Ghost city Ordos: financial contagion, suicides, loss of trust, 50-90% economic collapse


Below is my summary, with comments, followed by the Google Translate version of the article.

The collapse of the high-interest private lending market has resulted in an economic depression in Ordos. After Spring Festival, workers did not return to the city, real estate activity has stopped and cab drivers have seen their incomes fall 50%. Restaurants that were clearing 800 yuan early in the day can now only earn 200-300 yuan. On businessman said his shop was seeing 17,000-18,000 yuan in turnover each day, now only about 300 yuan. On one of the main streets in Ordos, businesses report sales declines of 90%.

On February 21, one of the prison staff in Ordos hung himself in a storefront facing the street; it's said that he owed 100 million yuan in high interest loans. This follows the September suicide of the head of a district court in Ordos, who owed 263 million yuan. A female boss in a similar financial situation committed harakiri, but was saved by doctors.

One person said, if the loan principal continues to be withdrawn from the market, there will be many more suicides. The non-repayment of debt is like an infectious disease, it will become a social epidemic.

Interest rates in Ordos were running at about 24% for lenders (investors), 1 million renminbi could generate 240,000 yuan in interest income, equivalent to a high level white collar employee in Beijing. And this is actually a low interest rate, some of the shorter-term loans had rates of 5% per month.

The cycle of collapse is as follows: home prices stop rising, real estate activity slows, the developer can't make interest payments, the financier cannot carry on the interest payments for more than three months, the result is disaster four months later: the developer high tails it or commits suicide. I add that the government steps in and cracks down on loan sharking, sucking capital out of the system and exacerbating the collapse.

One cab driver said his father gave his 200,000 yuan life savings to his younger cousin. He was happy to earn the 2% monthly interest for 3 months, but when it stopped he could not get his money back. His car ended up requiring servicing and in the end he has earned nothing, in addition to losing his savings. To add insult to injury, cab driver earnings are now about 100 yuan per day, down half from a year ago. (This example reiterates what I've said before, in most "loan sharking" cases, what's really in play is underground credit markets. The local barber, cab driver and professional is handing savings over to a bundler who loans the money at high interest to a developer. There's no threats of leg breaking or forced loans, everyone is a voluntary and satisfied participant as long as the bubble is expanding. When it collapses, people look for scapegoats and in some cases, the bundler may have appropriated some funds for personal use, but this was completely covered by the rising bubble—shades of Enron. In any event, when the bubble bursts the real crooks and the honest lenders are all lumped together as thieves and the government targets them, freezing the private credit market and setting off a total collapse in activity.)

In sum, there's a crisis of confidence in Ordos and a loss of trust as people lose their savings in the loan sharking system. This is the natural cycle of a credit bubble: the real estate bubble fueled economic growth, which fueled wage growth. The collapse of the bubble wipes out the entire economy. Social mood is also in play: people willingly handed over their life savings based on greed, now they fear they will lose everything.

The article ends on a hopeful note for Ordos: at least there's coal underground! The bubble was fueled and underpinned in part by rapidly rising commodity prices. After the bubble bursts, there's still the base economy. Woe to the housing bubbles in areas of China with a pure bubble economy!

The collapse of the sample cities go from here?

1:00 pm on February 21, Ordos City Bureau of Justice staff Ding Hu Dongsheng District Fuyuan district outside the north gate of a street pavement room hanged to death allegedly their body saddled billion loan-sharking.

This is just the Ordos usury a total collapse of the latest footnote. By the real estate bubble burst and usury collapse of the joint effect of the Ordos economy, already into recession.

Property market is a continuous turnover of a few months bleak, a large number of private lending arrears did not return, shopping malls, hotels, entertainment city, a considerable decline Festival foreign workers who do not want to return, the taxi drivers' income has been halved, the per capita GDP is almost equal to the Mainland in Hong Kong's most The city of Ordos is a Aihong.

"Hing vigorous, and its decline also ignore the many local residents lamented the happy days how so short?" Said Erdos City party committee system of civil servants Jin Shou Yuan (a pseudonym).

