On the sandy plains east of Beijing, The World is in trouble. The property development was supposed to bring five continents, in the form of artificial islands, to scrubby farmland near the booming city of Tianjin.
Instead, the project, which is about three times the size of New York’s Central Park, exemplifies both the excesses and more recent sharp downturn in China’s property market.
Asia and North America’s villas and tower blocks are mostly finished, but only about 20 homes out of thousands of units are occupied. And with the developer running out of funds, construction has virtually ground to a halt, leaving Europe, Africa and South America in varying states of underdevelopment.
The World was designed to house 100,000 people, an indoor ski dome, a replica of San Francisco’s Golden Gate Bridge and a seven-star hotel. Its troubles echo those of another project that goes by the same name – an archipelago of island homes started in Dubai before the global financial crisis.
“It’s definitely not an ideal time to be in the property business,” said a receptionist in the showroom.
The property market is the single most important engine of economic growth in China, making its fate a global concern. Housing prices spiralled in the wake of the global financial crisis when the government launched a fiscal stimulus program to boost the economy.
Beijing shifted gears in 2010, turning the screw on speculators to rein in house prices and reckless investment, which officials feared could put the economy at risk. Prices have finally started to fall, and the government wants to see them decline further. However, developers warn that what has been a mild correction could turn into a rout if Beijing does not let up.
Despite this gloomy prognosis, The World is showing signs of life. After a quiet stretch, buyers have confounded expectations and started to return. One day last month, a few people were in the showroom, surveying a model of the development and talking to agents.
A middle-aged woman clutching a Louis Vuitton bag said she and her husband already owned “seven or eight homes” on the southern island of Hainan and were now trying to diversify geographically.
“We heard about this project and wanted to come see it,” said Ms. Sun, who declined to give her first name. “We’re mainly worried about buying at the right time, before the government loosens policy and prices start rising again.”
The World was not the only complex to benefit – the housing market perked up across China in February. According to local property websites, deals increased 17 per cent month-on-month in Beijing, 24 per cent in the wealthy eastern city of Hangzhou and also climbed at the end of the month in the metropolises of Shanghai, Shenzhen and Guangzhou.
The rise was partly seasonal, as there were few buyers in January when China came to a standstill for the lunar new year festival.
Yet many like Ms. Sun were also betting on something more fundamental: That Beijing would back down in its long-standing tightening campaign, allowing the housing market to soar once more. That expectation fuelled a 20 per cent jump in the shares of the country’s biggest developers such as Vanke and Evergrande last month.
But the central government has shown no sign of taking its foot off the brake. At every turn, Wen Jiabao, the premier, has reiterated that he still wants to reduce prices to more affordable levels. A few cities, desperate for revenue from land sales, have tried to loosen policy, only to be slapped back into line by Beijing.
Ni Zhengzhen, a contractor at The World with a crew of electricians and plumbers, predicted that the government would soon lose its nerve.
“Our country needs housing construction. It’s what drives the economy. They’ve got to let money back into the sector. We’re all suffering and short of cash,” he said.
Pointing to a grey-haired worker in a coat held together by clothespins, he added: “If there’s no money, he won’t get paid and will lose his job. The government doesn’t want that.”
While Beijing is worried about high property prices, it is also concerned about the potential for unrest, particularly as the Communist party prepares to change its leadership.
Mr. Ni has already cut his crew from a peak of 200 to about 20. And he has also accepted property as payment – he now owns two villas and two apartments in North America.
Investment in housing directly accounts for about 10 per cent of China’s economy. Through its indirect impact on companies from steel mills to fridge makers, it is even more important.
But the highway from The World to downtown Tianjin, a 40-kilometre stretch of new towers and construction sites, is a reminder of why the government has been so determined to cool the property market.
“The situation of housing prices continually increasing and local governments selling more and more of their land to finance their investments ... is crazy. This is destroying our economy. No economy can grow like that,” said Li Daokui, a Tsinghua University professor and an adviser to the central bank.
“If it continues, the fundamental health of the country’s economy will be in jeopardy.”