More Signs of China’s Bubble: Deserted Fake Disneyland

From Reuters Blog (hat tip Bob Wenzel)

Along the road to one of China’s most famous tourist landmarks – the Great Wall of China – sits what could potentially have been another such tourist destination, but now stands as an example of modern-day China and the problems facing it.

Situated on an area of around 100 acres, and 45 minutes drive from the center of Beijing, are the ruins of ‘Wonderland’. Construction stopped more than a decade ago, with developers promoting it as ‘the largest amusement park in Asia’. Funds were withdrawn due to disagreements over property prices with the local government and farmers. So what is left are the skeletal remains of a palace, a castle, and the steel beams of what could have been an indoor playground in the middle of a corn field.

It’s sad to see vast amounts of capital wasted on grand projects.

Yet the above is just one of the many other symptoms (ghost cities, empty malls, vacant apartments) of failed government policies in promoting permanent quasi booms. Phony boom always ends up in a bust.

I am not sure if current market conditions in China have been exhibiting a systemic bust.

But China’s stock market and capital flows suggest that this could be happening. (commodity markets may also partly reflect this) The Shanghai index has forged a new 2 year+ low.

Hot money may also have began their exodus (chart from Danske Bank), although this has yet to be reflected on China's currency, the yuan.

Nevertheless, given today’s policy activism practiced by central banks (and backed by governments), we have to watch the PBoC's (as well as China's government) next moves and how markets will react on them.

As I have been saying a China crash is likely to surprise the global financial markets more than the events in the Eurozone, as everyone seems to have been fixated on the latter.

So we should keep constant vigil over the developments in China.