China’s Economic Surge Has Roots Before Deng, Book Finds

The official position of the Chinese Communist Party is that the answer is easy: Mao Zedong. But as evidence has accumulated in recent years about the extent of the killings, torture and chronic economic mismanagement through much of Mao’s rule, academic assessments outside China and sometimes even inside have been increasingly damning about Mao’s legacy.

That has produced a search for who should be given the credit for China’s re-emergence as an economic juggernaut with growing military and political heft. Jung Chang, the author of one of the most scathing biographies of Mao, as well as the best-seller “Wild Swans,” has suggested an alternative in a new book: Cixi, the empress dowager who for practical purposes was the ruler of China for most of the years from 1861 until her death in 1908.

Using extensive access to imperial court archives in Beijing that have not been available to biographers outside China, Ms. Chang presents her subject as neither the cruel despot nor the easily manipulated ruler whom the Communist Party and other critics have long portrayed. Her book, “Empress Dowager Cixi: The Concubine Who Launched Modern China,” presents Cixi (pronounced tsuh-shee) as a powerful, strong-willed woman responsible for most of the modernizing programs undertaken during her rule, only to be thwarted on many occasions by men who were sometimes in the pay of foreign powers.

Ms. Chang gives Cixi credit for building China’s first rail artery from Beijing to Wuhan, although she initially opposed it, as well as for strenuously resisting Japan and other foreign powers, protecting freedom of the press and even seeking in her last days to give millions of Chinese men the right to vote.

Some historians have criticized the book as painting too rosy a picture of its subject.

John Delury, an assistant professor of Chinese studies at Yonsei University in Seoul, South Korea, who specializes in the Qing dynasty, said that, with most of the chapters ending with strong praise of Cixi, he was concerned about whether the archival material had been objectively assessed. “As a reader, you don’t know what to trust, because everything is the best possible” interpretation of her actions, he said. “Really what we need is a post-revisionist biography that is very scholarly and very careful.”

Speaking in Hong Kong last week, Ms. Chang defended her work as fair while acknowledging that she “did develop sympathy” for Cixi.

“I documented every single one of Cixi’s killings, some of which have not even been put out by the official propaganda,” she said. “What I did was to provide the context and why Cixi did it.”

Ms. Chang said: “It is a biographer’s job to enter the head of your subject. I mean that is my job — I felt I entered Mao’s head, and I felt I entered Cixi’s head.”

A few other authors have also begun offering somewhat favorable interpretations of Cixi, notably Sterling Seagrave in his 1992 book, “Dragon Lady: The Life and Legend of the Last Empress of China.” Chinese historians, too, have offered more sympathetic interpretations of Cixi and other Qing court figures who resisted more radical calls for change in the late 19th century. But Ms. Chang said the Beijing archival material to which she unexpectedly gained access after the international success of her biography of Mao showed that Cixi had played an even more central role and been even more important to modernization than previously believed.

Although Ms. Chang’s books are banned in mainland China, Ms. Chang said the government had continued to let her travel to China each year to visit her aged mother, but with restrictions.

“I’ve made a commitment not to speak at public gatherings, not to talk to the press and not even to see my friends — I just restrict my visits to my mother and very close, old friends who have nothing to do with politics,” as well as a few Chinese scholars, she said. “I just hope that I can still go back to China and see my mother.”

China’s Richest Man to Build $8 Billion Film Park

Property developer Wang Jianlin, 58, founder of Dalian Wanda Group, was surrounded by Hollywood stars John Travolta, Nicole Kidman and Catherine Zeta-Jones on Sunday as he launched his most ambitious project yet in the picturesque coastal city of Qingdao.

When completed in 2017, the Oriental Movie Metropolis will boast 20 sound stages, including the world's first underwater studio, a massive convention and exhibition complex, a sprawling shopping mall with an indoor amusement park and seven resort hotels.

The project also will include a yacht club with 300 berths.

"The Oriental Movie Metropolis is a major step in China's strategy to become a global cultural powerhouse," Wang said.

