing for them but giving them offices is better than letting their communities decay, even if it loses money in the short AND long term. And who knows, maybe after a few boom and bust tech cycles the innovation labs will actually make something useful and profitable. That's just an added bonus. [1] http://www.bbc.com/news/technology-36376966 http://www.bbc.com/news/technology-36376966
chj 10y ago
A real estate bubble in disguise? Yes! But considering that young people in China don't have the luxury of garages, any rent-free office space can be of great help to them. At least the empty buildings are now put to use.
chvid 10y ago
From the article: "The result: like steel mills, theme parks and housing before them, the country now faces a glut of innovation centers as another top-down policy backfires to leave white-elephant projects and a further buildup of debt." Western media have always had a skewed one-sided perspective on China and today that perspective is predominantly negative. So negative that it is almost silly. The other side of the story is: No other place has a middle class of that size growing that strongly. Internet giants Facebook and Google are excluded from the market leaving big room for smaller companies to innovate. Electronics are produced right next door opening for all sorts of crossplay innovation between hardware and software.
- JPKab 10y ago
  While I agree with the often one-sided and biased western view of China, these innovation centers are being built in droves, and remain empty. A commenter below who lives in China and works next to one of these new innovation centers describes it as yet another "ghost mall". In all fairness, the US economy has it's own version of ghost malls, which is defense spending. We spend billions of dollars on military hardware that just floats and flies around with nothing to do and no purpose except to fight a war that's almost certainly not going to happen in that equipment's lifetime.
  - ctvo 10y ago
    We do have our own version of ghost malls. Actual ghost malls. The US is where that term was coined. Most of the time those developments involved partly public funds (directly or via tax incentives). And I wouldn't characterize our military spending as ghost malls. They serve a purpose even when not actively used: deterrent. You can argue how important that is but it's not useless.
    - Retric 10y ago
      [Source?] US has dead malls, but those had actual stores at some point. ex: http://www.businessinsider.com/23-haunting-photos-of-a-dead-mall-in-ohio-2015-8 http://www.businessinsider.com/23-haunting-photos-of-a-dead-... Often because a much better mall was built in the area, or just completion from online shopping. As retail goes online you just don't need as many stores. Malls take a critical mass of shoppers and stores to keep going. If not enough stores move in they can be stillborn but I assume that's really rare in the US.

69 points by T-A 10y ago

"China's economy a debt bubble in disguise" <-- There, fixed it for you.

One of these innovation centers popped up recently next to our office. These are basically re-purposed "ghost malls" for malls that couldn't make it in retail, of which there are many. So call it "fall out" from the real estate bubble more than anything, and who wants to be stuck in a window-less subterranean labyrinth? Not the best place to be innovative. At least this is in Beijing Zhongguancun, which does have a startup scene...kind of. And such space might be appealing to lower cost startups who don't want to rent office space out in the suburbs.

