Economy/Resources - 54. page

A former Chinese official, Sheng Songcheng, wrote an article titled, “China’s Real Estate Market Is Now at a Turning Point.” Sheng is the former Director of the Survey and Statistics Department of the People’s Bank of China and is now a Professor of Economics and Finance at the China Europe International Business School.

Sheng said that China’s real estate industry is a at a transition point. In the future, China is unlikely to rely on this industry to boost large economic growth. China’s per capita dwelling space is close to 2/3 of that of the United States, while its per capita GDP is only 1/6 of that of the U.S. This indicates that the development of China’s real estate industry has reached a new stage (a ceiling).

Sheng argued that, although real estate development may not help the economic growth much in the long run, it still can in the short term, especially during the downfall of the economy due to the COVID lockdown,. He suggested that the government should loosen policies and provide more money to help the struggling real estate companies to complete their projects.

Source: SINA, July 29, 2022
https://finance.sina.com.cn/china/2022-07-29/doc-imizmscv4009355.shtml?cre=tianyi&mod=pcpager_news&loc=21&r=0&rfunc=96&tj=cxvertical_pc_pager_news&tr=174

China attempted to regulate the tutoring industry with a “double reduction” policy to reduce the burden on both students and parents. A year later, the tutoring industry has not disappeared, but has gone underground, with higher tuition fees and more hunting efforts that end up redistributing resources to middle and upper-class families.

For example, a parent surnamed Wu in Beijing said her child’s English class used to cost about $20,000 a year before the “double reduction,” but now it’s twice as much due to a special arrangement for a private tutor. She estimated that her daughter’s extracurricular learning costs are more than $10,000 a month. Such tutoring expenses are affordable for the Wu family. However, most Beijing families earn only a quarter of her family’s income.

Another parent in Shanghai, surnamed Fan, said her daughter can only attend a tutorial class that has been converted to a non-profit organization due to the “double reduction” policy. To cut costs, the classes have switched from physical to online. Her child has not gained much and her grades have slipped.

Fan said that although she saved money on tutoring, she had to spend more time teaching her daughter. She found she could not teach as systematically as the tutoring class and she also said it was difficult for her to find underground tutoring as other parents have been reluctant to share their information. In some cases, parents worry someone might tip off the authorities. In others, it’s because the competition at their children’s schools is so fierce. They don’t want other children to have access to the same tutor.

Source: Central News Agency (Taiwan), July 26, 2022
https://www.cna.com.tw/news/acn/202207260241.aspx

According to a survey released by a Japanese data provider, as of June 2022, the number of Japanese companies in mainland China was 12,706, the lowest for the past 10 years. The survey points out that the “Zero Covid” policy has added to the risk of doing business in China. It also points to a trend involving the growing  exodus of companies from China.

Compared to the last survey conducted in February 2020, there were 940 fewer Japanese companies (about 7 percent less). Among all the previous surveys, the year 2012 saw the highest number (14,394) of Japanese companies in China.

Among all the cities, Shanghai hosts the largest number (6,028) of Japanese companies. However, the number is 272 lower than it was in the previous 2020 survey. Since late March, and for about two months, Shanghai has been under lockdown and has been closed. Factors such as a delayed supply of parts have dealt a huge blow to the operations of Japanese companies.

The data provider, Imperial Database, observes that the extended lockdown under the “Zero Covid” policy has led to work stoppages, production shutdowns, and logistics and supply chain disruptions. There is an ongoing movement of European and American companies leaving China, with Japanese companies also pushing for supply chain adjustments.

Source: Kyodo News, July 23, 2022
https://china.kyodonews.net/news/2022/07/462eb725f11e.htmlS

The lithium battery is critical for electric cars. Chinese companies have been buying lithium mines around the world.

China’s Ganfeng Lithium announced on July 11 that it will buy 100 percent of Argentina’s Lithium shares for US$962 million. Lithea has two projects at lithium salt lake in Argentina, which can produce 30,000 to 50,000 tons of lithium carbonate. Ganfeng has another four lithium salt lake projects in Argentina, three lithium mines in Australia, two lithium stone projects (one in Mali and one in Ireland) and one lithium clay project in Mexico.

