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China's Building Boom In Los Angeles

The Chinese building boom transformed the skylines of Beijing and Shanghai.

Now it is happening in Los Angeles. Witness the recent report in the "Los Angeles Times" about the unprecedented investment in high-priced real estate in Los Angeles.

Chinese developers are moving into Los Angeles on an unprecendented scale. These are megaprojects and they will change the landscape of downtown Los Angeles.

Many of the residential units are expected to sell to Chinese who want to invest in the perceived safety of overseas real estate, partly because they are worried about the slowing of the Chinese economy.

According to the report written by David Pierson, “The building boom is something of a showcase for Chinese real estate companies, which are willing to pay a premium to establish themselves as global brands.”



The Chinese economy is slowly moving from an export-driven model to a new model. That is the model where China has overseas investments and has become a player on the world stage, like the U. S. China is expanding its business interests into Africa, Latin America and even the United States.

According to Pierson, “After a boom period that saw property values skyrocket, China’s real estate market has quieted down. Deep-pocketed investors, having exhausted Beijing and Shanghai, looked to foreign markets like Vancouver, Canada; Sydney, Australia; and the San Gabriel Valley to park their cash (some in the belief China’s economic miracle was due for a reckoning).

“The Chinese projects are huge by our standards, but not so huge by Chinese standards. The speed with which the Chinese move in these projects is much faster than what is usually done in the United States."

This is one of the reasons the Chinese leadership sings the praises of what is called “authoritarian capitalism.”

This is another word for Market Stalinism. The Chinese model of capitalism driven by the state was heavily endorsed by Lee Kwan Yew, the president of Singapore. He believed in the Strong Man model of governance that kept as its top value social stability. This model, said Lee, was better for Asian societies, as opposed to the Free Market and Liberal Democratic forces as in the West.

Does this model work? Is this theory valid? After all, Singapore is a mere city-state and China is a vast country with a huge population. Does the model work when the scale is so radically changed? The opportunities for corruption are vast. History shows that the model exposes cracks in the Chinese system. See my upcoming book "The Lamborghini and the Lao Gai" for a discussion of the so-called Asian model of capitalism.

The Chinese system is in the robber baron phase of economic development. Even with decision-making concentrated at the top, the system has been responsible for corruption. In fact, corruption makes an appearance at the local level of Chinese politics, where more liberalization has occurred.

The evidence of this are the hundreds of thousands of protests all over China, including at the local level. The state cannot survive corruption at the local level. More than one Chinese dynasty, during the imperial period, was brought down by a peasant rebellion nurtured by local grievances. This is a pattern as old as Chinese history.

This is why the current president of China, Xi Jinping, has embarked upon a massive anti-corruption campaign. The system cannot maintain its legitimacy if the party elite are stealing.

According to the "Los Angeles Times" piece, a deputy mayor in charge of economic development, head of the Los Angeles Department of Building and Safety, threw the book at one of the developers.

Now regulators and developers are working to insure that the Chinese building projects conform to safety standards. Los Angeles is on an active earthquake axis. These buildings are to be skyscrapers.

Why is this happening now? Corruption in Chinese building practices has resulted in a number of high profile catastrophes, such as the landslide in Shenzen in December of 2015 in which buildings collapsing and killing people. Of particular relevance was the Sichuan earthquake of 2008 in which poorly constructed schools collapsed killing thousands of children. This was the original impetus for the more outspoken protests of the Chinese artist Ai Weiwei, who has mounted an international art project using hundreds of bookbags, to commemorate the lives of the children lost.

Good for the city of Los Angeles for insisting that Chinese real estate companies and constructions companies play by the rules when playing on American soil. Authoritarian capitalism meets the rule of law.

http://www.latimes.com/business/la-fi-0825-china-dtla-snap-story.html

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