We direct readers to an astounding essay by (and CBC podcast interview with) Jonathan Manthorpe, a foreign correspondent and international affairs columnist for nearly 40 years. The title — “Vancouver: not mind-numbingly boring, but vacuously vain” (29-May-2015 on the “Facts and Opinions” website) — belies the seriousness of its content.
Excerpt: The flood of this money into Canada has not only contorted and distorted the Vancouver housing market beyond redemption, it has changed the sort of community Vancouver is going to be for generations to come. In a bizarre piece of absence of mind and lack of attention, it has also hitched the future of Vancouver to the fate of the Chinese Communist Party.
… Politicians and officials have allowed the economy, and especially the housing market, to become so distorted that it would now be dangerous to try to impose reality.
Mr. Manthorpe pulls many pieces together and presents a picture of the huge political and financial forces at play in China and beyond, including the possibility of regime collapse. Though Vancouver is an extreme case, this essay gives the impression that the tsunami of money flowing into property here is just a gnat in the bigger geopolitical context and global money flows (including laundered and illegally-gained money).
Our elected leaders at the municipal, provincial, and federal levels were fiddling away and looking the other way while the tsunami gained strength. Now what? For starters, the public needs to demand better data (see “Vancouverites for Affordable Housing” rally June 24 at the VPL). A growing network of people is delving into details and proposing actions.
Excerpts of article:
Vancouver: not mind-numbingly boring, but vacuously vain
(by Jonathan Manthorpe, in Facts and Opinions, 29-May-2015)
Vancouver has the double affliction of a deeply embedded lack of self-esteem and an overdose of self-obsession.
A result is a temperamental inability to make sound judgments about communal pressures, including those coming from outside. Sad to say, the vain and vacuous “Real Housewife of Vancouver” is the perfect civic emblem for the Western Canadian metropolis.
Forget the verdict of a writer in The Economist that Vancouver is among the world’s most “mind-numbingly boring” cities. Immeasurably more important in recent years is the inability to address the seismic problem of money flooding in from China.
The most mind-numbing element of this story is the amount of money flooding out of China illegally. The numbers are obscene. Last week the major French bank, BNP Paribas, published an analysis of financial flow statistics for the first quarter of this year tabled by the People’s Bank of China. The French bank concluded that in the first three months of 2015 over $80 billion had been spirited out of China illegally. This puts China’s wealthy on track to shuffle over $320 billion out of the country this year.
This represents a significant increase on reasonably reliable estimates of illegal outflows in recent years. For example, the Washington-based anti-money laundering organization, Global Financial Integrity, calculated that in 2012 just under $250 billion was slipped out of China and that the total for the previous decade was about $1.25 trillion.
The rush to get money out of China has now reached almost three times the amount of money being invested in China. According to official Beijing statistics, inward investment was $119 billion last year.
….Authoritarian regimes usually look very solid. But they are always very brittle. A tap on the plate glass in the right time and the right place and the whole window collapses into the street. We’ve seen it with the Soviet Union and, more recently, with the Arab Spring and fall or besieging of the authoritarian regimes in Tunisia, Libya, Egypt, Syria and Yemen.
The flight of money from China suggests that very many people at the top of the regime have doubts about how much longer the Communist Party can hold power, and they are arranging safety nets for their assets and their families.
The flood of this money into Canada has not only contorted and distorted the Vancouver housing market beyond redemption, it has changed the sort of community Vancouver is going to be for generations to come. In a bizarre piece of absence of mind and lack of attention, it has also hitched the future of Vancouver to the fate of the Chinese Communist Party.
… Some people, most of them in Vancouver’s economic and political ruling class, have been unwilling to look critically at what is happening because they are doing so well out of it. Developers, building contractors, engineers, lawyers, luxury goods retailers (or, often more accurately, retailers of goods with luxury prices), sellers of expensive cars have all done very well out of the Chinese cash tsunami.
The municipal and British Columbia provincial government have also seen their revenues grow, making them reluctant to curb or even gather useful data on what is happening. Vancouver City Council is reported to make about $700 million a year on property transfers, and the province is making over $1 billion.
… A report by the Royal Bank of Canada a couple of years ago said that for the average family in Greater Vancouver the total cost of homeownership has rocketed up to a mind-blowing 92 per cent of pre-tax family income. If anything, the situation has got worse since. Vancouverites face not only the emigration of their children to more affordable parts of Canada, but also the prospect of people performing what used to be thought of as middle income, but essential public service jobs, such as the police and teachers, having to move elsewhere.
Politicians and officials have allowed the economy, and especially the housing market, to become so distorted that it would now be dangerous to try to impose reality. It would not take much to trigger the kind of mortgage crisis that so devastated the United States economy in 2008-2009.
… Well, doubtless some are attracted by the geography. But a much greater draw is that Canada and British Columbia are open doors without gatekeepers or much in the way of rules or regulations impeding wealthy Chinese anxious to find a safe haven for their assets. Other favoured destinations with the rule of law and respect for private property, such as the U.S., Australia and much of Europe, impose stringent restrictions and requirements on foreign investors or property buyers. Canada, on the other hand, has no real idea of who owns what, and the planning departments of far too many of our municipalities are so amateurish and ill prepared that anything goes. And local politicians seldom push back against the energies of the property industry, much of which is often inexorably entwined with the elected officials anyway.
But an essential part of understanding what is happening in Greater Vancouver and, indeed, Toronto, is to look at what is happening in China.
…. Clearly, an extraordinary proportion of the senior echelons of the Chinese Communist Party has one foot out the door, having already moved a good deal of their wealth, much of it ill-gotten, to politically sunnier climes.
….Air pollution in China has been well publicized. It is now so bad that foul air is directly responsible for the death of well over a million people a year.
For those who can, there is every reason to get out of China. And the perfect landing spot is somewhere where the people don’t ask too many questions and are easily manipulated through flattery.