It was not only crucial to the development of Wanda's entertainment business, he added, but also an important step for building China's cultural brand.

For Wang, who was named by Forbes as China's richest man with personal wealth of $14 billion, the Qingdao project also represents the latest move by Wanda Group to parlay its real estate and shopping mall development into a leisure and entertainment empire.

Wanda Group, which is privately held, has invested in 72 Wanda Plazas across China, along with 40 five-star hotels. The company also owns 6,000 movie screens, 62 department stores and 68 karaoke centers.

More recently, the company has turned to offshore markets to expand its real estate and leisure investment. Last year, Wanda closed its $2.6 billion buy-out of U.S. cinema chain AMC Entertainment. Wang this year also announced a 1 billion pound ($1.57 billion) British investment that included the purchase of Sunseeker, Britain's largest luxury yacht maker by sales.

The Wanda chairman told Reuters earlier this month that he could afford to spend as much as $5 billion every year to buy foreign firms or assets.

In an interview on the sidelines of Sunday's ceremony, Wang said that he expected Wanda Group revenue to increase to $30 billion this year, and to continue to increase by $10 billion every year.

Wanda Group says it has total assets of 300 billion yuan ($49.01 billion) and annual revenue for 2012 of 141.7 billion yuan ($23.15 billion).

"We will have more than $50 billion in revenue two years from now," he said. "In 2020, we will have at least $100 billion, even by conservative estimates."

Offshore hotel investment is a major focus of the company's strategy. "In the next eight to ten years, we will build high-end hotels in major cities around the world," he said.

To reach the site of Oriental Movie Metropolis, which is planned as a 376-hectare, eight-phase development, it's necessary to drive about one hour from downtown Qingdao past rows of upscale apartment complexes that appear partially occupied.

Wang, who started his own film production company in recent months that has met with mixed success, explained that movies were a "sunrise industry" in China. He expects Wanda to be among the world's leading 20 entertainment companies by 2016.

He declined to discuss financing for the new project, although he has not ruled out the use of partners or of debt.

($1 = 6.12 yuan)

(Reporting By Jane Lanhee Lee in Qingdao and Matthew Miller in Beijing; Editing by Nick Macfie)

DealBook: JPMorgan Hiring Put China’s Elite on an Easy Track

Mine Deal Puts New Scrutiny on China’s State Industries

The Zhongshe mine and two others, in Shanxi Province in northern China, are at the center of unusually public accusations of mismanagement and corruption afflicting one of the nation’s flagship state conglomerates, China Resources. Critics say that the $1.6 billion purchase was vastly overpriced and illegal and that large sums may have been squandered or, as some are claiming, improperly diverted.

Leaked documents about the deal, and a court case in Hong Kong, have shed an unusually harsh light on the usually secretive workings of a major state-owned company. The disputed deal raises a stark question: Are China’s economy and resources held hostage by privileged state corporations and their executives, who can use influence and gain access to easy credit in ways that undermine long-term growth?

The dispute has become a chief exhibit in a debate in China about the wisdom of investing so much of the nation’s money in state-owned companies, especially when China’s economy has slowed. For the Communist Party leadership, the case distills concerns about the grip that state-owned conglomerates exert.

The problems for China Resources began in 2010, when its affiliates as well as a partner state company agreed to pay 9.9 billion renminbi ($1.6 billion) for the three coal mines and related assets, according to documents submitted to a Hong Kong court. The seller was a businessman, Zhang Xinming, a man with a reputation as a swashbuckling gambler, who also gained a 20 percent stake in the new joint venture.

The deal appeared to give China Resources a foothold in the coal industry here in Shanxi, the hub of China’s coal industry for more than a century and close to the energy-hungry cities and factories on the coast. But the company’s monthly business operations statements show that since the mines changed hands in 2010, the mines have not produced any coal.

“Legally speaking, this was a totally abnormal transaction,” said Chen Ruojian, a lawyer with the Duan & Duan law firm in Beijing. Mr. Chen is helping to represent the minority shareholders in Hong Kong, where the subsidiary behind the deal, China Resources Power Holdings, is listed on the stock exchange.