The Ordos usury problem 2011 special investigations director of Guangdong Province Social Science Research and Development Center, Beijing Jiaotong University, School of Economics and Management Professor Li Youhuan Ordos is a worthy study sample, the lessons and experience is also a matter of thinking.

Life knocked down by huge debts

"I was at the door to clean up when I heard that the shop building huge sound coming from a guy an over 20-year-old child into the phone out, '" send an ambulance to save lives'. "February 29, sanitation workers Miss Zhu shop building, pointing to a close the door to the blessing word "China Times" reporter.

120 arrived, the hanged man has been killed, police and forensic subsequently confirmed suicide.

Reporters learned from the Ordos City Bureau of Justice, and hanged the council of the Department of suicide man stationed in Ordos City, the prison staff, small tiger. From the printing of the rumors that the Ding Hu bear moneylenders who dun commit suicide, toting the billions of dollars of loan-sharking debt.

In the past six months, the private lending prevalence of the Ordos due to loan suicides have taken place in several cases, especially in 2011, Wang Fu-gold, the legal representative of the mid-September-rich real estate development company, committed suicide by outside attention. Wang served as the Dongsheng District People's Court, the debt of 263 million yuan to make strong self - esteem him toward the dead end. Reporter during the interview in Dongsheng, a netizen privately informed that a female boss dun fed borrowers with a knife and ritual suicide, after being taken to hospital to save lives.

"If you continue to take back the principal, there are many people like Ding Hu, like live." Reporter for Beijing on the way, victims of female sage case of the Ordos outbreak last year, Ms. Chen call reporters, said he dun and four to escape, struggled to live.

The reporter learned from relevant sources, has been how since the outbreak by the police investigation of a major loan-sharking case, including sage female case, the case and the newspaper of white Hao Zeng Qi Youqing first reported case.

Continuous outbreak of usury major serious impact on the financial stability and social order. Because the funds are not withdrawn from circulation, on-line money to pay off the assembly line, assembly line under the natural reach of the principal and interest. Like a contagious disease, the debt not yet become a social plague.

The morning of February 29, the 10-story building located in the Juli Dongsheng District to combat illegal deposits from the public office (hereinafter referred to as the constant flow of people "fighting to do"). 5 together to come to the report of the public statements to the staff, from the start in August or September last year, that is, get the interest and want to get back the principal and was told no money yet, because the money to vote for developers, stuck in the reinforced concrete can not flow.

Playing non-office staff said that the accepted report, the Bureau arranged a three squadrons shifts. Specifically accepted the report of the number of victims, the staff refused to disclose.

The security of the building's lobby old Liu said, fighting to do its inception last summer, went to report on and off, and suddenly a large area in November. Another climax before the Spring Festival, up to more than 200 people came together.

The another lenders concentrations of the Dongsheng District Public Security Bureau of Economic Investigation Brigade. Reporter survey found that three days in a row, starting from February 27 in the second floor corridor of the Economic Investigation Team, always surrounded by some people, whispering. The year round, announced the latest situation of the police is investigating the usury case. Those who did not get back the principal lender involved, a time will go to find out news.

An approximately 60-year-old man, told reporters that the end of 2010 to lend money to Qi Youqing collar interest, who just turned three months, Qi Youqing the incident, followed by interest and principal can not get. In the days of waiting to get back the principal, the elderly every few days to come here, hoping to Good News. Like him, in Dongsheng. Is slightly Fortunately, he has been back from the police at 20% of the principal, the remaining yet to recover.

The usury destruction of happiness

In Dongsheng, the folk wisdom that "ten nine loans" usury wide, ranks first among the country.

Erdos a real estate company chairman Wang force (a pseudonym), due to the demolition of a sudden a huge sum of money, most of the balance in the room and the car is purchased inputs to usury. Over the years, Dongsheng ordinary people develop the habit to rely on the lives of high interest. Example, such as 2 minutes and monthly interest of $ 100 million, an annual income of more than 240,000 yuan, which is equivalent to two high-level white-collar income. In fact, the monthly interest rate of 2 points belonging to a lower level in the local businessmen, eager to spend money to lend to short-term usury interest of up to 5 points.

