The "if you build it, they will come" mantra does not seem to be working, writes business editor Liam Dann.

Beware of anecdotes about ghost cities, an economist tells me in Beijing. China is big and the forces at work are of a scope not as easy to visualise as the giant concrete and steel shells that dot many urban sky lines.

It is sage advice.

Even forewarned, it is hard not to be shocked by the scale of abandoned development when you visit a second tier city like Tianjin - about 150km south of the Chinese capital.

In the centre of the city - which has a population of 15 million and boasts a commercial centre dating back to the colonial era of the 19th century - stand three monolithic blocks of concrete and steel.


Typically, as is the case here, you'll still find plenty of new building going on nearby. Central Tianjan has a flash new financial centre in development.

The future of the three ghost towers, who the owners are and why they are left unfinished, seems to be forgotten as the city forges on to new and better things.

Cashflow, debt and a complicated mix of local body politics all seem play a role in the process of abandoning the work. Empty, often unfinished property developments aren't hard to find in China and have fast become emblematic as growth slows and the economy undergoes one of the most dramatic transitions in modern history.

The official line is a dramatic slowdown in export, manufacturing, and construction as the central Government looks to shift the economic balance towards the service sector and domestic consumption.

The building anecdotes get worse as you head further out of town.

On the southern outskirts, in an area destined to become a new science and technology zone you can count one block of about 25 high rise towers - unfinished concrete and steel.

The cranes appear to be long gone, although once again, just a few hundred metres down the road, there are several towering over what appears to be a similar tower complex.

Keep driving a further 40 kilometres and you'll hit a staggeringly ambitious development some have described as the the ultimate monument to China's property development excesses. Modelled on the Manhattan skyline, Yujiapu is a new financial district being built from scratch and due for completion in 2019. It is billed as covering a larger area than the City of London and the financial district of Manhattan.

Liam Dann explains that China's economy is more growing more bearish than bullish. Photo / Pat English
Liam Dann explains that China's economy is more growing more bearish than bullish. Photo / Pat English

In terms of "build it and they will come" optimism it is certainly impressive. But even if you take the property anecdotes with a grain of salt, economic data out of China has been consistently coming in below expectation for months.

It was clear from economists, bankers and financial analysts I met on my visit this month that the tone of commentary on China's transition to a "new normal" is growing steadily more bearish.

And it is hardly surprising that, among the China bears, property is often singled out as the most likely cause of a more serious China crash.

In the West it is so often the case that property - or lending-based around property investment - is the spark for a major market fire.

Last week Western media reported the first-ever default by a major Chinese developer - Kaisa Group Holdings - as further evidence of an impending crash.

It should come as no surprise that Kaisa - which has missed $52 million in interest payments - is embroiled in an anti-corruption probe targeting officials in the city of Shenzen.

Under Xi Jinping's leadership addressing corruption has become a key focus and is quite closely entwined with the economic rebalancing.

There is a view that corruption - particularly at local government level - has contributed to poor quality infrastructure and investment. It has become a serious risk factor for a whole range of companies doing business in provincial China.

China is a big place and while some regions will suffer in this period of change others will continue to grow.

Many analysts, both Chinese and Western, now believe that Beijing's biggest task to ensure the success of the economic transition is to re-establish control in the regions.

Standard & Poors has warned that more property defaults cannot be ruled out and few would disagree.

One Western property analyst I spoke to in Shanghai, before the Kaisa news, told me he was surprised we hadn't seen a major developer go under - despite that remained optimistic about the broader Chinese property picture.

China is a big place and while some regions will suffer in this period of change others will continue to grow.

Underlying urbanisation remains a powerful trend. Only 53 per cent of the population is urban, compared with about 86 per cent in New Zealand. Migration to cities is still strong with between 17 and 19 million people making the move every year.

Perhaps the ghost towers will be completed and filled in time.

Regardless, this slowdown is very real and over the next few years may well involve shocks that will rattle Western markets and economies.

Whether they rattle the Chinese establishment is another story altogether.

For New Zealand businesses trying to make sense of the increasingly negative stream of economic China news it is important to keep things in perspective. This country is a small player in a vast market.

Most of the things we export - food primarily - are on the right side of the "new normal" policy equation.

The Chinese Government wants to see wage growth, employment and consumer consumption stay strong.

Secondly, a Western-style crash may never come. This is a regime with trillions of US dollars in stimulatory firepower and the political clout to regulate as and when it needs to.

There may be slumps and defaults and growth will slow, but it would be brave to bet against the Chinese Government's ability to maintain stability as it goes through this transition to a new normal.

• Liam Dann has been travelling in China as a recipient of the New Zealand China Council Media Award.