Skip to content

Economy/Resources - 159. page

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

China Securities Journal: Three Major Challenges for China’s Economic Reform

A China Securities Journal article listed three major challenges that severely hinder China’s economic reform:

1. The lack of protection for legitimate property rights. Local governments expropriate farmer’s land, even when the farmers have the proper contracts for using the land. When there is a need to boost the economy, local governments invite companies to invest. Later, when they try to cool down some overheated sectors, the local governments force them to exit the market.

2. The lack of a formal government budget spending process. The top official can, individually, make a decision on spending. At end of the budget year, government agencies rush to spend funds.

3. The lack of measurements for correct performance and of a reward system for government officials and the heads of state-owned enterprises. Their evaluation is linked to short-term economic achievements instead of long-term performance. This induces officials to pursue temporary results while leaving the major burdens for the public to handle in the long run.

Source: China Securities Journal Online, May 13, 2014
http://www.cs.com.cn/sylm/zjyl_1/201405/t20140513_4388241.html

China Review News: New Countermeasures to Guard Against and Defuse China’s Financial Risks

On May 18, 2014, China Review News published an article discussing China’s rising financial risks. The article suggested “new countermeasures to guard against and defuse these financial risks.” Below are the new countermeasures recommended in the article:

  1. Carry out thorough investigations into China’s financial risks to enable easier management. However, the results of these investigations should not be released to the public so as to prevent any substantial volatility in financial markets.
  2. Develop contingency plans for financial emergencies.
  3. Set up a bank deposit insurance system as soon as possible to stop people from withdrawing all of their money from banks.
  4. Further strengthen supervision over financial businesses.

Source: China Review News, May 18, 2014
http://hk.crntt.com/doc/1031/9/2/4/103192492.html?coluid=53&kindid=0&docid=103192492&mdate=0518071527

Non-Performing Loans Hit New High

Sina Finance, a popular Chinese financial news site under Sina.com recently reported that the amount of non-performing loans reached RMB 646 billion yuan (US$104 billion) in the first quarter of 2014. That figure represents a record high for the past six years. The scale of defaults has continued to rise for ten quarters in a row. The report expressed the worry that, with the slow-down in the Chinese economy, more and more credit defaults are surfacing. The China Banking Regulatory Commission (CBRC) also stated that the nationwide overall bank credit risk level has been increasing. Bloomberg analyst Rainy Yuan pointed to the quality of assets as the biggest issue that Chinese banks face and to the government’s unwillingness to provide a monetary stimulus policy as a contributor to the worsening situatiion. CBRC is calling on banks to have tighter risk management while preparing for new pressure tests for the sector.
Source: Sina Finance, May 16, 2014
http://finance.sina.com.cn/money/forex/20140516/121419132270.shtml

300 out of 657 of China’s Cities Face a Severe Water Shortage

According to the Ministry of Housing and Urban-Rural Development, based on the standard set by United Nations Human Settlements Program, out of 657 cities in China, over 300 cities can be categorized as facing a “severe water shortage.” The Ministry also disclosed that the consumption structure of China shows that agricultural use is at 61 percent, industrial use is at 24 percent, and residential use in the urban regions is at 13 percent. 

Source: Xinhua, May 17, 2014
http://news.xinhuanet.com/politics/2014-05/17/c_1110734884.htm

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

Xinhua: Capital for Real Estate Companies Is Drying up

Xinhua recently reported that, according to the E-House Real Estate Research Institute’s "Report on Real Estate Enterprises’ Capital in the First Quarter of 2014," China’s real estate companies are tight on money.

For the first quarter, the year-on-year increase in the rate of fully-funded capital was 6.6 percent, a significant drop from last year’s 26.5 percent. On the source of capital, year-on-year foreign investment decreased 33.9 percent, while money from domestic lending and self-raised capital increased by 20.4 percent and 9.6 percent respectively.
The year-on-year increase in the rate of money lent domestically, foreign investment, self-raised money, and other sources of capital also dropped by 12.7 percent, 66.7 percent, 11.7 percent, and 30.8 percent respectively.

Unlike the tight money in real estate, the land market was still hot. Ten typical cities’ land transfer fees totaled 269 billion yuan (US$44 billion), an increase of 83.1 percent from a year ago. The total in land transfer fees from first tier cities (Beijing, Shanghai, Guangzhou, and Shenzhen) was 175 billion yuan (US$28.6 billion), which was 35 percent of last year’s annual amount.

As both overseas capital and domestic capital are drying up and as land prices keep increasing, the real estate business faces a severe money challenge. "Mid-level and small companies need to prepare for bad times. Some companies that can only tolerate a low risk may be forced out of the market."

Source: Xinhua, May 13, 2014
http://news.xinhuanet.com/house/bj/2014-05-13/c_1110654420.htm

HSBC’s April Chinese Manufacturing PMI Remains Low

Well-known Chinese news site Sina Finance recently reported that the newly released HSBC April Chinese Manufacturing PMI (Purchasing Managers Index) number remains low, at 48.1. This key indicator has remained below 50 for four consecutive months. Both “new export orders” and the “employment rate” have dropped significantly. Qu Hongbin, the HSBC Chief Economist for the China Region, commented that the domestic demand level recovered slightly but still remains low. He expressed the belief that the new numbers demonstrate that the manufacturing sector as well as the whole Chinese economy are still slowing down and that more economic stimulation policies are needed. PMI is an indicator of financial activity reflecting the purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline. 
Source: Sina Finance, May 5, 2014
http://finance.sina.com.cn/china/hgjj/20140505/103519001934.shtml