mjevans 10y ago
How about an arcology overhaul route? Make more of the 'common' inner areas a combination of hydroponics (above) and greenway parks (beneath). Use skylights and/or artificial sun-lamps as necessary/effective.
turnip1979 10y ago
This seems to be a non-issue IMHO. If they try to attract foreigners ala Startup Chile, they could fill these things up in weeks. If 40% occupied innovation centers is the biggest thing wrong with China, they aren't in bad shape. Btw ... Ontario, Canada tried to do innovation from the top-down via the Mars building. The amount of money they spent in real-estate could have been used to give every person with a Masters/PhD in a STEM discipline from an Ontario University a bag of cash. But the buildings look prettier I guess than seed capital.
- seanmcdirmid 10y ago
  Believe me, they have no interest in foreigners. All this is by Chinese for Chinese.
  - throwaway1979 10y ago
    Can you elaborate? Is this some kind of xenophohia like we see in other parts of the world? Or is it they want to learn how to do everything in the entire vertical chain (with a focus towards moving up the value chain)? Or something else entirely? I see Chinese tech companies open up R&D shops in North America, and I'm curious what they really want out of it.
    - seanmcdirmid 10y ago
      The markets they are going after is domestic, the primary language even at my branch of an American company (Microsoft China) is Chinese. It is not a place where multiculturalism is common or especially appreciated. A few foreigners get hired here and there, but it's not very common at all. If they really want foreign employees, they probably think setting up shop abroad is the only way to do it.
soperj 10y ago
Because most garages that start ups In Silicon Valley were originally in were windowed?
- seanmcdirmid 10y ago
  Touche. Abandoned shopping malls might be a step up from garages.
  - mac01021 10y ago
    Not really. The point of startup in a garage is that it's your garage. No commute to get there, and no extra rent beyond what you were already paying.
    - seanmcdirmid 10y ago
      China lacks garages. I mean, they have underground tenant garages everywhere, but there is nothing like the western detached garage anywhere, even in the countryside. This might be the next best thing. However, 798 was an old factory complex that was taken over by artists for awhile before that success caused gentrification that then kicked them out. That...would be cool, but the Chinese government doesn't think so innovatively (they would never think a bunch old work shops would make a better startup workspace than an abondoned shopping mall - sigh).
- matt4077 10y ago
  I'd guess they were mostly operated with the doors open, at least in the summer. From what I recall, most startups in the garage-stage also had no employees. I can see myself working without daylight, but I'd never consider subjecting employees to that (It's also illegal in my jurisdiction).
  - johncolanduoni 10y ago
    > I'd never consider subjecting employees to that (It's also illegal in my jurisdiction) I'm curious, what jurisdiction is this? I've never heard of such a restriction (though I have to say I'm a fan).

mrslave 10y ago

Tangentially: independent of the truth of this article, the volume of criticism of China's economy from Western media is hilarious in contrast to propaganda reported verbatim from the USA: the "slow recovery"; metrics that are hollow once the surface is scratched (e.g. jobs numbers comprising large below-full-time service sector, new housing starts with growing shared-residence numbers). Never mind bankrupt cities, territories, and soon states; inflation; and the national debt.

ra1n85 10y ago
Can you elaborate or provide sources? The language you use is incredibly dense, almost as if an online translation service was used.
- adrenalinelol 10y ago
  1. U.S. Natl. Debt: $18.8 Trillion [1] 2. ~ 20 states face some form a fiscal problem/crisis [2] 3. I assume he's talking about the alternative means of measuring unemployment? The worst case scenario that is accepted by mainstream economics is ~10% [3] None of what he said was wrong, but China is in serious trouble. The real-estate bubble is hiding a credit bubble. As the government attempts to scale back stimulus programs, the % of the economy which is dependent on such activity will start to feel the pinch. No one really knows how much pain the average Chinese citizen is going to feel, but the situation has no parallel in history, the amount of money the Chinese government has spent is astronomical. Some economists have stated they expect the debt to peak 283% of GDP... [4] 1. https://www.nationalpriorities.org/campaigns/us-federal-debt-what/?gclid=CjwKEAjw2PK7BRDPz5nDh9GjoGcSJAAybcS3NpF90rW7AdZ3WqxiM7x5ynKwI8HwDnQBIf8MMDvO8RoCYrDw_wcB https://www.nationalpriorities.org/campaigns/us-federal-debt... 2. http://mercatus.org/statefiscalrankings http://mercatus.org/statefiscalrankings 3. http://www.bls.gov/lau/stalt.htm http://www.bls.gov/lau/stalt.htm 4. http://www.bloomberg.com/news/articles/2016-02-21/china-s-debt-seen-rising-through-2019-peaking-at-283-of-gdp http://www.bloomberg.com/news/articles/2016-02-21/china-s-de...
- paulsutter 10y ago
  The labor force participation rate kept declining throughout the supposed recovery. http://static4.businessinsider.com/image/563caf319dd7ccfc418bcbfb-1200-900/october-2015-labor-force-participation-rate.png http://static4.businessinsider.com/image/563caf319dd7ccfc418... The "unemployment" rate doesn't include people who gave up looking for work among other adjustments, it doesn't tell you how many people are actually working. That's what the labor force participation rate measures. The rise of nontraditional candidates is less surprising in light of this.

