CHINA Are You Sure It Can't Happen There?

You probably already know plenty about the golf boom in China. I'm sure you've heard that golf courses are being built in the People's Republic at a dizzying, near-exponential pace that could easily result in the opening of 1,000 or more new tracks over the next two decades.

Such growth hardly seems possible, until you remind yourself that everything in China happens on a scale that would be unimaginable in a normal-sized country. If its golf participation continues to grow as it has over the past decade, China can easily accommodate another 1,000 golf courses, maybe even 10,000.

That's why it sometimes seems as if China is an unstoppable force. It's one of the few places on earth where people are still writing checks, so it has a gravitational pull on all of us who make a living in golf.

But maybe it's time to ask the obvious question: Is there an immovable object out there somewhere?

I ask because several news services have recently reported some disturbing news about the real estate market in the People's Republic.

MarketWatch, citing a study by a research firm called Standard Chartered, says that real estate prices in China more than doubled in 2009.

Allow me to state the obvious: Such an increase isn't sustainable.

MarketWatch also says that real estate prices on Hainan Island, China's major golf hot-spot, increased by more than one-third in the first five weeks of 2010.

Clearly, also not sustainable.

Just last week, the New York Times noted that real estate prices in Shanghai have increased by more than 150 percent since 2003 and, as a result, an 1,100-square-foot apartment now costs $200,000.

Okay, that doesn't sound like much. But consider the newspaper's next sentence: "Shanghai residents typically earn less than $5,000 a year."

My math isn't very good, but I believe the apartment is roughly 40 times the salary. In the United States, you can't get that kind of mortgage, at least not anymore.

The New York Times also says that "speculators are snapping up properties on the expectation that prices will continue to rise, as prices have nearly every year for more than a decade."

As a result, according to the Times, "developers are scrambling to build more mansions, villas, and high-rise apartments with names like Rich Gate, Park Avenue, and Palais de Fortune."

Sound familiar? Because I have a distinct recollection of something like that happening in the United States just a few years ago.

And look at us now.

If you think that the Chinese government hasn't noticed, or isn't concerned, you'd be wrong.

"There is a bubble forming, and it is bound to burst if effective measures are not applied soon," a government official recently told China Daily, a state-run newspaper.

If the bubble bursts, some of the sizzle will inevitably leave China's golf business. We saw it happen in the United States. Buyers get skittish, bankers tighten up, over-leveraged developers go broke. Things fall apart. And when they do, there's nowhere to hide.

It happened here, and it can happen there. Those fabulous golf communities that are taking shape in China could, virtually overnight, become ghost towns.

Don't think so? Because it's also become clear that China has its share of developers who are afflicted with a "build it and they will come" mentality.

In the current issue of Executive Travel magazine, a U.S. golf architect, David Dale, says that some Chinese golf communities are taking shape in places that are so far off the beaten track that they can't possibly pencil out.

“There are 54-hole complexes going up in remote places, three hours from the nearest city, and there’s no logical way for the operating numbers to make sense,” says Dale, a partner in Santa Rosa, California-based GolfPlan. “But they’re in a projected growth corridor, and the land is seen as having huge appreciation potential.”

This is no surprise. If you were a developer, how would you maximize the potential of land in the middle of nowhere?

Well, you'd make your community as exclusive and as full of cachet as it could possibly be. You'd build an ultra-expensive golf course (maybe even two) designed by a "brand-name" architect, and you'd build huge, luxurious houses that would be coveted by home buyers eager to show off their new-found wealth.

Kind of like what Tim Blixseth did at Yellowstone Club. Or what Bobby Ginn and Bonita Bay Group did in Florida. Or what Pivotal Group did in Park City.

I could give other examples, but I'm sure you get the point.

Which leads me to a related issue, this one raised by Michael Hurdzan in a recent issue of Sports Illustrated.

"The danger I see," said Hurdzan, a Columbus, Ohio-based golf architect, "is that the developers and golf architects will go out and make the same mistakes in Asia that they made here in North America. They'll build mostly big resorts and private clubs. They won't make it a people's game."

And wouldn't it be ironic if things worked out that way in the People's Republic?