The money flows to real estate, mining and other fields. In good times, high interest rates to ease the lives of lenders. Before 2011, the Ordos property prices rose continuously, affected developers everywhere enclosure development. Kangbashi New Area, West New Area, one after another, high-rise are closely linked. It is understood that many developers of funds from loan sharks.

According to official data released by the end of October 2011, the downtown area of ​​Hubei cumulative built 235,000 housing units in the construction of 110,000 units, a total of 34.5 million units, according to the population of the central area of ​​translation, the average of 1.35 sets. When the 2011 Central commence on the property market regulation, Hubei property market feast halted.

House prices stop rising, slow-moving real estate, the boss can not pay off the assembly line on time interest, off the assembly line can not be paid to the three-wire, when this situation for four months, the disaster is inevitable, the boss is either running, or commit suicide. Debt collection surfaced that the informant, police intervention, the liquidator. Loss is a foregone conclusion.

Special investigations last year the Li Youhuan of the Ordos usury E property prices will be the rapid regression of Hainan after the second region, may also be long-term have no market price.

Funding strand breaks mean the loss of a source of income, lenders had to drive down consumer spending. Street luxury car is scarce, and the sharp drop in consumption of high-grade entertainment, people, and even suppress the basic day-to-day life in consumer spending. From Shanxi Dongsheng business 8 years Lvgang Ping told reporters a day early before the hotel opened by a few fellow can sell $ 800, now only a meager two or three hundred dollars. Last winter to buy clothes, we shot very cautious. Spring Festival this year, Dongsheng put fireworks than in previous years a lot less.

Lv Gangping in Dongsheng District of Hubei Rostock West operates a company called "East as" machinery and equipment parts store, the main sales site for construction power tools, pumps, hoses, etc.. The afternoon of February 28, at 5:30, days of micro-black Lvgang Ping is lonely standing in front of the store that day, his shop turnover of more than 300 yuan. "This business is the worst year." Lvgang Ping told reporters that the daily turnover in the first two years of business, there are seven or eight thousand, and now almost negligible.

E Rostock West Hardware Tools Dongsheng's most prestigious street. Many store owners were very poor business, turnover was only one tenth of the same period last year or even less. Business is bleak because of the real estate industry of the Great Depression, real estate owners generally money on Haipang flyover frame E City Branch Zhang Fen.

Lvgang Ping said he had a customer, responsible for the construction of eight site a few days before Lu call the inquiry, was told that all the sites the whole has not started, because the money Zhouzhuanbukai, when to start uncertain. "We only look at the real estate is up." Speaking here, Lv Gangping down. Shop building lease of more than 50 square meters, four years ago, the rent is 160 000, followed by mid-rise, this year has reached 25 million, rent and living expenses of close to 1000 yuan.

The reason why so expensive rents in Lvgang Ping seems hot about this local loan sharks. Huge demolition section of the family, through loan-sharking easily get high returns for the requirements of the rent, they are freely quoted a high price. Was rent rent rent on vacant. It is this mentality, many shops rent high.

Almost everyone to the Ordos work of people have lamented the local commodity prices. The business manager of the Shenyang Cable Plant Zhao Shijian, your dinner, renting expensive, expensive shopping , although outsiders to Dongsheng to work more lucrative, but in the face of high prices, it is difficult to take the money out Dongsheng.

Lee Marine Fish the Erdos Dalateqi people, in March 2011 and his father to gather the 200,000 yuan put to his father's cousin, monthly interest rate of 2 points, the money was the latter third of five to put to the developers. Happy to eat interest "time lasted only three months, after which the principal and interest are to get. Under the pressure of life, in July, went to Dongsheng contracted a taxi every day to pay 200 to the owners did not expect the second half of the business started well and spent ten thousand dollars, plus repair to not make any money. 200 000 All of our savings, money back feeling sweeping changes, and I feel very bad, the car did not mind. "He said.

The reporter of their income to at least five taxi drivers, their answer is exactly the same: the daily net income of only 100 yuan up and down, compared to last year, dropped by about half, because the foreign sparsely populated.