jonathankoren 10y ago

I came from Dalian last month and the entire city seems to be under construction. Just in 5 years, the city has changed. There's a new subway, that wasn't even under construction then, and everywhere you look there's a new high rise condominium being built, often times just a couple of blocks away from another either under construction, or worse yet, a finished, but completely empty building. The city is trying to get people move into the reclaimed land in East Harbor, and bizarrely even a 19th century Parisian neighborhood... which is empty for 2 years except for an "American-style" kindergarten and a wedding photographer.[0] It's clearly a bubble. It's hard to understand how any of these are going to be filled. There's no real place to invest except real estate in China, and even there it's full corruption. It's apparently not unusual to "own" (well, have a 70 year government lease on) on a property but not actually have the deed, because the deed has been lost somehow. It's very weird. [0] http://english.sina.com/culture/p/2014/1024/748460.html http://english.sina.com/culture/p/2014/1024/748460.html

zhte415 10y ago
Fantastic. I live in Dalian, and have done for around 10 years. The city has changed - that's why I dropped an alternate career - to see what newspapers were writing about in the mid-2000s, about China's rise. Dalian is not unique in this respect. Cities across the seaboard and a select few more inland are all doing the same thing. But is it a bubble? Yes, it is, but in a strange kind of way. 10 years ago there was one software park with around 12 buildings and a local college. Now, that software park has 30+ buildings, and there are an additional 3 software parks located further from the city center all larger than it. The industrial development zone was a road with a bar district and a few 24 hour restaurants (many nearby factories operate round-the-clock shifts), a couple of hotels, and several large lots filled by largely Japanese corporations. Now it is a city of 1 million+ itself, a city on the edge of the city. 10 years ago there were also a lot of empty buildings, all of which are now full. When you visited you probably noticed a lot of high-density housing near the newer office and industrial districts. The local government makes around 1/2 of its revenue (highly trusted word of mouth) from land sales to developers, who in-turn make their profit from the workers that fill these hugely subsided commercial buildings, including the cost of the subway and subsidising busses. What's the core driver for this? Jobs for educated people from rural areas who have no hope nor desire to work on the farm or in the rural town. Their family will invest all they have on ensuring their child 'makes it' with a stable job at a big-name company in a clean city. As long as the jobs are coming, the city is sustainable. For Dalian, a lot of jobs have stopped coming over the past 1-2 years (4-5 years ago was boom-time, especially in BPO and ITO) and construction considerably slowed, but these are cyclical. Somewhere else a city is allowing companies to enjoy lower taxes (a lot of incentives in Xi'an, Chengdu, Chongqing for 'soft' jobs where the export is electronic in the form of email and SVN and not hindered by these cities' physical locations), and the boom is happening there, and the city is making money despite the tax breaks it's offering. It's a bubble, for sure, but it's being juggled.

jdc 10y ago

Betteridge

Kgas84 10y ago

Not sure how often this is the case with innovation centres, but many real estate developments take advantage of specific policies to secure backing for their projects. By including 'Innovation centres' they might be able to get land use rights, secure debt financing etc. for their project even if 80+% of the m2 is actually office, residential, retail. Whether this creates a real estate bubble depends on how well the other parts of the project do in the market.

spoonie 10y ago

"In any sort of market, you want the experts making the decisions, not some technocrat or bureaucrat," Seems to me the use of "technocrat" here is contradictory? Or are business/marketing "experts" not called technocrats?

ommunist 10y ago

Never forget, that China is not Western democracy. So they are not driven with economic gain as such, or prosperity of "the one percent". Many awkward economical decisions only look awkward for outsiders. Within Chinese system these totally make sense. Beware of approaching any feature in China with a western mindset. So it is probably not what it looks like. It may be some kind of a social sieve purposed for entirely other goal.

