Stahl she is the fifth richest selfmade billionaire woman in the world. Shes pointing out her building. With her partner husband, she has built more of beijing than almost any emperor in chinas history. China produced more selfmade billionaires than any other country in the world. Stahl while xins fortune has been made on office buildings, china may be sitting on a residential and Retail Real Estate bubble. Where is the proof . We found what are known as ghost cities. Look at these brand new towers with no residents, desolate condos and vacant subdivisions uninhabited for miles and miles and miles. Tonight, two stories that provide a rare window into china. Im steve kroft. Im leslie stahl. Im morley safer. Im bob simon. Im lara logan. Im scott pelley. Those stories tonight on 60 minutes. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. New kelloggs raisin bran® with omega 3 from flax seeds. Plus plump juicy raisins. Flax seed . Who are you . I still got it. [ male announcer ] invest in your heart health with kelloggs raisin bran® cereals. [ male announcer ] invest in your heart health im gonna have to ask you to power down your little word game. I think your friends will understand. Oh. No, its actually my geico app. See . I just uh paid my bill. Did you really . From the plane . Yeah, i can manage my policy, get roadside assistance, pretty much access geico 24 7. Sounds a little too good to be true sir. Ill believe that when pigs fly. Ok, did she seriously just say that . Geico. Just a click away with our free mobile app. Pelley last fall, 17,000 vials of a steroid were shipped to clinics and hospitals in 23 states. The drug had to be sterile because patients would have it injected into their joints or into their spines to relieve chronic pain. What happened next is the worst pharmaceutical disaster in decades. The steroid was contaminated with fungus. More than 50 people have died, and around 700 are being treated for persistent fungal infections. The tragedy has exposed a failure in drug safety. And, in a moment, you will hear the commissioner of the f. D. A. Acknowledge that she can no longer guarantee the safety of many highrisk drugs. The steroid was produced by new England Compounding Center, and in the six months since the first deaths, no one at new england compounding had ever revealed what happened. But they did when we first aired this story last march. As for the victims, this has been an unrelenting horror after just one injection of lethal medicine. Julie otto ive been in the hospital seven times, total of 75 days. Ive missed thanksgiving and christmas and my sons birthday. Pelley julie otto is one of 13 injured patients who met us at st. Joseph Mercy Hospital outside detroit. Willard mazure im on 60 milligrams of morphine a day with no cure in sight. There is no cure in sight for me. Pelley Willard Mazures morphine is to kill the pain from the fungal infection. We asked the patients to sit down in the first two rows, and many of them brought family to the auditorium. Michigan is a hotspot for the toxic steroid, one of 23 states that received the drug from massachusetts. St. Joseph mercy has treated 189 patients, all of whom endure brutal antifungal drugs. Mazure the medicine is just unbearable. You know, they talk about cancer treatments, and im sure theyre unbearable, too. But this is some unbearable stuff. Pelley this is the fungus. It is a sample that has been grown from the spinal fluid of a patient. The fungus is a form of mold that attacks bone and nerves. The patients who had it injected in the spine have an infection called meningitis, which can also reach the brain. Have the doctors told any of you that the fungus is gone and you never have to worry about it again . No. Absolutely not. No. Pelley the steroid, methylprednisolone acetate, made by new England Compounding Center, known as n. E. C. C. , came from this Industrial Park near boston, which houses the pharmacy and an outfit that recycles construction debris, both owned by the family of barry cadden, a pharmacist and president of n. E. C. C. Caddens new England Compounding Center was whats known as a compounding pharmacy. By law, compounding pharmacies are not allowed to manufacture pharmaceuticals for the mass market. That would require the oversight of the f. D. A. Instead, states license compounding pharmacies to make drugs for individuals. For example, a doctor might order a liquid form of a medication for a patient who cant swallow a pill. Compounding pharmacies are bound by one rule they must have a prescription for each individual patient. But n. E. C. C. Was shipping tens of thousands of vials from its lab called clean room one. Investigators shot video inside n. E. C. C. This is the first time the public has