Slow times, fast cars

Ordos, an Inner Mongolian boomtown that holds one sixth of the country's coal resources, is suffering from dropping mineral resource prices and a faltering real estate market. But for used car buyers, it is a paradise thanks to the downturn as local residents sell them as collaterals.

Since the start of 2012, people from all over the country have come to the city to buy a car, and there are many people seeking business opportunities in the field, the Economic Observer reported on November 23.

Xu Wenbo, a coal miner turned car scalper in the city just scored a Toyota Land Cruiser GXR 4500 at one tenth of the original price.

After successfully procuring several luxury cars at cut-rate prices for clients, Xu, who asked to use a pseudonym for this article, bought this vehicle, made in 2010, for just 110,000 yuan ($17,664).

Car town

Car scalpers like Xu are middlemen that coordinate between buyers and secondhand car companies, hammering out cheap deals.

A used car company manager in Ordos told the paper that the market has been rising, and high-end brands, including Mercedes-Benz, BMW and Audi, are among the most popular.

Thanks to resources, the GDP per capita in the nouveau riche city beat all Chinese cities in 2011, exceeding Hong Kong. The city also has more than 7,000 yuan billionaires, according to a report by the Ministry of Housing and Urban-Rural Development.

Resources including coal, rare earth and natural gas have helped prop up the city's economy and helping residents rake in money.

Many locals also became rich after receiving significant compensation for expropriated land.

The city government started large-scale land expropriation in 2004 for coal exploration and urban construction. Residents have received substantial demolition and relocation compensation from the local government, leading to more millionaires and luxury car owners.

The report also said that the city with a population of 1.6 million has the largest number of Land Rovers in China. In 2010, there were over 5,000, in contrast to only 2,000 taxis.

There are more than 10 authorized luxury car flagship stores in the local Tongchuan Automobile Trade Market, including Land Rover, Cadillac and Porsche. Ferrari and Maserati also tested the market feasibility of opening a store last year, according to China Times.

Slump brings bargains

But all that took to a sudden change last year, when the national economy started to slow down. As a result, banks in the city have been pressuring on borrowers for repayment, and some even report defaulters to the police.

A businessman in the coal sector told the paper that people are selling cars, using them as collateral, or hiding them for fear that creditors might take them.

Xu added that luxury cars are being sold to secure liquidity to pay back the debt, as the local property industry, depending largely on investment from private capital, has been going down along with the coal mining industry.

"Selling cars, for many, is the fastest way to get cash," he said.

"Some construction sites are left half-finished due to a lack of capital," a local used car dealer, surnamed Zhao, told the Global Times.

"More people began selling cars in late 2010 when the economy showed signs of dipping," he said.

Not that cheap?

But Zhao challenges the report by the Economic Observer.

"Getting a secondhand car at such a cheap price as reported is almost impossible," said Zhao, who has been in the secondhand car business for four years, trading brands such as Toyota, Land Rover, BMW and Benz at the local Sanlian Automobile Trade Market.

It's true that some people sell their luxury cars when they are short of money, but this year the secondhand car market has remained relatively stable, Zhao explained.

"Most of my clients are car scalpers. Recently there've been an increase in the number of visitors coming to enquire, most of whom are from outside Inner Mongolia," said Zhao, adding that it's become customary for locals to blow their compensation on luxury cars.

"Some love luxuries and look up to vanity, what can I say?" said Zhao, explaining that it's natural for people to buy good stuff when they get rich. "It's true that some residents in Ordos, even if they do low-paid work such as housekeeping and cleaning, drive Land Rovers."

A local resident in Ordos also told the Global Times that the reports did not reflect the true situation in the city.

Song Jiageng, an official from the publicity department of the CPC Ordos City Committee, told the Global Times that it's common for local residents to purchase new houses after they get a demolition compensation, but few of them splurge the compensation on luxury cars to showcase their wealth.

"I haven't heard of anyone around me wanting to sell their cars, nor have I seen anyone drive luxury cars," said Song, who lives in the city's new Kangbashi area, adding that he wants to clarify that Ordos is not as fragile as some claim, and most people there do not take pride in their fortunes like people assumed.

"The private capital restraint caused by the sagging property market has pushed many to sell their assets, including cars, after the country's macroeconomic measures drove up the inflation and injected excessive capital into the real estate market," said Jiang Yuezhong, deputy head of the Inner Mongolia Academy of Social Science.

"Ordos is just an example of the negative consequences of previous policy," Jiang added.