The Kangbashi district of Ordos City in Inner Mongolia illustrates the exact reason that the US has little to fear from China's saber economic saber rattling.
While the US housing and banking markets are recovering, with the Chinese holding a fair amount of US debt, and many fearing the day when the Chinese start demanding bills come due, we have to remember the symbiosis that our markets and the Chinese now exist in.
Ordos City was established to be prefecture seat, and a highlight of the economic boom that the Chinese have lashed themselves to. Inner Mongolia bloomed with a thoroughly modern city, created from scratch. The Kangbashi District is its jewel, with high rises, daring architecture, and lavish infrastructural amenities that rival many Western cities, it is also damn near empty and unused. Of the 1.3 million or so residents of the city, most are the workers actually building this marvel in the Mongolian desert.
The Ordos Museum is an impressive structure, a marvel of the new style of Chinese public buildings, designed to wow the rest of the world, as well as impress and instill pride in the residents and their countrymen. It is also rarely visited, save by those who are putting the finishing touches on the structure, and to take photos for promotions to try to lure folks to the Mongolian desert.
The real estate bubble in the West was devastating. The housing bubble here in the US was dotted with developments that were bought to be flipped, and fueled by rampant speculation. We were, however, amateurs to the scale that the Chinese have invested in their own real estate bubble. While neighborhoods were fabricated for growing cities, the Chinese were betting on creating whole cities whole cloth, and it is this very reason that, while the amount of US debt in Chinese hands is a matter of some concern, we have little to fear from the Chinese rattling economic sabers. While indeed they own a fair amount of our debt, they need that interest at this point just to survive, and we exist now in a form of economic symbiosis that neither the US nor China can even think about extricating ourselves from any time soon.
The boundless optimism that dominated the last several years, with dreams of nothing but wealth spiraling upwards wasn't just a Western conceit. While there may have been the clucking of tongues at the waste and recklessness of US regulatory bodies with our own investment in financial fictions, at the same time, our economic partners were using the wealth that they were skimming from our loan structures, and their own investments in ways that were both impressive, and in their own way, filled with as much hubris and and fiscal hallucination.
While there are economists who are worried what the real estate bubble in China looks like, with such a huge investment by the Chinese government into what amounts to ghost towns, it only illustrates that the Chinese are going to need our interest payments for some time, and while there may be hardliners who may think about trying to squeeze a bit, ultimately, our interests and the Chinese are interlinked. Our debt, and the servicing of that debt, may be the only thing that can save the Chinese from economic implosion.