Rising Occupancy In China's Fake Manhattan Is "Mostly Government Driven"

China"s copy of Manhattan is no longer a ghost town, Bloomberg reports. But that doesn"t mean it has forever forestalled a "day of reckoning" for its debt-fueled growth.

The northern city of Tianjin drew negative press coverage a few years ago because of a newly built replica of Manhattan complete with a mock Rockefeller Center that was created as part of a massive government infrastructure project but for years was little more than a ghost town.  But the city is now occupants are finally clocking to the city: Bloomberg reports that once empty skyscrapers, vacant office towers and unfinished hotels and apartments are gradually filling up amid the central government’s renewed push to refashion the city into a crucial gateway for a revitalized Northern China.

As Bloomberg reports:

There still may still be a financial reckoning for Tianjin looming in the future, but right now there are green shoots of economic life in the urban districts at the center of the city’s unprecedented construction boom.

But there"s a catch, of course: As is true for the broader Chinese economy, the growth in Tianjin "is mostly government driven, though there are signs private industry is coming."

Here"s more from Bloomberg:

In the Binhai district, empty offices are filling up with staff from private companies as well as employees of some of the biggest state-owned enterprises, such as China National Chemical Corp., railcar manufacturer CRRC Corp., and China Poly Group Corp., a conglomerate with businesses ranging from explosives manufacturing to real estate." While many local governments across the country are struggling with heavy dependence on debt-fueled growth, Tianjin benefits more than almost any city from its position at the vanguard of two of the country’s biggest national projects.

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Bloomberg saves one notable detail for the last paragraph of the story, citing an official who offers some local perspective: The city is supposed to play in important role in China"s "one belt, one road" initiave, another massive debt-fueled trade and transport infrastructure project meant to replicate the ancient Silk Road trade routes that connected Europe and Asia. The government-funded expansion aims to join Beijing with the surrounding Hebei Province to create a mega city of 100 million people.

It should come as no surprise that Tianjin has...backing from heavy hitters in the party.

"We want the city to become one of the world’s largest ports like Singapore or Hong Kong," said Xiao Sheng, vice director of the free trade zone in Tianjin. "We want to develop a new business and development model that could be promoted to other regions in China."

But even as China signs up foreign partners for its latest scheme, offering financial inducements like a $50 billion infrastructure investment in Pakistan, a key U.S. ally, some at least are showing unease at the massive debt-fueled spending necessary to bring the project into reality. 

In a diplomatic showcase years in the making, Chinese President Xi Jinping invited leaders from 29 countries to hear his pitch about the "one belt, one road." But what"s notable is that India, the worlds fastest growing and second-most populous country, didn"t even bother to send a delegation, warning that the "unsustainable debt burden" required to launch the project would be a disaster for the countries involved.

The story notes that though Tianjin"s growth rate slipped to 8% last year – down from 9% the year before – it still outpaced 6.8% YoY rate for the broader Chinese economy in 2016. But that"s a pretty low bar: China"s economy grew in 2016 at its slowest pace in 26 years.

Chinese Cruise Ship With 2,000 Passengers Stuck At Sea For Two Days Due To Smog

Beijing"s pollution problem is getting worse by the day.

On Wednesday, the Chinese capital issued its highest "red fog alert" for only the second day in history, keeping highways closed in and around the city which is already under a smog alert after weeks of choking winter pollution. China"s weather bureau warned of visibility of less than 50 meters in some areas, leading many airports to cancel flights.

The heavily polluted Hebei province, which surrounds most of Beijing, said on Tuesday it had ordered all polluting firms in Tangshan, China"s biggest steel-producing city to the east of Beijing, to shut down which likely means that China is in for a substantial "manufacturing" shock in the coming months. 

Hebei, which was home to seven of China"s 10 smoggiest cities in 2015, will build the world"s biggest dust prevention barrier, stretching nearly two miles, at the major coal port of Qinhuangdao in a bid to cut pollution, state media said on Wednesday.

For now, however, China is very much defenseless against the toxic byproduct of its rapid industrialization, which also happens to be a major factor permitting the Chinese economy to grow at the goalseeked 6-7% level or somewhere thereabouts. Unfortunately for Beijing, it"s a choice of either stable manufacturing growth or clean air: the two are mutually exclusive.