seen it. And this is the first interview with a technician from clean room one. Joe connolly the underlying factor is that the company got greedy and overextended, and we got sloppy and something happened. Pelley joe connolly started in clean room one in 2009. He remembers, in 2011, a salesman came by with a boast and a warning. Connolly he was walking through and says, oh, i got. I got a bunch of stuff coming for you guys. You guys are going to be busy. Youre going to. Im going to keep you guys moving. And that just meant compound it, process it, get it out the door. Pelley connolly says, over months, the lab was overwhelmed with orders. Output of drugs that he made increased by a factor of 1,000. Connolly we became a manufacturer overnight. So we were basically trying to have the best of both worlds it was trying to manufacture without the oversight of a manufacturer. And it was just. We all got overtaxed and everything. Pelley which made it harder, he says, to follow the strict procedures that kept drug preparation sterile. They would occasionally find mold in the clean room . Connolly occasionally, yes. Pelley how often . Connolly i would say maybe a dozen times in three years we would find it. Pelley he told us they would clean up and keep moving. But a month before the first steroid death, he says he warned his supervisor. Connolly somethings going to happen, somethings going to get missed, and were going to get shut down. Pelley what did you mean by that . Connolly we were going to hurt a patient we were just thinking hurt a patient. We werent compounding anymore, we were manufacturing. Pelley when you went to your supervisor and told him that, he said what . Connolly thats verbatim. laughs he shrugged. That was his response for a lot of our questions or comments or concerns was a shrug. Pelley meaning . Connolly just do it. Hed. Either he didnt care or he was powerless to change it. Pelley n. E. C. C. Was growing explosively, and so was the compounding industry. It started in 1998, when congress exempted compounding pharmacies from the oversight of the food and drug administration. The theory was, mixing drugs one prescription at a time shouldnt require federal inspection. The law passed, over the strong objections of thenf. D. A. Commissioner david kessler. You, as f. D. A. Commissioner, testified before them and you said, dont do this. David kessler if youre not going to have oversight, one day, people are going to die. Pelley that days arrived. Kessler this should not happen in 2013 maybe at the turn of the previous century, where we didnt have institutions like the f. D. A. There is no reason why people had to die. Pelley without f. D. A. Supervision, compounding took off. State Health Departments are responsible for regulating what is now nearly a 2 billion industry. Dr. Margaret hamburg is f. D. A. Commissioner now, and she told us, because of the 1998 law, she doesnt know how many compounders there are or what theyre making. You know, i can just hear the folks at home saying, wait a minute. I thought every pharmaceutical drug in this country was approved by the f. D. A. And you seem to be telling me in this interview that thats not the case . Dr. Margaret hamburg well, compounded drugs are not f. D. A. Approved. Pelley so if a patient goes into a clinic, and the doctor or the nurse pulls out a vial of something, that patient has no way to know whether that drug has been approved by the f. D. A. Or not . Hamburg well, i think thats right under the current system. And what i think emerged in the meningitis outbreak was that many patients and their Health Care Providers didnt realize that they, in fact, were using a compounded product. Pelley as commissioner of the f. D. A. Then, you cant tell us sitting here now that every drug being used in the United States is safe and effective . Hamburg no, i really cannot. Pelley it was up to the massachusetts board of pharmacy to inspect n. E. C. C. Records show occasional problems with sterility. But the pharmacy passed a board inspection in 2011. Still, there is no indication that the state fully realized how big and dangerous n. E. C. C. Had become. This is an n. E. C. C. Salesman, speaking for the first time. And we were surprised when he told us how many hospitals and clinics were clients. Close to 3,000, id say. Pelley 3,000 clients, all across the country . Yeah. Pelley the salesman asked us to disguise him and not use his name. He fears the connection to n. E. C. C. Will ruin his career. He left n. E. C. C. A year before the steroid disaster. He says he was replaced by a competing salesman. He told us that many of n. E. C. C. s clients were in on the fraud at the heart of the companys growth. The law required n. E. C. C. To have a name on a