China owns 6 percent of the global lithium reserves and produces 13 percent of the global lithium output. Chinese companies manufacture half of the total lithium batteries.

Chinese companies intensified competition to control the lithium resources outside of China. Six companies, including four Chinese companies, bid for lithium resources in Bolivia. Ganfeng Lithium beat CATL to buy the Canadian company Millennial which has two lithium salt lake projects. BYD, a Chinese electric car company, signed an agreement to buy six lithium mines in Chile. Tianqi Lithium bought 24 percent of the shares of SQM, a lithium mine company in Chile.

Source: Epoch Times, July 17, 2022
https://www.epochtimes.com/gb/22/7/17/n13782559.htm

In China, more and more businesses are finding it increasingly difficulty to survive and have had to close their doors. The reason is the COVID-19 epidemic coupled with the government’s tough “Zero-COVID” policy. On July 21, China’s Guyu Data reported that the vacancy rate of shops in Shanghai and Guangzhou reached 9.8 percent and 14.1 percent, respectively, (data for most cities are not yet available). In 2019, the vacancy rates in China’s first- and second-tier cities were around 6.1 percent. That rate increased to 11.0 percent and 9.0 percent in 2020 and 2021. Generally speaking, a store vacancy rate of 6 percent is cause for alarm.

From January to April, the total daily shopping mall traffic in China decreased by 19 percent compared to the same period last year. According to China’s National Bureau of Statistics, the total retail sales of consumer goods in April was down by 11.1 percent year-over-year.

In the first quarter of 2022 in Beijing, Shanghai and Guangzhou, the store opening/closing ratios were 0.85, 0.88 and 0.76, respectively, showing more store closures than store openings.

In the second quarter of 2022, the People’s Bank of China conducted a questionnaire survey of 20,000 urban depositors in 50 cities nationwide. The results showed that 23.8 percent of residents tended to “consume more,” while 58.3 percent of residents tended to “save more.” This is 3.6 percentage points higher than the previous quarter.

Source: Creaders.net, July 21, 2022.                                                                                                                                                             https://news.creaders.net/china/2022/07/21/2507106.html percent

Following the protests of thousands of depositors in Henan Province as they could not withdraw their money from a local bank, people in China have discovered that the difficulty in withdrawing money has also occurred in other provinces and cities.

According to China Times, a newspaper based in Beijing, one depositor from Shaanxi province, who opened an account at a Hainan branch of the Industrial and Commercial Bank of China (ICBC), recently found he was unable to withdraw, transfer or spend money from his account. Another depositor from Hunan province also said that he had his bank card frozen after taking out a loan from a bank.

Another mainland Chinese newspaper, Securities Daily, reported that similar cases also took place in Beijing and in Shandong province. In response to media inquiries, the bank involved said the operation was a risk control measure taken by officials to prevent accounts from being used for money laundering.

Source: Radio France International, July 20, 2022
https://rfi.my/8b0E

At a press conference on July 15, China’s National Bureau of Statistics announced that the Consumer Price Index (CPI), the key measure of inflation, was 2.3 percent in the second quarter. It was 2.1 percent for both April and May, and 2.5 percent for June. In the U.S., the CPI in June was 9.1 percent, reaching a 40-year high.

The South China Morning Post (SCMP) has reported on why China’s inflation rate has been relatively lower than that of the West. A major reason for China’s lower inflation rate is that the weight of products included in the CPI calculation is very different.

CPI tracks the prices people pay for a “basket” of goods and services. The list of goods is weighted, with those more often bought for daily consumption getting a higher weight.

While China puts more weight on food and clothing, the U.S. values housing and transportation more, the latter being more susceptible to global energy prices.

According to Huang Wentao, an analyst at the China Securities Finance Corporation (CSF), in China’s CPI calculation, the weight of food is about 18.4 percent, while that weight in the U.S. CPI is 7.8 percent; China’s weight for clothing and apparel is about 6.2 percent, while in the U.S. it is 2.8 percent. The rent for housing accounts for 16.2 percent in China’s CPI, and 32 percent in the U.S. calculation. Transportation accounts for 10.1 percent in China, which is much lower than the 15.1 percent in the U.S. counterpart.

Source: Central News Agency (Taiwan), July 15, 2022
https://www.cna.com.tw/news/acn/202207150277.aspx