And nowhere was that more visible today, so to speak, than near the port of Tianjin, where according to the Beijing Evening News, a large cruise ship with more than 2,000 people on board was stuck at sea for two days because it was unable to dock in the heavy smog that has enveloped much of northern China. The vessel finally returned to the Port of Tianjin on Monday afternoon after drifting for two days at sea. The thick air pollution had earlier made it impossible to safely berth the vessel, according to the article

A passenger was quoted as saying that the ship was scheduled to return on New Year’s Eve after traveling to South Korea and Japan. But she was told by the crew that the ship could not dock as visibility was severely compromised by the smog. She said the passengers had been unsure how long they would be stuck at sea but were grateful there was plenty of entertainment on board to kill time.

“Unlike passengers who are stuck at some public facilities like an airport, we got to use the pool and the gym to keep ourselves busy,” she said.

As Reuters adds, poor visibility prompted three major northern ports to suspend the loading of ships on Tuesday, maritime safety agencies said.

Unless Beijing"s leadership is willing to take draconian measures to curb smog production, which inevitably means an economic slowdown, expect scenes such as the ones shown below to continue.

It"s started snowing in Beijing. What do you call smoggy snow? Smow? Snog? pic.twitter.com/BKWGYufidu

— Chris Buckley ??? (@ChuBailiang) January 5, 2017

Beijing out my window - the air has taste and texture today. pic.twitter.com/QoZWH20f4E

— Chris Hadfield (@Cmdr_Hadfield) January 5, 2017

Beijing from the air as smog blankets the city. Just otherworldly - and alarming pic.twitter.com/P8oTLRFomR

— Jim Sciutto (@jimsciutto) January 4, 2017

Dramatic Time-Lapse Video Captures Arrival Of Beijing Smog Cloud

The following dramatic time-lapse video, shows a wall of toxic smog rolling into Beijing over a 20-minute period collapsed into a 10 second video; it gives a glimpse of the pollution problem in China"s capital city. Chas Pope, a British engineering consultant working in Beijing, shot the video.

An air-quality index released by China"s municipal environmental protection bureau, which measures potentially hazardous particles in the air, hit 482 on Sunday, almost touching the 500 mark where the scale tops out, and far beyond the point deemed hazardous to health, according to the South China Morning Post.

"Everyone should avoid all physical activity outdoors," a warning accompanying the reading warns. "People with heart or lung disease, older adults, and children should remain indoors and keep activity levels low."

As a result of the heavy smog to hit much of northern China on Sunday, hundreds of flights were canceled and highways shut, disrupting the first day of the New Year holiday. The latest smog incident to hit Beijing, and which forced local authorities to extend an "orange alert" - the second highest level for air pollution until Jan. 4 - followed a similar hazardous smog alert in mid-December, leading authorities to order hundreds of factories to close and to restrict motorists to cut emissions.

The latest bout of air pollution began on Friday and is expected to persist until Thursday, although it will ease slightly on Monday, the last day of the New Year holiday according to ABC.

In Beijing, 126 flights were canceled at the city"s main airport and all buses from there to neighboring cities suspended, state news agency Xinhua said.

Average concentrations of small breathable particles known as PM2.5 were higher than 500 micrograms per cubic meter in Beijing - 50 times higher than World Health Organization recommendations.

In Tianjin, Beijing"s next door metropolis, the smog was not as serious but visibility much worse, with more than 300 flights canceled at Tianjin airport and conditions not expected to improve in the near term, the city government said. Xinhua said highways into and out of the city were also closed.

In Shijiazhuang, the capital of Hebei province that surrounds most of Beijing, about two dozen flights were canceled and eight flights diverted to other airports because of the smog, the People"s Daily said on its website.

A total of 24 Chinese cities have issued red alerts for the current round of pollution, which mandate measures like limiting car usage and closing factories, while 21 have issued orange alerts, including Beijing and Tianjin.

As Reuters notes, Pollution alerts are common in northern China, especially during winter when energy demand, much of it met by coal, soars. The country"s northern provinces mostly rely on the burning of hundreds of millions of tonnes of coal each year for heating during northern China"s bitterly cold winters.

China began a "war on pollution" in 2014 amid concerns its heavy industrial past was tarnishing its global reputation and holding back its future development, but it has struggled to effectively tackle the problem.

Unfortunately for China"s residents, the "war" is lost every time Chinese production goes into overdrive, forcing the government to order manufacturing to halt output, leading to an economic slowdown, and forcing a sharp restart several weeks to months later, usually as a result of more trillions in credit injections, which then send the credit impulse propagating around the globe.

In other words, the global economy is now held hostage by the level of toxic particullate matter in northern China: any time this goes off the chart, manufacturing in China is halted, leading to significant downstream effects around the entire world.