prescription, so clinics provided names any names. Bart simpson, Homer Simpson that we. Those ones did raise red flags, and we told to call our client back, and say, hey, give us different names. The followup names would be like a john doe, jane doe, bill doe, you know, jane smith, bill smith, et cetera. Pelley these werent real people . As far as i know. I mean, how many jane does and john does do you know . I mean. Pelley and when you got the prescriptions with Bart Simpsons name and Homer Simpsons name, you went back to that client and said what . Can you please, you know, give us legitimate names or people that you know . Sometimes, theyd take a phone directory within their office, and scribble out their extensions and fax it over to us. Pelley its obvious what was going on, and it was obvious to them. Yeah. Pelley . That this wasnt above board . Right, i mean, if youre in your position, if youre a buyer, and your job is to save money, and youre going to get a brand name for 40, and we offer you a 20 vial for the same drug, same size, same everything, what are you going to do . Youre going to go and get two for the price of one, using us. So, they. Most of them knew that. I mean, some of them wouldnt do business with us. The ones that we didnt have as clients are the ones that knew, hey, you guys cant be doing this. Youre not doing it right. And wed run into that a lot. But wed move on to the next one. Theres more big fish out there. Pelley big fish kept a big sales team busy. But the salesman told us barry cadden, the president , hid that fact during state inspections. So, barry would notify the managers of the sales team, hey, dont let the sales team either come in today, or if theyre already in the building, dont let them leave. If the f. D. A. Went upstairs, or the board of pharmacy went up there and saw 30 sales reps making phone calls, 100 calls a day, theyd wonder what was going on, and why are you so big when youre supposed to be a mom and pop specialty pharmacy, and youre not . Pelley that sales force sold methylprednisolone to a pain clinic in michigan, which treated george carys wife and anita baxters mother. Lillian cary and Karina Baxter were among the first to die. Weve pulled together pictures of about half of those who died. Death often comes when the fungus reaches the brain. George cary by the time the hospital determined that she had suffered a stroke, it was too late. Anita baxter same here. Cary she died five days later. Pelley lillian cary died before doctors figured out what was happening. So, while she was in the hospital, her husband george decided to do something about a nagging pain in his back. He went to the same clinic she had, and now the fungus is in him, too. What has the treatment been like . Cary youre not able to function. Youre not able to concentrate. You. You. The staff called us the walking zombies. Pelley on september 26, after patients started dying, state officials came to inspect n. E. C. C. What happened that day . Connolly we were told that were being inspected, so, everybody stop what youre doing, start cleaning. Pelley so you started cleaning the clean room . Connolly yeah. Pelley now, at this point, there is a federal investigation under way. Connolly i did. We didnt know that. Pelley you didnt know that, but the company knew that. Connolly i would assume, yeah. Pelley a prosecutor investigating this case might consider that to be obstruction of justice. Connolly i would very much agree. Pelley the evidence was getting cleaned up. Connolly it seemed like it. Pelley despite the cleanup, the f. D. A. Tested 50 leftover vials of methylprednisolone, and all were contaminated. They noted that the intake for n. E. C. C. s ventilation was 100 feet from the recycling plant. Barry cadden, new england compoundings founder, was subpoenaed by congress. Barry cadden i respectfully decline to answer on the basis of my Constitutional Rights and privileges, including the fifth amendment to the United States constitution. Pelley i wonder what you would say to him today. Id hope itd be through bars. Whatever i said to him, i hope itd be through bars. Pelley after this interview, Willard Mazure lost feeling in both legs. He went back to the hospital, and so did george cary. Margaret hamburg, commissioner of the f. D. A. , now wants congress to return authority over compounding pharmacies to her agency. Hamburg we need clear, strong, consistent federal standards that will be applied across the board, all 50 states. We need to be able to go in and inspect these facilities and get access to all of the information that we need. Pelley what are the chances of this happening again . Hamburg im sad to say that if we do not put in place the comprehensive legislation that really defines