“It’s impossible to understand why they’d do this — pay so much for mines with expired exploration licenses,” he said. “State-owned companies have all sorts of problems, but we think it’s rare to have something as stark as China Resources.”

Political unease over the case grew after two Chinese journalists made accusations of corruption about the deal, and one singled out Song Lin, the chairman of the parent conglomerate, China Resources.

The Web site of People’s Daily, the Communist Party’s newspaper, has reported that the party’s discipline unit has received an accusation of corruption against Mr. Song and other senior executives at China Resources and is processing the complaint. Mr. Song has not been detained or charged with any wrongdoing, judging from the reports on the company’s Web site of his various public appearances. China Resources has denied wrongdoing and has hinted it might take legal action against Chinese journalists who have raised corruption accusations.

China Resources “is a major global player,” said David Zweig, a specialist in Chinese natural resource companies at the Hong Kong University of Science and Technology. If the claims about the coal mines are proved true, he added, “it would show that these companies can be ripped off or tricked. It doesn’t bode well for the globalization or professionalization of these companies.”

China Resources traces its roots to the days of Mao Zedong’s revolution, when it was established in 1938 in Hong Kong to raise money and buy military supplies to support Communist forces.

By 2012 it was China’s 18th-largest state-owned industrial company by sales, with revenue of $52 billion. Its wide-ranging products include medicine and beer, coal and real estate. Its chairman, Mr. Song, holds the same government rank as a vice minister.

The controversy over the coal deal has made China Resources a lightning rod for criticism of all state-owned enterprises, which produce about two-fifths of the nation’s economic output.

Keith Bradsher reported from Zhongshe, China, and Chris Buckley from Hong Kong.

China’s Trade Data Is Significantly Weaker Than Forecast

Is it worth it for state college graduates to repay a portion of their future incomes to the state if they get to attend college for free?

Consolidation among publishers carries costs you won’t find on a price sticker.

China’s Trade Data Is Significantly Weaker Than Forecast

Is it worth it for state college graduates to repay a portion of their future incomes to the state if they get to attend college for free?

Consolidation among publishers carries costs you won’t find on a price sticker.

China’s Credit Squeeze Relaxes as Interest Rates Drop

China’s central government made no official announcement on the situation, and it remained unclear whether policy makers had intervened, but short-term interest rates fell sharply Friday from the day before, when they had reached some of the highest levels in a decade.

Still, rates for Chinese institutions seeking interbank financing on Friday were substantially higher than they had been a few weeks ago.

Financial experts said they expected the higher interest rates to persist for some time because the Chinese government appeared to have abandoned its longstanding policy of responding to any hint of an economic slowdown by expanding credit. Analysts say the government is holding back because it is determined to rein in excess credit expansion and avert a financial crisis that could result from years of poor lending practices and overinvestment. There are also hints that a huge shadow banking operation in China could be masking more serious financial risk-taking.

“The government at the moment wants to signal, we’re working on reform; we’re not interested in short-term stimulus, like China did in the past,” said Louis Kuijs, the chief China economist at the Royal Bank of Scotland.

The government’s reluctance to increase bank liquidity is troubling investors because of concerns that China’s economy is weakening much faster than expected.

Economists in China cut their growth forecasts sharply in the last week, though projections remain robust at 7 percent. Prices of Chinese shares plunged on the Shanghai and Shenzhen stock markets, ending one of the worst weeks in four years.

Joe Zhang, a longtime banker and the author of “Inside China’s Shadow Banking: The Next Subprime Crisis?,” said the apparent decision by the central bank to discipline banks by allowing rates to rise this past week was necessary.

“Effectively, they’re telling commercial banks to go and sort out their problems,” Mr. Zhang said by telephone on Friday. “The banks have lent out too much money. And what happens over time? You go from prime to subprime to silly loans. This is what happened with the U.S. subprime crisis. Banks start lending to bad projects. We’ve been too reckless.”

Determined to shore up defenses in a financial system that now underlies the world’s second-largest economy after the United States, China’s top leaders are slowing the flow of the fuel that has helped foster many of the risks: credit from state-run banks.

