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Financing Difficulties Caused 400 Chinese Real Estate Companies to Go Bankrupt

The real estate industry has been the first to bear the brunt of the Chinese government’s actions to tighten corporate finance. A mainland Chinese paper The 21st Century Business Herald quoted from court data that at least 408 real estate firms have declared bankruptcy. Guangdong province is leading the number of bankruptcies, followed by Zhejiang and Jiangsu.

At the same time, a researcher at the Guangdong Real Estate Research Association, who observes China’s real estate dynamics, said that the information mainly comes from the court’s bulletin board, and that there is room for the discussion of some data. The researcher pointed out that most of the companies that entered into bankruptcy procedures were small and medium-sized firms that had been plagued by financing problems. He also said that firms that have difficulty do not necessarily choose bankruptcy. Some will “sell the project as well as the land to large companies.” Meanwhile the Chinese government and state banks maintain a high degree of vigilance over the industry and exert tight control over the scale of housing credit. A major shock to the market will bring about systemic risks.

September and October are traditionally the peak season for the Chinese housing market. However, according to the National Bureau of Statistics, the sales price of new commercial residential buildings in 70 large and medium-sized cities increased by 8.4 percent in September. That was 0.4 percentage points lower than the increase in August. It was the smallest climb in the past year, while the housing prices have been on the rise for 48 months in a row.

Source: Central News Agency, October 30, 2019

CNA: Government Paying Off Debt Is Now a Political Duty

Primary Taiwanese news agency CNA (The Central News Agency) recently reported that Chinese Deputy Premier Liu He tasked all levels of the government, as a “political duty,” to pay off their debts owed to private sector companies. Currently, privately owned companies are facing high pressure from both internal challenges and international threats. Liu indicated that this important task is tightly related to the government’s reputation, economic growth, social expectations, and the job market. The measures of the task were established to, by the end of this year, clear up half of the debts that the government and state-owned companies owe as well as all debts that the central government owned companies owe. The urgent task reflected a growing problem that the government, for many years, has been dragging out the payments owed to the private sector. The current domestic and international economic challenges have now brought that issue to a tipping point. Private companies in China face a very unfair business environment.

Source: CNA, October 23, 2019

Aboluowang: Chinese Economist Questioned Authenticity of the Official 3rd Quarter GDP Number

China just announced that the GDP growth rate in the third quarter was six percent, but Xiang Zuoxiu, a professor at Renmin University who is the deputy director of the International Monetary Research Institute, publicly questioned the number and stated that it was seriously overestimated.

On October 18th, the National Bureau of Statistics announced that GDP in the third quarter increased by six percent year over year, which was the lowest since 1992 and below the expected rate of 6.1 percent. In his Wechat account, Xiang Zuoxiu stated that the official GDP growth rate was “obviously overestimated.” He said that most of the fiscal revenue and corporate profits show negative growth. In the first three quarters the national tax revenue also showed negative growth, so how could the GDP growth rate be six percent? He analyzed that even if the tax cuts lead to a fiscal decline while GDP still maintains a growth rate of six percent, then either the corporate profits would grow rapidly or the income of the people would grow rapidly. However, neither of them happened. This indicates that the GDP growth is not so rapid.

Xiang spoke to the Executive Class of Renmin University in December last year. His speech was bold and blunt. It spread widely on the Internet but the officials also censored what he said. In his speech, Xiang pointed out that China’s economy is now in serious decline. The GDP growth rate was not 6.5 percent as the statistics bureau’s said. Instead, it was 1.67 percent, and might even be negative. He also pointed to many problems facing the current Chinese economy and society. The biggest obstacle that the companies have to deal with is that the government lacks credibility. Xiang proposed that only tax reform, political reform, and state governance system reform could solve the fundamental problems.

Source: Aboluowang, October 19, 2019

As Subsidy Ebbs, China’s Electric Vehicle Sales Down by 34 Percent

According to the China Association of Automobile Manufacturers, China’s auto sales in September were 2.271 million. This represents the continuation of a decline stream that has lasted 15 months in a row and is down 5.2 percent from the same period last year. The sales for the first nine months of the year were 18.371 million, down 10.3 percent year-over-year. In September, the national sales volume of passenger vehicles was 1.933 million, down 6.3 percent year-over-year. As the Chinese government scaled down its car subsidies, the electric vehicle sales for September was 80,000, down 34.2 percent from the same period last year, seeing a third consecutive month of decline.