roles and responsibilities, we will have other similar problems. Pelley barry cadden and others are targets of a criminal investigation. Cadden declined to be interviewed. His lawyer told us that cadden is saddened by all of this, but does not know how the drug was contaminated. N. E. C. C. Has gone into bankruptcy, and we noticed in the court papers that cadden and his partners withdrew 16 million from the company over the last year, some of it as people were beginning to die. Cbs money watch update, sponsored by . Glor good evening. Retail Sales Numbers for july are out tuesday. A closely watched number says Consumer Spending accounts for 70 of economic growth. The price of gas dropped 6 cents last week. 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Its amazing whatll happen when. Tall things have the right space. Also amazing, jd power ranks. Kenmore elite highest in customer satisfaction. One Appliance Store helps more people. Find savings and solutions than any other. This is sears. Stahl no one symbolizes chinas rapid 30year rise from the backwaters of communism to the second largest economy in the world better than Real Estate Developer zhang xin. Whats interesting about her is that, while we think of china as being uncreative, repressive, and as far as you can get from the American Dream, she breaks every one of those stereotypes. As we first reported in march, shes a mogul who got her start not in china, but on wall street. But she missed the great wall, so she went back home and made it big. The mogul, zhang xin, is the fifth richest selfmade billionaire woman in the world. Zhang xin this is us, the one outside, that one is us. Stahl shes pointing out her buildings. With her partner husband, she has built more of beijing than almost any emperor in chinas history. How many buildings have you and your husband built . Xin oh, a lot. Stahl you cant even count them, right . Xin yeah. Stahl wherever you look, you see the company logo, soho china, on one cuttingedge skyscraper after the next. As a developer, xin pays special attention to design, which is why shes been called the steve jobs of the architecture world. Her buildings are fluid and futuristic and daring, and would be at home in new york or london, an expression of chinas emergence into the modern world. Im wondering, when you see these buildings, if it ever strikes you, you are designing beijing. Its a huge responsibility. Xin i feel that. I really feel that. Stahl do you feel it on your shoulders . Xin i feel that. I feel these buildings are forming the face of our city. Stahl and you build huge buildings and huge projects. Xin thats china, you know . China if you think about what is the character of china, its enormous scale. Its bigness. Everything. Stahl she took us to the site of her newest project. Do you love to come out . Xin i love coming out here. Stahl . Thats so huge, its swarming with thousands of workers. These kinds of projects are one reason for chinas explosive economic growth. Recently, though, thereve been fears of overbuilding and a real estate bubble. Xin told us thats why she keeps her focus narrow only office buildings, and only in beijing and shanghai. Xin my own view is that Residential Property development in china has really come into an end. Stahl you dont feel theres any threat of a bursting bubble in commercial real estate in beijing and shanghai . Xin i think in retail, like shops, Shopping Malls, there is oversupply. But office is doing. Is the only property sector thats doing well. Stahl even though the future may be uncertain . Xin the future may be uncertain in terms of. Well, the future is always uncertain wherever you go. Stahl but more uncertain now. Xin even if the certainty is not 10 growth for china, it goes down to 7 growth, its still a better place to put your money. Stahl . Than anywhere else. laughter you think . Xin i think so. Stahl you have that much faith . Xin mmhmm. Thats why were investing heavily. Stahl her business instincts are usually right. Theyve made her enormously wealthy and a celebrity here. When she opens a new building, it can look like a hollywood premiere. Yet, at 47, she remains grounded and unpretentious, never forgetting she grew up wretchedly poor. She says her personal story shows that china is the new land of opportunity. Xin china is the place that produced more selfmade billionaires than any other country in the world. Stahl do you know what the American Dream is . Xin mmhmm. Stahl it sounds like the American Dream, doesnt it . Xin mmhmm. Very much so. Stahl how times have changed xin was born during the cultural revolution, when mao zedong brutally purged all the capitalists and intellectuals, whom he derided as running dogs. And if you were educated, you