jomamaxx 10y ago
" So they are not driven with economic gain as such, or prosperity of "the one percent"" Yes, they are. Inequality is worse in China than in most Western democracies. They have more billionaires in Shanghai than New York (rougly, I may not be perfectly correct) and yet still 100's of millions in abject poverty. Here's the Gini coefficient: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html https://www.cia.gov/library/publications/the-world-factbook/... But this only measures stated wealth, it's much easier to hide wealth as a Chinese citizens than as a US citizen. Ask someone living in Vancouver.
jerf 10y ago
Chinese are human too. This includes greed in all its forms, the will to power, the construction of awkward systems that get repurposed and only vaguely serve their original goal, and are subject to Pournelle's Iron Law of Bureaucracy [1], and everything else that goes with it. The differences between China and the West only seem so large because we are all so similar in the first place, being all humans. [1]: http://www.jerrypournelle.com/reports/jerryp/iron.html http://www.jerrypournelle.com/reports/jerryp/iron.html
westiseast 10y ago
What it looks like to me is this: Beijing decides that innovation needs to be a key focus for the economy (for face maybe). It announces funding, sets development goals for local politicians, and writes the buzzwords in all new economic plans and development documents. Local developers and politicians read that, and their instincts kick in - they know now that any development that can show "innovation" will get a green light and throw themselves into it head first. So now, any new development that goes on is not "grass roots" or "green" or "core" - it's innovative, creative. So a bunch of pretty standard, low quality office buildings go up, but now they're called 'Creative Parks'. Rent is low for any business that is 'creative'. So local entrepreneurs fill them with creative businesses - fashion studios, wedding photographers, ad agencies, designers. The businesses do well because they are effectively getting direct government support and investment, and because there's no other genuinely creative competition around to challenge them. Innovation all round! It's a blunt and wasteful approach. It won't necessarily encourage creativity, innovation, new approaches, risk taking. More likely at best it will create a superficial impression of innovative industries, and maybe, maybe that might result in some innovation. This is the China way, and the reason China isn't a global creative or innovative superpower. <Mic drop>

liamconnell 10y ago

I think its about putting the next generation to work. The Chinese model of manufacturing, which has really been the world's model for two decades, is that cheap labor is more economical than technologically advanced industrial robots. That is eventually going to change, and maybe sooner than later [1]. Then what do you do with half a billion unemployed people? Even doing nothing for them but giving them offices is better than letting their communities decay, even if it loses money in the short AND long term. And who knows, maybe after a few boom and bust tech cycles the innovation labs will actually make something useful and profitable. That's just an added bonus. [1] http://www.bbc.com/news/technology-36376966 http://www.bbc.com/news/technology-36376966

chj 10y ago

A real estate bubble in disguise? Yes! But considering that young people in China don't have the luxury of garages, any rent-free office space can be of great help to them. At least the empty buildings are now put to use.

chvid 10y ago

From the article: "The result: like steel mills, theme parks and housing before them, the country now faces a glut of innovation centers as another top-down policy backfires to leave white-elephant projects and a further buildup of debt." Western media have always had a skewed one-sided perspective on China and today that perspective is predominantly negative. So negative that it is almost silly. The other side of the story is: No other place has a middle class of that size growing that strongly. Internet giants Facebook and Google are excluded from the market leaving big room for smaller companies to innovate. Electronics are produced right next door opening for all sorts of crossplay innovation between hardware and software.

JPKab 10y ago
While I agree with the often one-sided and biased western view of China, these innovation centers are being built in droves, and remain empty. A commenter below who lives in China and works next to one of these new innovation centers describes it as yet another "ghost mall". In all fairness, the US economy has it's own version of ghost malls, which is defense spending. We spend billions of dollars on military hardware that just floats and flies around with nothing to do and no purpose except to fight a war that's almost certainly not going to happen in that equipment's lifetime.
- ctvo 10y ago
  We do have our own version of ghost malls. Actual ghost malls. The US is where that term was coined. Most of the time those developments involved partly public funds (directly or via tax incentives). And I wouldn't characterize our military spending as ghost malls. They serve a purpose even when not actively used: deterrent. You can argue how important that is but it's not useless.
  - Retric 10y ago
    [Source?] US has dead malls, but those had actual stores at some point. ex: http://www.businessinsider.com/23-haunting-photos-of-a-dead-mall-in-ohio-2015-8 http://www.businessinsider.com/23-haunting-photos-of-a-dead-... Often because a much better mall was built in the area, or just completion from online shopping. As retail goes online you just don't need as many stores. Malls take a critical mass of shoppers and stores to keep going. If not enough stores move in they can be stillborn but I assume that's really rare in the US.