only at denny's. captioning funded by cbs and ford-- built for the road ahead. >> pelley: it's the worst pharmaceutical disaster in decades. >> this should not happen in 2013. >> pelley: more than 50 people have been killed and around 700 are being treated for dangerous fungal infections caused by 17,000 vials of tainted medicine. our investigation turned up disturbing evidence of how it happened and exposed a critical gap in drug safety in america. as commissioner of the f.d.a. then, you can't tell us that every drug being used in the united states is safe and effected. >> no, i really cannot.

>> stahl: she is the fifth richest self-made billionaire woman in the world. she's pointing out her building. with her partner husband, she has built more of beijing than almost any emperor in china's history. >> china produced more self-made billionaires than any other country in the world. >> stahl: while xin's 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. >> i'm steve kroft. >> i'm leslie stahl. >> i'm morley safer. >> i'm bob simon. >> i'm lara logan.

>> i'm scott pelley. those stories tonight on "60 minutes." [ male announcer ] it's 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. ♪

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>> 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 high-risk 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: i've been in the hospital seven times, total of 75 days. i've missed thanksgiving and christmas and my son's birthday. >> pelley: julie otto is one of 13 injured patients who met us at st. joseph mercy hospital outside detroit.

>> willard mazure: i'm on 60 milligrams of morphine a day with no cure in sight. there is no cure in sight for me. >> pelley: willard mazure's 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 anti-fungal drugs. >> mazure: the medicine is just unbearable. you know, they talk about cancer treatments, and i'm sure they're 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. cadden's new england compounding center was what's 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

can't 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. you're going to... i'm 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 over-taxed 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: "something's going to happen, something's going to get missed, and we're 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 weren't compounding anymore, we were manufacturing. >> pelley: when you went to your supervisor and told him that, he said what? >> connolly: that's 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." he'd... either he didn't 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 shouldn't require federal inspection. the law passed, over the strong objections of then-f.d.a. commissioner david kessler. you, as f.d.a. commissioner, testified before them and you said, "don't do this."

>> david kessler: if you're not going to have oversight, one day, people are going to die. >> pelley: that day's arrived. >> kessler: this should not happen in 2013-- maybe at the turn of the previous century, where we didn't 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 doesn't know how many compounders there are or what they're 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 that's 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 that's right under the current system. and what i think emerged in the meningitis outbreak was that many patients and their health care providers didn't realize that they, in fact, were using a compounded product. >> pelley: as commissioner of the f.d.a. then, you can't 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, i'd 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 company's 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 follow-up names would be like a john doe, jane doe, bill doe, you know, jane smith, bill smith, et cetera. >> pelley: these weren't 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 simpson's name and homer simpson's 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, they'd take a phone directory within their office, and scribble out their extensions and fax it over to us. >> pelley: it's obvious what was going on, and it was obvious to them... >> yeah. >> pelley: ...that this wasn't above board? >> right, i mean, if you're in your position, if you're a buyer, and your job is to save money, and you're 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? you're 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 wouldn't do business with us. the ones that we didn't have as clients are the ones that knew, "hey, you guys can't be doing this. you're not doing it right." and we'd run into that a lot. but we'd move on to the next one. there's 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, don't let the sales team either come in today, or if they're already in the building, don't 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, they'd wonder what was going on, and why are you so big when you're supposed to be a mom and pop specialty pharmacy, and you're not? >> pelley: that sales force sold methylprednisolone to a pain clinic in michigan, which treated george cary's wife and anita baxter's mother. lillian cary and karina baxter were among the first to die. we've 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: you're not able to function. you're 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 we're being inspected, so, "everybody stop what you're 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 didn't know that. >> pelley: you didn't 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 clean-up, 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 compounding's 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. >> i'd hope it'd be through bars. whatever i said to him, i hope it'd 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: i'm 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. and tomorrow on cbs "this morning," "money" magazine reveals the 2013 list of best places to live. i'm jeff glor, cbs news.

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one appliance store helps more people... find savings and solutions than any other. this is sears. >> stahl: no one symbolizes china's rapid 30-year rise from the backwaters of communism to the second largest economy in the world better than real estate developer zhang xin. what's 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, she's 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 self-made billionaire woman in the world. >> zhang xin: this is us, the one outside, that one is us. >> stahl: she's pointing out her buildings. with her partner husband, she has built more of beijing than almost any emperor in china's history. how many buildings have you and your husband built? >> xin: oh, a lot. >> stahl: you can't even count them, right? >> xin: yeah. >> stahl: wherever you look, you see the company logo, soho china, on one cutting-edge skyscraper after the next. as a developer, xin pays special attention to design, which is why she's 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 china's emergence into the modern world. i'm wondering, when you see these buildings, if it ever strikes you, you are designing beijing. it's 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: that's china, you know? china-- if you think about what is the character of china, it's enormous scale. it's 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: ...that's so huge, it's swarming with thousands of workers. these kinds of projects are one reason for china's explosive economic growth.

recently, though, there've been fears of overbuilding and a real estate bubble. xin told us that's 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 don't feel there's 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 that's 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, it's 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: mm-hmm. that's why we're investing heavily. >> stahl: her business instincts are usually right. they've 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 self-made billionaires than any other country in the world. >> stahl: do you know what the american dream is? >> xin: mm-hmm. >> stahl: it sounds like the american dream, doesn't it? >> xin: mm-hmm. 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: mm-hmm. 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 re-education camp. >> stahl: but call it the revenge of the running dogs. their children are today the country's 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: mm-hmm. 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 that's 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 i'd 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 wasn't 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 didn't understand, nothing familiar. >> stahl: you didn't know anybody? >> xin: didn't know anybody. i sat on my suitcase, started crying. >> stahl: you end up-- no one's 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 xin's 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. i'll give you some of the quotes that you've said. "people spoke crassly, treated others badly, looked down on the poor and adored the rich." those are your quotes. >> xin: that's 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: that's 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 hasn't 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-- it's not manhattan, it's 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 wasn't 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, i'll 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 couldn't 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 i'm back to work.