were almost crushed . Xin mmhmm. My parents were university graduates. Stahl oh, boy. They were in trouble. Xin they were sent to the countryside. I spent years in the countryside as part of the reeducation camp. Stahl but call it the revenge of the running dogs. Their children are today the countrys leading capitalists. For xin, it goes back to when she was eight. Her mother was allowed to return to beijing, where she found work as a translator. But they were destitute and homeless, forced to sleep in an office. Xin i remember we would sleep on her desk. We will use her dictionaries, because my mother was a translator, as the pillow. Stahl you slept on the desktop, dictionary as your pillow . Xin pillow. Stahl oh, my goodness. Xin yeah, for months, we did that. Stahl when xin was 14, she moved to hong kong in search of work, but life there was just as hard. She was forced to slave away on Assembly Lines as a sweatshop girl. Xin on my table, there are like five different chips you need to put on the board boom, boom, boom, boom, boom. Then, you put on. Put on the belt. And then the belt goes down to the next one. So we all become like a machine doing that. Stahl so, this is how you spent your teenage years . Xin mmhmm. Five years doing that. Stahl five years . So, do you look upon that as lost years . Xin no, i look at those as a different chapter in life. I knew thats not a life i wanted to have. Stahl did you have a dream . Xin no. I wanted to just escape. Stahl so when she had saved enough money, she bought a one way ticket to london, packed up her bags, and left. Xin i thought id need to cook for myself, so i carried a wok, a chinese wok, you know. Stahl in your suitcase . Xin yeah. Stahl but forget chinese food. With no money, she ended up working in a fish and chips stand. Her dickensian journey wasnt over. Xin i think i was very afraid in england only because i had never seen so many caucasians. Stahl funny looking people. Xin funny looking. Language i didnt understand, nothing familiar. Stahl you didnt know anybody . Xin didnt know anybody. I sat on my suitcase, started crying. Stahl you end up no ones going to believe this you end up working at Goldman Sachs what a tale from crying and alone to school to learn english, which led to a scholarship to the university of sussex, and then a masters in economics from cambridge it was 1992, and xins timing was perfect. China was opening its markets to foreign investors. Goldman sachs sent the sweatshop girl to the mainland to look for opportunities. But she was unhappy in the world of Investment Banking. Ill give you some of the quotes that youve said. People spoke crassly, treated others badly, looked down on the poor and adored the rich. Those are your quotes. Xin thats pretty much true. I think Investment Banking environment was very competitive and cutthroat. I was always looking for opportunities to leave. Stahl you wanted to come back to china. Xin i think i was just missing the idealism that i was naively brought up with in the communist socialist china, when everyone was encouraged and brought up to be idealist. And i guess i was just missing what i was brought up with. Stahl thats when she met the man she would marry, pan shiyi. He was part of a wave of young idealists, committed to liberalizing china through business in his case through a new industry, real estate. Xin and i remember he took me to see a construction site. It was evening, it was late at night. He took me, he said, you have to come and see what i do. And i went, wow. I had never seen a hole that big on earth. And he told me, this is a place will be the manhattan of beijing. And i laughed. laughter i thought, because he hasnt been to manhattan. He has no idea what manhattan means, right . The whole bunch of factories in the area, big hole on the ground. This is not going to be a manhattan of beijing. This is where we are now. All this area used to be factories. Stahl we stood at that spot, in a sea of offices they built its not manhattan, its bigger building after building, some projects the size of entire neighborhoods, and all built in the last 19 years, going back to the night xin and pan first met. Did you really decide to get married in four days . Xin yeah, we did. And i left my bank and we joined together, formed the company with no money, no backing. No relationship. None of us is the sons or the daughters of anybody in china. Stahl he wasnt a princeling. Xin no. No, in fact, just the opposite. He came from one of the poorest provinces in china, the most impoverished place. Stahl but she and pan were finding out that mixing how east and west did business was not easy. They fought constantly. And so, one day, she packed her bags and went back to england. But then, she changed