For much of the last decade, when the economy has slowed, Beijing has pressed state-owned banks to lend more aggressively.

But when interbank lending tightened this month — after aggressive lending early in the year — the central bank refrained from adding liquidity to the market, which would have kept short-term interest rates low.

As credit markets began to freeze up and mistrust among banks spread, rumors circulated of defaults. Late Thursday, the Bank of China, one of the country’s biggest lenders, was forced to issue a statement on its Web site denying local news reports that it had defaulted on interbank payments.

By late Friday, the markets had settled somewhat. The overnight lending rate between banks had dropped to 8.49 percent, down from a record-high fixing of 13.44 percent on Thursday, but still much higher than last month’s levels of less than 4 percent.

The situation remains volatile. Another benchmark rate for bank-to-bank borrowing costs, the seven-day repurchase rate, opened Friday at 8.1 percent, briefly soared as high as 25 percent and closed at 5.5 percent.

“Persistent tight liquidity conditions in China’s financial sector could constrain the ability of some banks to meet upcoming obligations on maturing wealth management products on a timely basis,” the credit ratings agency Fitch Ratings said in a report. Wealth management products are instruments sold to investors through banks and trust funds but do not appear on the financial companies’ balance sheets.

Referring to wealth management products, Fitch went on: “Issuance of new products, and borrowing from the interbank market, are among the most common sources of repayment for maturing W.M.P.’s, and the recent interbank liquidity shortage complicates both.”

Neil Gough contributed reporting from Hong Kong.

China’s Export Growth Slows Amid Concern of Slowdown

HONG KONG — Chinese exports showed only modest growth in May, rising just 1 percent from a year earlier, officials said Saturday, an increase that was much lower than analysts’ expectations.

In April, the increase was 14.7 percent, a figure that was believed to have been artificially inflated. Before Saturday’s figure came out, analysts expected Chinese exports to have risen at least 7 percent in May.

Concern is rising about the sputtering Chinese economy and tightening liquidity. The European Union, China’s biggest trading partner, remains mired in a stubborn economic downturn, while in the United States, China’s next-largest export market, the Federal Reserve has recently been sending signals it may start curtailing its stimulative monetary policies.

China’s figures showed it had a trade surplus of $20.4 billion in May, up from $19.3 billion, as imports declined 0.3 percent, the Customs Administration said. The drop in imports — however slight — was a possible sign of weakness in the domestic economy.

Chinese stocks declined last week, their first weekly decline in six weeks, amid signs of tightening liquidity within China. A clearer picture of the Chinese economy is expected Sunday, when the government releases data on retail sales, industrial output and inflation.

Economists had expected the May figures to show a slowdown, as the government has begun a campaign to prevent companies from overstating their exports. Many businesses are believed to have done so in March and April as a way to bypass currency controls and bring more money into the country to speculate on further appreciation of China’s renminbi.

The main evidence for such strategies lay in official statistics showing soaring exports to Hong Kong and bonded export zones on the mainland even as exports to the rest of the world from these places remained weak.

Louis Kuijs, an economist in the Hong Kong office of the Royal Bank of Scotland, had estimated in May that more than half of the officially reported growth of 14.7 percent in April from a year earlier was the result of companies’ manipulating their statistics to place bets on the Chinese currency. The true rate of export growth in April, without the effects of these strategies, was more like 5.7 percent.

The sharp slowdown in export growth in May “in part reflects the impact of a clampdown by the government on firms dressing up financial inflows as exports,” Mr. Kuijs said in an e-mail on Saturday.

Chinese customs data compiled by CEIC Data in Hong Kong showed that the mainland’s exports to Hong Kong were up only 7.7 percent in May from a year earlier. In April, they had been up 57.2 percent from the same month last year, and in March they had been up 92.9 percent.

Changing expectations about China’s currency — fewer businesspeople now expect further appreciation — may have also reduced the incentive for companies to overstate exports, Mr. Kuijs said.