Money is trapped real estate

Previously involved in real estate development, and retreat when the financial crisis in 2008, Wang Dudley believes that the current economic crisis in the Ordos not open around the proliferation of loan sharks and the lack of planned real estate development. "For developers, private lenders, this lesson is very deep." He said.

Wang Dudley said she was more cautious and frankly did not make a lot of money. But he also thankful that, although there is no retreat in the climax, but at least not to be buried by the waves. Wang up to force a look of excitement when talking about the passion for years I missed that part of the real estate. The country launched a 4 trillion of fixed-asset investment initiatives, injected great vitality to the real estate, huge assets, such as the Tigers came out into the real estate, steel, cement, artificial prices are rising, but also to promote the soaring prices. In order to increase the value of the residents to buy a house real estate, some rich people, a shot is good sets, developers cover how much you can sell, the entire Ordos everyone usury, every household real estate.

Wanda force in local, then the collapse fire summarizes the status of all participants. "In 2010, the 2011 land prices have been high, involving the demolition of the land cost approaching a million per square meter. You think about it, the prices will be lower? As far as I know, some of the higher cost of real estate, in the face the current status quo, but to continue to postpone the opening because there is no one to buy. "he said.

The reporter visited two of the Tiexi District here Rongcheng, jungle King, Kam Tai Washington, Wan are Pearl Metro everywhere, and some have been completed, some still under construction. However, two of the West New Area as a whole is sparsely populated, the sales office is deserted.

Wang Dudley said the Ordos real estate in a few years ago rushed to engage in development, large tracts of land for a night propped up a lot of scaffolding. When they meet the national macro-control to tighten the money supply, all the previous investment count them out to freeze. Frightening is that the funds of these developers, most of them from usury.

Dongsheng, real estate and loan sharks are a pair of twin brothers. Hing real estate because of usury, and therefore bad. Usury major exposure, almost all as a reminder.

House prices have soared, to use loan sharks can accept, prices rose not move, usury poison. "Wang Dudley said, this is the consensus of many bosses.

City-wide credit crisis

The usury sequestration small tiger hanging suicide news caused great repercussions in the Ordos did not, people seem to have become numb to such news. To end their lives as avoiding the debt, get more sympathy. Deliberately avoiding the debt, easily aroused public outrage.

Erdos is experiencing a human crisis of confidence caused by usury. Came from usury major local stop paying interest and not even the principal case was the high momentum.

February 27, the reporter three days in a row in the Dongsheng District Public Security Bureau of Economic Investigation Brigade survey encountered a number to the report of the public. One named Zhang Fugui the person lending, he lent 177 million yuan has been owed for a long time, lenders homes flight home, missing. For the behavior of this malicious Avoiding the Debt, Economic Investigation Team to non-intervention in the grounds of specific economic activities, it is recommended by the proceedings to resolve this borrowing disputes.

Zhang Fugui said he lent money on-line from the relatives and friends in the on-line malicious to hide debt, he was forced to possessions account. "Actually, I can learn them, and hide debt not yet, but I think it is a disgrace." Zhang said, to pay off debts, the wife of the Spring Festival to sell fireworks, and their hard work, and slowly accumulate money.

Sage female case of a victim statement to reporters, she began in January 2011 lending to the sage woman, initially fifty thousand one hundred thousand to the other party may still pay interest on time. Since then, the sage female shares of coal need of working capital on the grounds, a large number of surrounding relatives to borrow money, she also believes that the Soviet Union with good credit turned to the financing of his surrounding friends. Ultimately to the sage of female crime, she lent a total principal amount of 1200 million. Promises to repay the relatives and friends borrowers without the victim had to be hard hard work of nearly 400 square meters of housing built more than a decade to sell repossessed.

Wang Dudley said the funding strand breaks in addition to the on foot this situation, real estate developers, there are two ways to cope with the lenders, a jointly developed by the sale of real estate, paying back the principal after they are sold by the lender; another is directly to the room to the lender, you serve lenders.

Most lenders held in contempt by the malicious to raise prices, forcing lenders to accept bonded. For example, a value of $ 300,000 Toyota Motor , the price of $ 600,000 or more lenders for fear of not drive away may fail to get a penny, only哑巴吃黄连.