her mind. Xin i thought i just cannot give up like this. I called him up. I said, you know what . I decided to stay in china. Stay in this marriage, ill quit the job. I will step aside, i stay at home. Stahl in her time off, she got pregnant with the first of their two sons, while pan was making a success of the company. Xin he did so well that there was too much work. He couldnt handle. So then he said, you better come back to work. Really, i need you to work. Stahl oh, my goodness. Xin everything changed from fighting, wanted to get divorced to starting a family with a baby, and the business is going well, and im back to work. Stahl now, they split their duties he focuses on everything inside china; she uses her wall street knowhow to raise money abroad, and hires the worlds top architects. Together, they have built soho china into a company with 10 billion in assets. What about corruption, though . Xin corruption is everywhere in china. Its really quite widespread. Pretty much whoever has power is in the position to be corrupt. Stahl so they expect you to pay them off. Xin to pay them off. Stahl so, how do you operate in this environment . Xin for instance, if we buy a piece of land, if we buy it in auction, then thats very transparent. Stahl openness. Xin openness, yeah. The more openness it is, the better it is. We dont need to know anybody, we dont need to be the daughters and sons of anybody, we can just buy with money on an open market. That building will stay, and the rest is all landscape. Stahl she believes that open market tools like public auctions and transparent accounting will lessen the corruption and the cronyism. The woman who once slept on a dictionary, and now has about 3 billion in her bank account, may tout china as the new land of opportunity, but she knows its still not the land of the free. Xin you know, i hear a lot in the u. S. People praise. Wall street people praise state capitalism in china look at how efficient things get done. Decisions get made so quick and so effective. It can roll over a policy overnight nationwide. And here in the u. S. , we need to go through congress, senate, and debate. And you know, i have to say, for a chinese living in china, chinese. If you ask one thing everyone craves for is what . Its not food, its not homes. Everyone crave for democracy. I know theres a lot of negativities in the u. S. About the political system, but dont forget you know, 8,000 miles away, people in china are looking at it, longing for it. Stahl do you think there will be democracy here lets say, ill put a time frame on it in 20 years . Xin sooner. Stahl youre an optimist. Xin i am. Stahl a bold statement in a country with heavy government censorship and limited freedom of speech. And while shes thriving, chinas Residential Real Estate is in trouble. That part of the story, when we return. 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In just 30 years, this state controlled economy became the worlds second largest, deftly managed by Government Policies and decrees. One sector the authorities concentrated on was real estate and construction. But, as we first reported in march, that may have created the largest housing bubble in human history. If you go to china, its easy to see why theres all the talk of a bubble. We discovered that the most populated nation on earth is building houses, districts and cities with no one in them. So this is zhengzhou. And we are on the major highway or the major road. And its rush hour. Gillem tulloch yeah. Stahl and its almost empty. Gillem tulloch is a Hong Kong Based financial analyst who was one of the first to draw attention to the housing bubble in china. Hes showing us around the new Eastern District of zhengzhou in one of the most populated provinces in china, not that youd know it. We found what they call a ghost city of new towers with no residents, desolate condos, and vacant subdivisions, uninhabited for miles and miles and miles and miles of empty apartments. Why are they empty . Ive heard that they have actually been sold. Tulloch theyve all been sold. Theyve all been sold. Stahl theyve all been sold . Theyre owned. Tulloch absolutely. Stahl owned by people in chinas emerging middle class, who now have enough money to invest but few ways to do it. Theyre not allowed to invest abroad, banks offer paltry returns, and the stock market is a roller coaster. But 15 years ago, the government changed its policy and allowed people to buy their own homes, and the floodgates opened. Tulloch so what they do is they invest in property, because property prices have always gone up by more than inflation. Stahl and they believe it will always go up . Tulloch yeah, just like they believed in the u. S. Stahl actually, Property Values