By Tom Dyson, editor, Postcards From the Fringe Can you imagine mobilizing hundreds of thousands of workers – including the top engineers of the day – and putting them to work for 40 years to build something that you then bury? That’s what the first emperor of China – Emperor Qin – did in 250 B.C. First, he unified China. (China gets its name from him.) Then he ordered the creation of 7,000 life-size soldiers, horses, and chariots, made of clay, which he then installed in a giant tomb to “guard” his corpse in the afterlife. Each statue in the emperor’s Terracotta Army is 6 feet tall and weighs 300 pounds. There are archers, infantrymen, cavalry, charioteers, and army officers. Every soldier has a unique face… like they were maybe based on real people. They are exquisite. 
7,000 of these 300-pound statues were meant to guard Emperor Qin’s body in the afterlife
The project took 100,000 local engineers and artisans – plus 650,000 prisoners of war – 40 years to complete. They call it the eighth wonder of the world. The kids thought it was amazing. I thought it was a grotesque waste of money… history’s ultimate bridge to nowhere. 
Dusty (11) and Miles (9) admire the emperor’s clay army
The story doesn’t end here. I’ll tell you what happened next in a minute… From Hostel to Hostel My ex-wife and I are on sabbatical. We decided to backpack around the world with our three kids: Dusty, Miles, and Penny. During our stay in China, we traveled around the country on the high-speed railway. We stopped now and again to stay in a hostel for a few days, catch our breath, eat some noodles, and check out the local scenery. Then we moved on again. We’ve covered more than 2,000 miles and stayed in a dozen different hostels. We were just in Xi’an, a city of 12 million people in the middle of China, near where they buried Emperor Qin and his Terracotta Army. (You can keep up with our travels – and my commentary on the global economy – by clicking here to instantly sign up for Postcards From the Fringe. I send a new postcard out at 7 p.m. ET every weekday.) 21st-Century Terracotta Army China is currently building a new “Terracotta Army.” Except the terracotta statues of the 21st century aren’t made of clay. They’re built of steel and cement… I’m talking about high-rise apartment buildings. They’re everywhere. In every city, in every town and in every village. Sometimes, we even saw them in the middle of nowhere. They build them in mini-cities. Dozens of identical buildings of exactly the same height and design placed in neat rows. Some look old. Some look new. And a lot of them are still being built. As I write these words, there must be over 10,000 high-rise apartment buildings under construction right now in China. You can spot them by the cranes on their roofs. We looked for them out of the train window every time we rolled through a new town. Incredibly, despite all these new apartments coming onto the market each day, prices are still rising. Our friend Jessica owns an apartment here in Xi’an. She tells us its price has doubled in the last three years. Then there are all the new roads, expressways, tunnels, bridges, railways, train stations, subway systems, power plants, etc., they are building… Economic or Wasteful? It’s an incredible thing to behold. And China gets the money to pour all this cement and dig all these holes by borrowing from its banks. Look at the chart below. It shows the growth of the banking systems of China, America, Europe, and Japan over the last 10 years: 
You can see that China’s banking system has inflated by more than 400% since 2008, faster than any banking system has ever inflated in history. China’s economy is 36% smaller than America’s by GDP, yet its banking system is now 2.2 times bigger. The four largest banks in the world are Chinese banks. The big questions are, are these projects going to be economic? Or will they turn out to be wastes? And what’ll happen to all the loans China’s banks have made? Slowing Growth Kate and I noted a lot of the buildings are empty. We could tell they were empty by either getting up close… or by looking for dark buildings at night. We also noticed a lot of empty seats in the railway stations. I saw a report from Bloomberg showing China’s office vacancies reaching a 10-year high. Chinese cities consistently have far higher office vacancy rates than other major cities. In October, China reported its slowest economic growth since 1992. Meanwhile, according to Reuters, prices are falling at the factory gate but rising for the consumer. That’s a bad combo. While apartment prices are still soaring, auto sales just registered their 15th decline in 16 months. And the People’s Bank is injecting liquidity into the markets again… According to the Financial Times: China’s central bank made an unexpected Rmb200bn ($28bn) injection into the banking system on Wednesday [October 16], highlighting policymakers’ concerns over liquidity levels as economic growth falls to a 30-year low. We won’t know how this story ends for a while, but I can tell you what happened to the Terracotta Army... 
The Future of China’s Boom? The year after Emperor Qin died and they buried the army, there was an uprising. The government was overthrown. Marauders broke into his tomb, destroyed all the terracotta statues, set it all on fire, and then left it for the weeds to reclaim. In 1974 – more than 2,000 years later – some farmers were drilling a well in a field when they found some broken pieces of pottery. They dug a little deeper and found themselves in a cavern the size of an airport hangar filled with broken clay soldiers. They call it the greatest archaeological discovery of the 20th century. Today, it’s one of the main tourist sites in China, receiving over 20 million visitors a year… Hopefully this isn’t a peek into the fate of China’s apartment building boom... Regards, Tom Dyson
Editor, Postcards From the Fringe P.S. In 2018, my ex-wife Kate and I sold everything… handed over the keys to our Delray Beach apartments… drained our bank accounts… and converted everything to gold. Now, we live out of a small suitcase, exploring the world with our three kids. If you want to follow along, click here to subscribe to my e-letter, Postcards From the Fringe. It’s where I share my daily insights about the markets as we backpack around the world. Like what you’re reading? Send your thoughts to feedback@caseyresearch.com.
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