In March of this year, China announced it would reform its subsidy system and limit the scope of subsidies to a few top brands. Back in 2017, the Chinese government provided a total subsidy of 22 billion yuan (US$3.1 billion) to electric vehicle manufacturers.

Contributing to the decline is the slowdown in the overall economy and the plummet in consumer confidence amid the US-China trade war. The market once expected that large cities would relax their traffic restrictions or the government would provide new subsidies to new car buyers. However, those expectations failed to materialize and the industry suffered a blow.

Source: Central News Agency, October 15, 2019

Cross-strait Marriages between China and Taiwan Down 80 Percent over 15 Years

Statistics from the Taiwan’s Ministry of the Interior show that, since the opening of people-to-people exchanges in 1987 between mainland China and Taiwan, the number of intermarriages increased continuously until 2003, when it reached 34,109, accounting for 20 percent of the total number of marriages in Taiwan in that year. However, the trend reversed and declined, year by year, after that. By 2014, the number of newly cross-strait married couples fell below 10,000. In 2018, it was only 6,800. Over the past 15 years since 2003, the number of cross-strait marriages has shown a steady decrease.

According to the Taiwan based United Daily News (UDN), as a matter of fact, the cross-strait marriages already plummeted to 11,886 in 2004. The drop was probably due to the fact that, in 2003, the Taiwanese government Introduced a requirement for face-to-face interviews in order to prevent fake marriages.

The UDN report also mentioned that, among the cross-strait marriages, the percentage of Chinese women marrying Taiwanese men has gradually declined. In 2004, it was as high as 98.2 percent. In 2018 it fell to 87 percent. In contrast, the ratio of Chinese men marrying Taiwanese woman has gone up year by year.

Source: Voice of America, October 7, 2019

YouTube Recording on Beijing’s Ruling Crisis

On September 8, an audio recording discussing Beijing’s handling of the U.S.-China trade war was posted on YouTube.

It is not clear who made the speech. The tone indicated it was from an official with some insider information. The time may have been in May of this year, after President Trump announced a 25 percent tariff on US$200 billion worth of goods imported from China and before he announced a tariff on the remaining US$325 billion in goods. Despite the time, the points in the speech are still relevant.


“When the U.S. imposes tariffs, we have many ways to balance it out, such as printing more money or reimbursing the tariff to the exporting companies. However, the biggest problem is that the foreign companies will no longer stay in China. They will move to Vietnam, Thailand, or other countries to maximize their profits.

“The foreign companies’ departure will leave 45 million Chinese who work there jobless. The state-owned enterprises cannot absorb such a big population. Chinese export companies will also be finished. A total of 80 million people will have no jobs. They all have mortgages. What kind of problem will that bring to China?

“The employment problem is tied to the financial crisis and the real estate crisis. These two crises are the ruling party’s ruling crisis. An economic hard landing will bring a dramatic impact to China.”

Economic Structure

“Liu Shiyu, former head of the Securities Regulatory Commission, is the head of the All China Federation of Supply and Marketing Cooperatives. He is setting up Supply and Marketing Cooperatives (SMCs) in each province. SMCs (were popular during the planned economy and) disappeared after the reform and opening up, but they are coming back. The goal of setting up SMCs is to let the government conduct unified purchases and unified sales.

“The higher levels have already arranged to use the planned economy to manage China’s weakening and hard-landing economy. The economic structure will go back to being a planned economy. There will be no way to start a private business.”

New Currency

“Another way is to print new money and recycle the old currency. This will force people who hide money under their mattresses to bring their money out for exchange.

“There are two concepts: One is that the renminbi is just a piece of paper, not real wealth. The other one is that people’s wealth (in banks) is the government’s liability. If the government wants to reduce its debt, it can evaporate the stock market or evaporate the real estate market.”

High-Level Fighting

“Whatever we do will not change the fundamental situation in China because the high-levels are conducting fierce in-fighting. There are three forces fighting each other. Among them, one group opposes the planned economy, but whether it can win out is not clear.”

Trade Negotiations

“Many of the (new) opening measures are just to fool the Americans in China’s trade negotiations. Actually, even if the negotiations reach agreement, (China) may not honor these measures. When have the Chinese honored their words? You think that the government issues an order then it becomes effective? No way…”

Source: YouTube, September 8, 2019