have doubled, tripled and more, so people in the middle class have sunk every last penny into buying five, even ten apartments, fueling a building bonanza unprecedented in human history. No nation has ever built so much so fast. How important is real estate to the chinese economy . Is it central . Tulloch yes. Its the main driver of growth and has been for the last few years. Some estimates have it as high as 20 or 30 of the whole economy. Stahl but theyre not just building housing, theyre building cities. Tulloch yes. Thats right. Stahl giant cities being built with people not coming to live here. Tulloch yes. I think theyre building somewhere between 12 and 24 new cities every single year. Stahl unlike our Market Driven economy, in china, its the government that has spent some 2 trillion to get these cities built, as a way of keeping the economy growing. The assumption is, if you build it, theyll come. But no ones coming. This is really completely, totally empty and it goes up. Gillem took us to this Shopping Mall thats been standing vacant for three years. Can i find this all over china . Tulloch yes, you can. Theyve simply built too much infrastructure too quickly. Stahl but i see k. F. C. Behind you. I see starbucks over there. I see some other very recognizable american franchises coming in here. At least they. Does that mean they have faith that this is going to ignite . Tulloch no, these are all fake signs, just to get potential buyers the impression of what it might look like if they moved in. Stahl theyre not real . So, k. F. C. Didnt buy this space or rent this space . Tulloch no, they havent. Stahl starbucks . Tulloch no. Stahl they just put the sign up . Tulloch thats right. Stahl its all makebelieve nonexistent supply for nonexistent demand. Look at that swarovski, piaget. Theyre hoping for high end, too. Tulloch h m. Zara. Stahl laughs and its all potemkin. Tulloch yeah. Stahl its surreal and its everywhere, like the city of ordos in mongolia built for a Million People who didnt show up. And no, you are not in england. Youre in thames town, a Development Near shanghai built like an english village. Tulloch and it was finished, i think, around five or six years ago. And it must have cost close to a billion u. S. Dollars. And youll see, its Still Standing there empty. Stahl well, ive heard that there is some industry there or some business, one business there. Tulloch marriage. Stahl wedding pictures and whats more uplifting than a wedding, or ten . You can see these empty developments on the edge of almost every city in china. What about the idea that china is urbanizing . People are flooding into cities or want to, anyways, by the hundreds of millions. And that this really is a smart move build the housing to accommodate the urbanization process. Tulloch well, so, people are being moved into the cities. But that doesnt necessarily mean that they can afford these apartments which, you know, cost u. S. 100,000 or whatever. I mean, these are poor people moving into the cities, so theyre building the wrong sort of apartments. Stahl and whats worse to build all these massive cities, theyve had to tear down what was there before, clearing rice fields and displacing, by some counts, tens of millions of villagers. On the edge of zhengzhou, gillem and i came upon a strange sight. Im just watching what theyre doing. Do you have any idea . Tulloch i think theyre trying to recycle the bricks. Stahl these villagers are salvaging whats left of their homes, bulldozed to make room for more empty condos already encroaching in the distance. There are all these empty apartments over here. Can they conceivably move into those upscale places . Tulloch most people in china live on about less than 2 a day. And these apartments probably cost upwards of 50,000 or 60,000 u. S. , so its very unlikely. Stahl what will happen to them, do you think . Tulloch theyll be forced to relocate somewhere. I have no idea where theyll go. Stahl these are the immediate casualties of the building boom. And theres another problem analysts warn that all this building has created a bubble that could burst. So, if the bubble bursts, whos left holding the bag . Tulloch there are multiple classes of people that are going to get wiped out by this people who have invested three generations worth of savings so grandparents, parents and children into properties will see their savings evaporate. And then, of course, theres 50 Million Construction workers who are working on all these projects around china. Stahl the prognosis of a bubble about to burst isnt only coming from financial gloomand doomers. We heard it from the most unlikely source. Are you the biggest home builder in the world . Wang shi i think. Maybe. Stahl you may be . Wang yes. Only