There is an unfolding story of SUPPLY and DEMAND in faraway China happening right now that centers around so many new and elegant cities that are standing nearly desolate—except for the foreign people who are “rented” as props to add an air of international life and the few pioneering Chinese citizens risking all for what they expect might be a brighter future.
Since China initiated its market reforms starting in 1978, and shifted from a centrally planned economy to a market based economy, they have truly experienced very rapid economic and social development; but it has not been without its pains, and is happening on a considerably steep learning curve.
Apparently, one of the very costly business lessons some Chinese businesspeople and government officials have elected to learn through trial and error is that of Supply and Demand for the real estate market.
As the Chinese government is not particularly well known for its openness, there are no official figures on the number of recently built empty cities in China, but experts say the scenario is present nationwide. Some of these cities, including one in the north named Ordos, being void of people and commerce have already incurred so much debt that the established local governments reportedly have to borrow money from the national government to pay city employees to maintain the buildings, utilities and empty streets.
Having embarked on the road to “the land of bustling international cities” without any prior survey or market research to speak of, new cities have been and are being constructed ahead of any existing demand, and “sometimes they are even building two to three years ahead of ‘projected’ demand”, this according to the head of research for North China at Jones Lang LaSalle*.
Regrettably, the people in charge of these vast projects had no idea of how to effectively use the notion of supply and demand as described in an article of 19 March, 1983 by L.Ron Hubbard titled EXECUTIVE SUCCESS wherein he states “The whole story of marketing is told in just a few words: ONE FINDS OR STRENGTHENS OR CREATES A DEMAND.”
Mr. Hubbard further states in this article, “ONE SUPPLIES OR DOES NOT SUPPLY A DEMAND AND GETS ADEQUATELY PAID OR DOES NOT GET PAID FOR IT.” China’s lack of adherence to the fundamentals of supply and demand has resulted in this ongoing rapid overbuilding (over-supply) that has led to the many empty towns that are nothing, if not a drain, on the few businesses, people and even the government in those areas—they are literally just towering rows of luxury apartments and office space that sit totallyvacant, particularly in some of their smaller cities.
The desolate streets negate government claims that the new developments will soon become globalized cities filled with a productive and moneymaking international populace.
In response to the self-imposed national dilemma, some of the ever-clever, but not completely ethical real estate professionals of China, in an attempt to offset the over-supply of vacant space and create a DEMAND, concocted a scheme wherein they would make it appear that their buildings were filling up with tenants (false Demand) to lure potential buyers to a “desirable area that was In Demand”. In the U.S. this would be referred to as a scam.
They are doing this by hiring companies specializing in collecting groups of foreigners whom they rent out to attend local events. The real estate sellers select people from a menu of skin colors and nationalities. They tend to select a majority of white people; some locals refer it to as “White Guy Window Dressing”, as white people are deemed to be “good for business”.
The people charged with selling the empty space believe that filling their remote buildings with foreign faces suggests that the area is “international,” a word that to them often translates into “buy.” The rented “residents and visitors” can take the roles of “high profile” musicians, models, businessmen, athletes, diplomats and some simply act as normal city residents.
For a day, a weekend, a week, up to even a month or more, Chinese companies are willing to pay high prices for the fair-faced foreigners to join them as fake employees, residents or even business partners.
In a country where civil rights or political correctness are not at the top of anyone in the government’s priority list, the requirements for these jobs are simple. 1. Be white. 2. Do not speak any Chinese, or do not speak at all, unless you are asked to speak. 3. Pretend as if you are newly arrived and just got off of an international flight yesterday.
It is unlikely, but really still unknown, at this time if such a dubious ploy will actually work over a longer stretch of time to fill the oversupply that they created. But it is noteworthy that they are aware of the concept of CREATE A DEMAND and are attempting to use it to resolve the self-imposed problem, albeit in a clear violation of ethical business practices.
In the follow up article to this one, The “How” and “To” of Supply and Demand, we will address what it actually takes to correctly Strengthen or Create a Demand in our current global and local economies so that you can get more ADEQUATELY PAID, and can avoid pitfalls–such as those aforementioned in the Chinese real estate market.
>>> Read the article: The “How” and “To” of Supply and Demand
* Jones Lang LaSalle: A professional services and investment management company specializing in real estate. The Company’s real estate services include agency leasing, capital markets, tenant representation, real estate investment banking / merchant banking, property management, corporate finance, facilities management / outsourcing, hotel advisory, project and development management / construction, energy and sustainability services, valuations, value recovery and receivership services, consulting and investment management.
1. NYTimes.com, The Opinion Pages. “Rent-a-Foreigner in China.” April 28, 2015. nytimes.com/2015/04/28/opinion/rent-a-foreigner-in-china.html?_r=0
2. Gizmodo.com. “Welcome to The World’s Largest Ghost City: Ordos, China.” By Darmon Richter for Ghost Cities. March 12, 2014. gizmodo.com/welcome-to-the-worlds-largest-ghost-city-ordos-china-1541512511
3. Xinhuanet News. “China Focus: Empty compound renews discussions about China’s “ghost cities.” English News. May 22, 2015. news.xinhuanet.com/english/2015-05/22/c_134262381.htm
4. Channel NewsAsia. “China’s property sector haunted by ghost towns.” Asia Pacific. May 19, 2015. channelnewsasia.com/news/asiapacific/china-s-property-sector/1856620.html
5. Shanghaiilist. “Gorgeous video of a Chinese ghost town turned into a skatepark.” Via Business Insider byJames Griffiths December 12, 2012. shanghaiist.com/2012/12/12/watch_gorgeous_video_of_a_chinese_g.php
6. CNN “Chinese companies ‘rent’ white foreigners” By Lara Farrar. June 29, 2010. cnn.com/2010/BUSINESS/06/29/china.rent.white.people/index.html