Opinion: China’s Economic Empire

HONG KONG — THE combination of a strong, rising China and economic stagnation in Europe and America is making the West increasingly uncomfortable. While China is not taking over the world militarily, it seems to be steadily taking it over commercially. In just the past week, Chinese companies and investors have sought to buy two iconic Western companies, Smithfield Foods, the American pork producer, and Club Med, the French resort company.

A heavy load carrier moored at the terminal of the Chinese shipping company Cosco, carrying five cranes for the expansion of the terminal in Piraeus, Greece.

Europeans and Americans tend to fret over Beijing’s assertiveness in the South China Sea, its territorial disputes with Japan, and cyberattacks on Western firms, but all of this is much less important than a phenomenon that is less visible but more disturbing: the aggressive worldwide push of Chinese state capitalism.

By buying companies, exploiting natural resources, building infrastructure and giving loans all over the world, China is pursuing a soft but unstoppable form of economic domination. Beijing’s essentially unlimited financial resources allow the country to be a game-changing force in both the developed and developing world, one that threatens to obliterate the competitive edge of Western firms, kill jobs in Europe and America and blunt criticism of human rights abuses in China.

Ultimately, thanks to the deposits of over a billion Chinese savers, China Inc. has been able to acquire strategic assets worldwide. This is possible because those deposits are financially repressed — savers receive negative returns because of interest rates below the inflation rate and strict capital controls that prevent savers from investing their money in more profitable investments abroad. Consequently, the Chinese government now controls oil and gas pipelines from Turkmenistan to China and from South Sudan to the Red Sea.

Another pipeline, from the Indian Ocean to the Chinese city of Kunming, running through Myanmar, is scheduled to be completed soon, and yet another, from Siberia to northern China, has already been built. China has also invested heavily in building infrastructure, undertaking huge hydroelectric projects like the Merowe Dam on the Nile in Sudan — the biggest Chinese engineering project in Africa — and Ecuador’s $2.3 billion Coca Codo Sinclair Dam. And China is currently involved in the building of more than 200 other dams across the planet, according to International Rivers, a nonprofit environmental organization.

China has become the world’s leading exporter; it also surpassed the United States as the world’s biggest trading nation in 2012. In the span of just a few years, China has become the leading trading partner of countries like Australia, Brazil and Chile as it seeks resources like iron ore, soybeans and copper. Lower tariffs and China’s booming economy explain this exponential growth. By buying mainly natural resources and food, China is ensuring that two of the country’s economic engines — urbanization and the export sector — are securely supplied with the needed resources.

In Europe and North America, China’s arrival on the scene has been more recent but the figures clearly show a growing trend: annual investment from China to the European Union grew from less than $1 billion annually before 2008 to more than $10 billion in the past two years. And in the United States, investment surged from less than $1 billion in 2008 to a record high of $6.7 billion in 2012, according to the Rhodium Group, an economic research firm. Last year, Europe was the destination for 33 percent of China’s foreign direct investment.

Government support, through hidden subsidies and cheap financing, gives Chinese state-owned firms a major advantage over competitors. Since 2008, the West’s economic downturn has allowed them to gain broad access to Western markets to hunt for technology, know-how and deals that weren’t previously available to them. Western assets that weren’t on sale in the past now are, and Chinese investments have provided desperately needed liquidity.

This trend will only increase in the future, as China’s foreign direct investment skyrockets in the coming years. It is projected to reach as much as $1 trillion to $2 trillion by 2020, according to the Rhodium Group. This means that Chinese state-owned companies that enjoy a monopolistic position at home can now pursue ambitious international expansions and compete with global corporate giants. The unfairness of this situation is clearest in the steel and solar- panel industries, where China has gone from a net importer to the world’s largest producer and exporter in only a few years. It has been able to flood the market with products well below market price — and consequently destroy industries and employment in the West and elsewhere.

THIS is the real threat to the United States and other countries. However, most Western governments don’t seem to be addressing China’s state-driven expansionism as an immediate priority.

On the contrary, European governments dealing with their own economic crises see China as a country that can help, either by buying sovereign debt or going ahead with investments in their countries that will create jobs.