the quantity, not quality. Stahl wang shi is modest, but his company, vanke, is a 53 billion real estate empire, building more homes than anyone in china. He was born on the frontlines of communism and joined the red army. But he secretly read forbidden books about capitalism, so that when china liberalized its economy, he rushed to the frontlines of the free market. Even he thinks todays situation is out of control. Are homes in china too expensive today . Wang yeah. Stahl heres a number that i saw. A typical apartment in shanghai costs about 45 times the average residents annual salary. Wang even higher, even higher. Stahl what does that mean for your economy if its just too expensive for the vast majority of people to buy . Wang i think that dangerous. Stahl dangerous. Wang thats the bubble, so i think thats the problem. Stahl is there a bubble . Wang yes, of course. Stahl there is a bubble, and the issue is will it burst or not . Thats the big issue. Wang yes, if that bubble. Thats a disaster. Stahl if it burst . Wang if it burst, thats a disaster. Stahl to try and prevent the disaster, the Chinese Government decided to act. Heard of their onechild policy . Since 2011, china has had what amounts to a oneapartment policy, where its very hard to buy more than one apartment in major cities. Because of this, prices plunged. The bubble was being tamed. And yet, the taming was creating all kinds of unintended consequences. Are Many Developers in debt . Wang yes, yes. Stahl and are many stopping development in the middle of projects because they dont have the money to go forward . Wang yeah, thats problem. Thats a huge problem. Stahl a problem because the slowing down of construction led to a downturn in the overall economy. Unfinished projects dot china, and not just apartment buildings. Look at this. Can you believe it . Analyst anne stephensonyang, who has traveled across china, showed us a giant project all but abandoned in the port city of tianjin, with concrete skeletons as far as the eye can see. The plan is to build a new financial district to rival manhattan, including a Lincoln Center and a world trade center, only taller. But it all seems frozen. Anne stephensonyang theres supposed to be a Rockefeller Center here. I hope they have a christmas tree, too. Skating rink. Stahl city officials told us everything stopped because Developers Want to build all the facades at once to match. But on the ground, we heard a different explanation. Workers told us that many of these buildings havent had any work done on them for weeks, months, as if the Developers Just dont have the money to go on. Stephensonyang its true. You see that happen first. The Migrant Workers will go home. Thats often the first sign that the debt crisis is starting. Stahl the debt crisis . Stephensonyang well, when you stop paying your bills, then everything stops. Stahl it could become a debt crisis because of the huge loans most of the developers took out. If they cant repay them, the whole economy will seize up. The governments great fear is that all this could lead to social unrest, and thats not hypothetical last year, when home prices fell, it infuriated all those owners of multiple dwellings, who watched the value of their nest eggs plummet. And theres already been some demonstrations over real estate around the country. Wang yes. Stahl have you had demonstrations against your showrooms anywhere, youre company . Wang often stahl so often, wang shi shudders to think what would happen if the bubble actually burst. Wang if that bubble break, then maybe who know what will happened . Maybe that. Maybe the next arabic spring. Stahl arabic spring. You mean people coming out and demonstrating. Wang mmhmm. Stahl a lot of economists say that its too big for even this government to control. Wang mmhmm. I believe that top leaders have enough smart to deal with that. I hope stahl youre doing this. Wang but thats uncertain. Stahl meanwhile, people who can afford it are still buying as much real estate as they can. Theyre even finding ways around the oneapartment restriction in big cities. Cant buy in beijing . Just cross the city line and the boom is in full swing flyers advertising new projects, potential buyers crowding buses to see new construction, and new owners line up to register their new apartments. Like us in our bubble, they just dont believe the good times will ever end. Go to 6ominutesovertime. Com to hear what one of the richest women in china has to say about criticizing her government. Its a taste so bold, yet so smooth it can only be called black silk. From folgers. A taste you can enjoy fresh brewed one cup at a time or on the go. Black silk from folgers. Or on the go. 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