Skip to content

All posts by TGS - 48. page

Pessimism in China’s Housing Market Continues

Since January, the housing market has been experiencing a sharp downturn due to the facts that, in addition to other factors, banks have been tightening credit and inventory has increased. Commodity housing sales in large and medium sized cities slid by 20 to 30 percent with some down as much as 40 to 50 percent. 

In Shanghai, for example, new housing transactions were down 25.56 percent for the first 21 days in May, compared to the same period in April, and down by 34.86 percent compared to same period last year. 
Market analysts believe that, were the banks to loosen credit, the pessimism in the housing market would not change. In fact, it is almost impossible for banks to loosen credit to stimulate the housing market. A reduction in housing prices seems to be the only option to deplete the existing inventory. 

Source: 21st Century Business Herald, May 29, 2014
http://fangchan.21cbh.com/2014/5-29/5MMDA1NzFfMTE4MjM5MA.html

Briefings | | |   Economy/Resources

Business Bankruptcy Filings Escalate

Economic Information, a publication under Xinhua, reported that bankruptcies are on the rise and banks have tightened credit, adding fuel to the economic downturn. 

A total of 346 bankruptcy cases have been filed in the Courts in Zhejiang Province. This represents an increase of 145.07 percent compared to the same period last year. The debt of these bankrupt companies totals more than 159.5 billion yuan. This is a six fold increase compared to the debt in 2012, which was 24.3 billion yuan. 
Of the 346 cases, 198 are from companies in Wenzhou City. Closures of the companies have caused a domino effect. Among the waves of corporate bankruptcies, over 90 percent of Wenzhou credit guarantee companies have gone belly up. Wenzhou Credit Guarantee Investment Co., Ltd., the largest credit guarantee company closed its doors in July 2013. 

Banks have ceased making corporate loans and have started asking for an accelerated payment of principal on outstanding loans. In Hangzhou City, Zhejiang Province, the default of one of the largest companies affected more than 600 companies because they provided credit guarantees to each other. In Xiaoshan, and also in Zhenjiang Province, the insolvency of one company adversely impacted over 300 other companies due to the credit guarantees that they provided to each other. 
Source: Economic Information reprinted by State’s China Radio International, May 23, 2014 http://gb.cri.cn/44571/2014/05/23/3005s4552048.htm
Briefings | | |   Economy/Resources

Ten Local Governments Allowed to Issue Bonds to Repay Debts

According to China’s Ministry of Finance, the State Council has approved 10 local governments as part of a pilot program to give them the authority to issue municipal bonds and be responsible for the repayment of their debts. 

Prior to the pilot program, the central government was responsible for the payments of interest and principal on the bonds that the local governments issued. These payments were then deducted from the funds the central government allocated to the local governments. 
The 10 local governments are Shanghai, Zhenjiang Province, Guangdong Province, Shenzhen, Jiangsu Province, Shandong Province, Beijing, Jiangxi Province, Ningxia Autonomous Region and Qingdao. Of these 10 governments, Ningxia and Jiangxi are considered to have a strong solvency. Their 2013 debt ratios were 50.5 percent and 68 percent respectively. The estimated value of the bonds may reach 150 billion yuan and they may mature in five, seven, and 10 years. These bonds will become part of China’s first-ever municipal bond market. 
Source: China Securities, May 21, 2014. 
http://www.cs.com.cn/zq/zqxw/201405/t20140522_4397444.html
Briefings | | |   Economy/Resources

Housing Inventory Hits Record High

Daily Economic News reported that, as of end of April, 35 major cities saw an overall housing inventory increase of 2.6 percent compared to March and 19.5 percent compared to one year ago, hitting a five year record high. 