>> stahl: now, they split their duties-- he focuses on everything inside china; she uses her wall street know-how to raise money abroad, and hires the world's 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. it's 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 that's very transparent. >> stahl: openness. >> xin: openness, yeah. the more openness it is, the better it is. we don't need to know anybody, we don't 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 it's 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? it's not food, it's not homes. everyone crave for democracy. i know there's a lot of

negativities in the u.s. about the political system, but don't 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-- let's say, i'll put a time frame on it-- in 20 years? >> xin: sooner. >> stahl: you're an optimist. >> xin: i am. >> stahl: a bold statement in a country with heavy government censorship and limited freedom of speech. and while she's thriving, china's residential real estate is in trouble. that part of the story, when we return. >> welcome to the cbs sports update presented by pacific life. jason dufner is the pga champion after a final round 2 under par 68 today to win the 95th pga championship and the final major championship of the year.

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find your perfect match at kp.org and thrive. >> stahl: if trouble comes in threes, then what'll be the next global market to melt down after the u.s. and europe? some are looking nervously at china. china has been nothing short of a financial miracle. in just 30 years, this state- controlled economy became the world's 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, it's easy to see why there's 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 it's rush hour. >> gillem tulloch: yeah. >> stahl: and it's 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. he's showing us around the new eastern district of zhengzhou in one of the most populated provinces in china, not that you'd 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? i've heard that they have actually been sold. >> tulloch: they've all been sold. they've all been sold. >> stahl: they've all been sold? they're owned.

>> tulloch: absolutely. >> stahl: owned by people in china's emerging middle class, who now have enough money to invest but few ways to do it. they're 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. it's 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 they're not just building housing, they're building cities. >> tulloch: yes. that's right. >> stahl: giant cities being built with people not coming to live here. >> tulloch: yes. i think they're building somewhere between 12 and 24 new cities every single year. >> stahl: unlike our market- driven economy, in china, it's 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, they'll come." but no one's coming. this is really completely, totally empty and it goes up... gillem took us to this shopping mall that's been standing vacant for three years. can i find this all over china? >> tulloch: yes, you can. they've 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: they're not real? so, k.f.c. didn't buy this space or rent this space? >> tulloch: no, they haven't. >> stahl: starbucks? >> tulloch: no. >> stahl: they just put the sign up? >> tulloch: that's right. >> stahl: it's all make-believe- - nonexistent supply for nonexistent demand. look at that-- swarovski, piaget. they're hoping for high end, too. >> tulloch: h&m. zara. >> stahl: ( laughs ) and it's all potemkin. >> tulloch: yeah. >> stahl: it's surreal and it's everywhere, like the city of ordos in mongolia-- built for a million people who didn't show up. and no, you are not in england. you're 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 you'll see, it's still standing there empty. >> stahl: well, i've heard that there is some industry there or some business, one business there. >> tulloch: marriage. >> stahl: wedding pictures! and what's 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 doesn't 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 they're building the wrong sort of apartments. >> stahl: and what's worse-- to build all these massive cities, they've 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. i'm just watching what they're doing. do you have any idea? >> tulloch: i think they're trying to recycle the bricks. >> stahl: these villagers are salvaging what's 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 it's very unlikely. >> stahl: what will happen to them, do you think? >> tulloch: they'll be forced to relocate somewhere. i have no idea where they'll go. >> stahl: these are the immediate casualties of the building boom. and there's another problem-- analysts warn that all this building has created a bubble that could burst. so, if the bubble bursts, who's 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, there's 50 million construction workers who are working on all these projects around china. >> stahl: the prognosis of a bubble about to burst isn't only coming from financial gloom-and- 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 today's situation is out of control. are homes in china too expensive today? >> wang: yeah. >> stahl: here's a number that i saw. a typical apartment in shanghai costs about 45 times the average resident's annual salary. >> wang: even higher, even higher. >> stahl: what does that mean for your economy if it's just too expensive for the vast majority of people to buy? >> wang: i think that dangerous. >> stahl: dangerous. >> wang: that's the bubble, so i think that's 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? that's the big issue. >> wang: yes, if that bubble... that's a disaster. >> stahl: if it burst? >> wang: if it burst, that's a disaster. >> stahl: to try and prevent the disaster, the chinese government decided to act. heard of their one-child policy? since 2011, china has had what amounts to a one-apartment

policy, where it's 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 don't have the money to go forward? >> wang: yeah, that's problem. that's 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 stephenson-yang, 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 stephenson-yang: there's 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 haven't had any work done on them for weeks, months, as if the developers just don't have the money to go on. >> stephenson-yang: it's true. you see that happen first. the migrant workers will go home. that's often the first sign that the debt crisis is starting. >> stahl: the debt crisis? >> stephenson-yang: 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 can't repay them, the whole economy will seize up. the government's great fear is that all this could lead to social unrest, and that's 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 there's already been some demonstrations over real estate around the country. >> wang: yes. >> stahl: have you had demonstrations against your showrooms anywhere, you're 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: mm-hmm. >> stahl: a lot of economists say that it's too big for even this government to control. >> wang: mm-hmm. i believe that top leaders have

enough smart to deal with that. i hope! >> stahl: you're doing this. >> wang: but that's uncertain. >> stahl: meanwhile, people who can afford it are still buying as much real estate as they can. they're even finding ways around the one-apartment restriction in big cities. can't 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 don't 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. it's a taste so bold, yet so smooth

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