After a Strong Recovery, China’s Economy Unexpectedly Stumbles Again

HONG KONG — Brightly hued men’s underwear in a rainbow of colors is no longer selling well in Europe for the Zhongtian Garments Company in Xiamen, China. Exports are down 30 percent in the last year.

Children’s guitars with bodies resembling cats and cartoon characters are losing their charm for Yuesen Musical Instrument Factory in Huainan, China. And at the Yuzhongniao Outdoor Products Company in Jinjiang, domestic sales and exports alike are declining this year. The Canton Fair, China’s biggest export event, ended on Sunday with few new orders. “We are not even getting many people browsing this time,” said Alice Hong, Yuzhongniao’s sales manager.

After a powerful recovery through the autumn and winter from a V-shaped downturn last summer, China’s economy is unexpectedly faltering once again. Exports are weak. The country’s domestic economy is still growing mostly because of huge increases in lending by state-controlled banks and a surge in off-balance sheet lending. Consumer spending is rising, but not fast enough to offset weakness in other sectors.

That combination has prompted growing concerns among economists and business executives about the sustainability of even 7.5 percent growth in China in the coming years, the government’s current goal after three decades of double-digit growth with only a few interruptions.

The latest sign of trouble came on Wednesday, when China’s General Administration of Customs announced export and import figures for April. On the surface, they looked fairly respectable: exports were up 14.7 percent from a year earlier, and imports were up 16.8 percent.

But April 2012 was an exceptionally bad month for Chinese exports and imports — indeed, dismal trade statistics for that month were the first sign that economic weakness during the preceding winter was turning into a precipitous decline.

This April’s trade figures appeared even weaker when economists looked closer and found that the export growth had been largely propelled by growth in exports to Hong Kong, up 57 percent, and to special customs zones in China for export later, up even faster.

Since Hong Kong’s own data has not been showing large increases in imports from China so far this year, the Chinese government has already opened an investigation into whether exporters are overinvoicing for shipments. Overstating exports can allow companies to evade currency controls and move money into China to profit from the gradual appreciation of the renminbi against the dollar.

Louis Kuijs, an economist in the Hong Kong office of the Royal Bank of Scotland, estimated that with the exclusion of overinvoicing, export growth came to only 5.7 percent.

Over the last few years, economists have tended to pay less attention to China’s exports because they were declining as a share of the country’s total economic output, because of weak overseas demand. But newer research suggests that China may still be dependent on exports.

The reason is that multinationals have been rapidly localizing their purchases of various items like computer chips and auto parts in China instead of importing them from other Asian neighbors. So while total exports may not have been rising quickly in recent years in China, the Chinese content in each dollar of exports has been increasing.

Mr. Kuijs estimated that 20.7 percent of China’s economic output came from exports last year, a figure that had bottomed out in 2009 at 19.7 percent.

In a bad sign for exports in the months ahead, the Canton Fair announced this week that export orders placed at this year’s spring session had fallen 1.4 percent from a year ago. It was the latest sign that steeply rising blue-collar wages in China and a gradually appreciating currency are starting to erode the country’s international competitiveness; foreign investment in China has also begun to level off, while surging in lower-wage countries in the region, like Cambodia and Vietnam.

Li Yong, the general manager at Yuesen Musical, said that many Japanese, Taiwanese and Korean companies in his industry had recently moved to Indonesia as costs climbed in China.

Hilda Wang contributed reporting.

DealBook: China’s Push to Cool Down Housing Raises Questions

Kim Kyung-Hoon/ReutersA man looks around a miniature of new apartment complex at a showroom in Beijing.

Chinese shares fell the most in two years on Monday as the Shanghai stock exchange’s property index tumbled 9.25 percent. Late on Friday, China’s State Council had announced a new set of policies designed to cool down the housing market.

Economic data released in the last few days has called into question the strength of China’s recovery. It may be that Beijing is so confident in the health of the economy that it can afford to squeeze the real estate sector harder. Or it may be that the government is so concerned about the social implications of a resurgent property market and the effect that real estate may have on the effort to rebalance the economy toward consumption from investment, that it is willing to take that risk.