From 2009 through 2012, the inventory in Tangshan, for example, reached 17,410,000 square meters. Last year, only 1,460,000 square meters were sold. It would take another 10 years to deplete the existing inventory. Staring last year, banks stopped making loans to developers of residential housing. Shenyang has an inventory of 17,200,000 square meters, an increase of 21.5 percent compared to a year ago. It would take close to 20 months to deplete this inventory. 
Source: Daily Economic News, May 21, 2014 
http://www.nbd.com.cn/articles/2014-05-21/835560.html
Briefings | | |   Economy/Resources

Politburo Group Study on Safeguarding State Security

On April 25, the Politburo held the 14th group study on safeguarding the State security. Xi Jinping spoke again to repeat his emphasis on the issue. Earlier, on April 15, at the first session of China’s newly established State Security Committee, Xi had hosted the meeting and given a speech on State security. 
A Study Times article described the concept of State security as "a complete system including State security in eleven main areas: politics, homeland, military, economic, culture, social, technology, information, ecology, resources, and nuclear."
The article continued that China’s State security has its "domestic and foreign elements that are more complicated than at any other period in the history." "China is facing a dual pressure. Internally, it’s about political security and social stability; externally, it includes pressure on national sovereignty, state security, and its interests in development."
Source: Study Times, May 12, 2014 
http://www.studytimes.cn/shtml/xxsb/20140512/4927.shtml

Briefings | | |   Government/Politics

Housing Market: Mortgage Defaults and Foreclosures on the Rise

China Securities reported that, since the beginning of 2014, people have been defaulting on high-end real estate loans or have simply abandoned their property. Some bank staff members have said that they no longer make housing loans. Real estate auction announcements frequently appear on the homepage of major auction websites. It will take a couple of years for banks to auction off their foreclosed properties. Few banks are interested in offering low interest loans; they prefer to keep the interest rate at 10 percent or above. However, some investment professionals indicated that those who are willing to pay 10 percent interest for loans are more likely to default. Typically, they have secured emigrant status and bought properties overseas. They are the high risk groups for defaults on loans. 

Source: China Securities reprinted by Xinua, May 15, 2014 http://big5.xinhuanet.com/gate/big5/www.cs.com.cn/ssgs/fcgs/201405/t20140515_4390839.html
Briefings | | |   Economy/Resources

Huanqiu on Corrupt Chinese Officials Hiding in the U.S.

Huanqiu published a report on corrupt Chinese officials who have fled China. The report was titled, “U.S. Media: China Has Provided a List of a Thousand Corrupt Chinese Officials Who have Fled to the U.S.”

“Since the 18th Congress of the Chinese Communist Party, China’s anti-corruption and clean government measures have attracted attention both at home and abroad. One hot topic is how to bring those criminals who are corrupt officials and have fled China to justice. The U.S. media said that China has provided the U.S. with a list of such corrupt officials. The list contains the names of more than 1,000 people. Although from time to time the United States publishes the so-called news that ‘the U.S. will help China arrest corrupt officials,’ due to the lack of an extradition treaty and because of the complexity and the lengthy judicial procedures, apprehending those corrupt officials hiding in the United States faces numerous difficulties. In the past 10 years, only two people were repatriated from the United States to China, while recently, the exodus of corrupt officials has been speeding up. Some U.S. law enforcement officials and legal professionals have told the Global Times reporter that China and the U.S. should truly carry out judicial cooperation through diplomacy and bring these corrupt officials to justice. At the same time, China and the U.S. should pay attention to the new characteristics of the funds from corruption that are fleeing China and close the loopholes in surveillance and control that have allowed these corrupt funds to escape from China.” 
Source: Huanqiu reprinted by Xinhua, May 12, 2014 
http://zgws.xinhuanet.com/info.aspx?id=48790&typeid=20
Briefings | | |   Government/Politics

Xinhua: Investment Funds Are Selling off Their Real Estate Holdings

Xinhua reported that, according to statistics, in the first quarter of 2014, 41.28 percent of stock funds and blend funds sold off their real estate holdings. 

Out of 625 stock funds and blend funds, 258 cleared out their holdings in the real estate sector and now have zero investment in that sector. 
In those three months, the market value of the real estate stocks that the funds held dropped from 39 billion yuan to 31 billion yuan, a decrease of 7.8 billion. 
According to the 2014 first quarter reports of the investment funds, after the financial sector, the real estate sector was the hardest hit. A downward price adjustment and a market cooling have been confirmed for the housing market. The changes in the housing market will put significant pressure on the stock market. 
Source: China Securities, May 8, 2014 
http://news.cnstock.com/news/sns_yw/201405/3014364.htm
Briefings | | |   Economy/Resources