Usury collapse may only be short-term impact on the local economy, but its crisis of confidence caused by long-standing and non-governmental economic activities have a negative impact. Wang Dudley, in Dongsheng, now want to be very difficult to borrow money, everyone will be worried about lending money never being paid, the money did not return, malicious default of the phenomenon is too common. Rely on the private capital of private enterprises, their financing difficulty will be more prominent.

The crisis of confidence has caused the official great importance, Dongsheng District Public Security Bureau to the country's first fight against money does not pay off their debts and malicious to avoid debt, high-priced top arrived in the debt of the special action is considered to save the credit, and maintain financial order of the experiments. In February, the council two malicious parties to the debt of low-value items at high prices top Detention "forced trading case.

31-year-old Dongsheng Area real estate corporate white one illegal deposits from the public more than 6,000 million, after deliberately insolvent grounds, a value of 398 million Bentley car forced to creditors top price of 580 million bonds; Yan a to the people on the grounds that borrowing to invest in real estate and corporate turnover, Yan will bottle worth 188 yuan Wuliangye [ 35.14 0.40% share it reported ] kingly Viscount 52 liquor to 400 or 438 yuan value to the lender a compensation for the debt, a total of more than 2,000 pieces.

Deposits from the public for those who commit suicide can be considered to be a good face, or reputation and worthy of respect than those deadbeat cheap material premium bonded even money and malicious. "Dongsheng District Public Security Bureau, a department official said.

The only hope

An interview with reporters, said Li Youhuan Erdos private financial risk control is very difficult. Area guarantee agencies and small loan companies are in the difficult period of suffering, they generally expect the Government to come forward to coordinate a variety of triangular relationship and come forward to guarantee in order to enhance market confidence, or more support for the introduction of civil monetary easing policy to further promote civil financial prosperity, but Li Youhuan believe that this expectation is not practical.

During the interview in Ordos, a civil servant, told reporters that the civil service district two projects originally scheduled for completion in 2011 is still in shutdown state, keen to raise funds to build meaning of the project when completion is unknown. In accordance with the policy, public officials can enjoy subsidized housing, the market price is about 8000 yuan per square meter house, the price of 4120 yuan direct marketing to public officials.

Is widely circulated argument is affected by the macroeconomic policy of the State, local governments are unable to adjust to sufficient funds to support the second phase of construction of more than 20,000 sets of civil service district, a well-known construction companies currently in arrears of debt is as high as several billion dollars .

A civil servant to remind reporters concerned about a special group: the old city house mortgage loan and then invest in the people of the usury, starting from the end of the crisis. As the borrowers stop paying interest, relying on the interest operation of bank lending and home buyers for the month of public officers know what to do.

Builders, who declined to be named, complained to the "China Times" reporter in 2007, he assumed a flag Development Zone in infrastructure projects, the contract amounted to 90 million yuan, the project completion has been four years, the government still owed him 50 million element engineering models. "Every time I go to the government, they say there is no money." He cried, those lenders every day chasing him for money before the Spring Festival, or even making instant noodles to live in their homes.

Career has already taken the cheeky worries Inner Mongolia Wang Dudley talked about the trend of the Erdos economic future. He said West New Area, a population of only 600,000 Dongsheng, the main population with government departments, the school moved to Kangbashi, not much can be diverted to the West New Area Human Resources. The Government hopes that the filling of the foreign population, but current observations, it seems quite difficult.

Wang Dudley said, real estate prices are high, the high consumption of Ordos in the face of the foreign population and build a high threshold. Not imagine a wage earners, how to afford such expensive house, how to integrate into the city. Correspondingly, Kangbashi, Dongsheng two urban areas of high housing prices, further widening the distance between urban and pastoral herders into the city summoned shall be bound to only a handful.

Wanda force by the end of February to participate in the municipal government organization meeting of the equipment manufacturing base, obviously feeling of a past full of passion, the boss has a lot of calm. "The Government is now very headache, want to do is not good to dry, because the bosses do not have money." He said.

The only Ordos people fortunate, even if everything collapsed, at least under the soles of their feet, sixth, accounting for reserves of black gold - coal!

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