The new rules include a 20 percent tax on gains from a sale, higher down payments and mortgage rates, and requirements that cities set annual price easing targets. The announcement was met with both skepticism and criticism.

This latest round of real estate controls is the ninth in the last 10 years, yet prices have increased markedly, and some on the Internet questioned the legality of levying taxes through administrative means and called for much more transparency and accountability in how the government might spend the proceeds.

Clearly investors are spooked, though as Yao Wei, chief economist at Societe Generale CIB wrote, according to Reuters:

“The actual impact of the new policy can be very severe or not severe at all, depending on implementation. But the wording is unexpectedly harsh. … In three months time, the impact may not be big at all. But it has stirred very high negative expectations.”

The announcement on Friday spurred a surge in existing home transactions. Some analysts, and most of the people with whom I have spoken, expect the tax to have the perverse effect of driving up the price of existing homes, as buyers will have to cover most of the tax, and pushing more of the sale into a side contract to hide both the true price and gains from the government.

The real estate market in China is already quite distorted, and these repeated rounds of repressive policies may be just layering on more distortions. But the changes required for a more rational housing market are so difficult that in the near term it is easier to try to manage through administrative fiat.

Christian Hartmann/ReutersZhang Xin, chief executive of Soho China.

In a bit of good timing for CBS, this week’s “60 Minutes” had two segments on Chinese real estate. The first was an interview with the billionaire developer Zhang Xin, chief executive of Soho China. “China’s Real Estate Bubble,” the second segment, examines the phenomenon of “Ghost Cities” that many China bears have highlighted over the last several years, complete with visits to the same empty malls and developments that we have been hearing about for years.

Jonathan Anderson of Emerging Advisors Group is out with a provocative report about those ghost cities. In “Hurray for Ghost Cities,” Mr. Anderson argues that these wasted investments are not really a big deal, adding that it might be better that the money was blown on developments rather than even more excess manufacturing.

Tom Miller is also mostly dismissive of the “Ghost Cities problem” in his excellent new book “China’s Urban Billion.” In one chapter, Mr. Miller writes:

The truth of the matter is that China is not building too many apartments, and a handful of empty urban districts are not evidence of a giant property bubble. Chinese property investment may be inefficient, but it is sustained by a huge, growing and sustainable demand for new housing. …

China’s current modern housing stock, defined as homes with individual bathrooms and kitchens, is around 150 million units. But 200 million migrant workers currently live in dormitories or slum housing. If one believes that the urban poor deserve to live in proper flats, the corollary is that Chinese cities actually have a significant shortage of housing – somewhere in the region of 70 million units. China is not building too many new apartments; it is building too few.

I do not mean to completely dismiss some of the dangerous imbalances that have been building in certain property markets across China. But China is not one real estate market, and taking a binary boom-or-bust view about the “China market” is likely a mistake.

The Financial Times examined the diverging markets last week, writing:

China takes bifurcation to a new extreme. Not only are housing prices in the biggest cities moving in a different direction to those in smaller centers, there is also a glaring discrepancy in the amount of development being undertaken.

The country’s main metropolises – Beijing, Shanghai and Shenzhen, which each have populations of more than 10 million – suffer from chronic shortages of housing for low- to middle-income residents. By contrast, scores of smaller cities with populations of up to 3 million face an increasingly severe oversupply.

This is why a simple description of China’s housing market as a “bubble” misses the point. Does “bubble” refer to the soaring prices in the biggest cities, where only the wealthy can afford homes? Or does it refer to the row upon row of empty apartment blocks in the smaller cities?

One of the crucial questions, for which very smart people offer very different answers, is can bubbles burst in certain areas without bringing down the whole economy?

Regardless of how that question is answered, we should perhaps give China’s leaders some credit for acknowledging potential bubbles and taking steps to rein them in. What might have been different if American policy makers had recognized and tried to manage the risks of a housing bubble in 2005, 2006 or 2007?