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Update: Car as Collateral in China’s Ordos
December 31, 2012
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In a recent Portal 9 article “Ordos: A Chinese City Constructed in the Fast Lane,” which I co-authored with Bert de Muynck for the journal’s inaugural issue, we argued that the automobile – more than the empty and, until recently, expanding skyline – would define Ordos’s future. Since completing the article, I returned to Ordos in summer 2012 for a few months of “social excavation,” exploring through the lens of urban anthropology the most recent developments of the city. This brief update provides an account of the current predicament of the automobile in the shadow of a precarious skyline.

In less than a year, everything seems to have changed, though the automobile – which represents velocity, acceleration, daring, and the hubris of rapid growth – still offers some way of understanding the city.

Since winter 2011, Ordos has taken an accelerated leap into the abyss of a financial debt crisis – a crisis that, in turn, has resonated through all levels of the urban texture and social strata: rich and poor, Han and ethnic Mongol, young and old, official and private.

An increasing number of bold development ventures, notable for their manic scope and shouldered by high-interest unregulated lending, characterized the local real estate frenzy. It finally crashed by the end of 2011: the first debtor-developers would either flee town or, with increasing regularity, commit suicide. Rumours, abductions, and threats of violence would follow in the maelstrom of unregulated lending as discussed in a recent conference presentation by Ordos researcher Max D. Woodworth. By summer 2012, the crisis had paralyzed around two-thirds of ongoing construction projects, halted the urban renovation process, and resulted in the outbound migration of laborers, who had arrived just recently to seize the opportunities offered by a boom-town economy.

A local entrepreneur working in a private investment company recently told me that his old grandparents had acquired a yellow Humvee. The large military vehicle is now jammed into a narrow brick alley outside the couple’s small one-story dwelling in the yet to be modernized residence area, “Building the East.” But how did an aging Chinese couple, each partner more than eighty-years-old, get their hands on this vehicle, more suitable for the set of a hip hop music video on MTV?

With the increasing regularity of private lending practices, the grandfather Lao Wang and his wife did nothing out of the ordinary when they extended the loan to a friend of the family – a developer – for a monthly 2.5% interest rate.

The last few years, Ordos’s residents rarely rely on salaries or government wages but mostly live off the informal lending system, or “eating from interest,” as locals like to phrase it. In the wake of the drastic collapse of real estate prices, their friend and debtor had encountered a cash shortage leaving his development projects stranded with no recourse to pay interest, or even return the principal to his many creditors. So, in an attempt to pre-empt the inconveniences of daily phone calls and visits from his creditors, he had decided to make an informal meeting with those who lent him money, none of whom affiliated with the formal banking industry.

As the old couple received the bad news, grandmother Wang suddenly had a turn and collapsed. Confronted with the old lady’s indisposition, their debtor offered to take his new car, the Humvee, as security until he was able to pay back the loan. Most of the other creditors would have to settle for property that would not meet the principal amount.

As it turned out, however, the real owner of the Humvee was yet to be determined in an ongoing lawsuit. Their debtor himself had acquired the car in a similar manner. The old Wang couple’s sense of security, therefore, was first and foremost a soothing gesture; a somewhat precarious peace of mind induced by the three-ton’s worth of mobile fortress with its V8 (325hp) 6.0-liter displacement engine.

In this way, cars still act as a pivot in the lives of Ordos’s citizens although they now serve different purposes. As there are many “Wangs” (i.e. informal creditors) out there, most of the high-end luxury cars are stashed away: they have now become the most common object for debt re-payment ever since the unregulated lending market crashed at the end of 2011. Today, cars flow through a constellation of owners – legal state institutions and informal lending circuits – and have almost created an economy of their own, only paralleled by real estate property that is also seized, transferred, and traded.
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Old Wang’s new Humvee. Cars, once an indicator of local prosperity and growth, now circulate more as collateral for loans and securities for unpaid debt.
Old Wang’s new Humvee. Cars, once an indicator of local prosperity and growth, now circulate more as collateral for loans and securities for unpaid debt.
  
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