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China’s Household Bank Deposits Increased by 58 Billion Yuan Over Last Four Years

According to the latest data released by the People’s Bank of China, household bank deposits increased by a total of 58.24 Trillion Yuan (US$ 8 Trillion) during the period from early 2020 to January 2024. Of the increase, 82% was attributable to time deposits. The total increase in deposits over these four years is equivalent to the increase seen during the period from 2009 to 2019.

Commentators have attributed the influx in bank deposits to “the international and domestic situation.” Many affluent families decided to halt investments during the pandemic. Meanwhile, ordinary families, facing reduced income, chose to conserve their resources and earn interest by saving money in banks.

With the increase in deposits, Chinese banks have been under pressure to issue loans and generate returns. Since the start of the COVID-19 pandemic, China has seen reduced demand for bank loans due to the decrease in China’s overseas orders and the rapid shrinkage of the country’s investment in infrastructure / housing construction. Property values have been falling, the Chinese stock market is declining, and private capital investment have seen significant contraction. Apart from export-oriented companies with existing orders, other businesses learned the lesson that they should not make investments, putting banks in a difficult position.

Source: Radio Free Asia, February 26, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/gt1-02262024233157.html

 

 

Briefings | | |   Economy/Resources

China’s Foreclosure Market Sees Record Listings, Flat Sales in 2023

Data from China Index Academy, a Chinese real estate research firm, shows 100,400 foreclosed properties were put up for auction in January 2024, a 48.2% year-over-year increase from January 2023. About 12,700 foreclosed properties sold in January 2024 for ¥27.31 billion (US$ 3.8 billion). The transaction rate of 12.63% was lower than the 15.8% seen in January 2023.

Foreclosure transaction rates were higher in economically strong regions. Five provinces/municipalities – Shanghai, Zhejiang, Beijing, Tianjin and Fujian – saw rates of over 20%. Shanghai had the highest rate, at 38.6% (154 out of 399 listings sold). Zhejiang had the second highest rate, 35.94% (1,185 out of 3,297 sold).

China’s foreclosure market has seen increased attention in recent times due to economic headwinds and uncertainty. The China Index Academy estimates that there are about 800,000 foreclosure listings in China in 2023, a record 36.7% year-over-year increase compared with 2022. Only 149,000 of these 2023 listings transacted, however, totaling ¥300.41 billion (US$ 41.7 billion), on par with the total for 2022.

Industry insiders believe foreclosure listings and transactions will keep rising in 2024, indicating a hot foreclosure market. The economic climate and real estate conditions will continue to be key factors influencing supply and demand.

Source: Central News Agency (Taiwan), February 25, 2024
https://www.cna.com.tw/news/acn/202402250010.aspx

Briefings | | |   Economy/Resources

Mingpao: China’s 2023 Foreign Direct Investment Hit 30-Year Low

Mingpao, one of the primary Hong Kong newspapers, recently ran a report on data released by China’s State Administration of Foreign Exchange. According to the released data, China’s “Direct Investment Liabilities” in its international balance of payment table rose by just US$33 billion in 2023. This represents a decrease of 82 percent from 2022, marking the lowest level of Foreign Direct Investment (FDI) in  China since 1993.

According to data from the Japanese government, net new investment by Japanese companies in China last year was the lowest in at least 10 years, and was lower than the funds flowing from Japan into Vietnam or India. Taiwanese government data showed that new investment by Taiwanese companies in Mainland China last year also reached the lowest level since 2001, with new investment reaching a year-over-year decrease of 39.8 percent. New foreign investment by Korean companies in China in the first nine months of 2023 also dropped 91 percent compared with 2022, falling to the lowest level since 2002. However, German companies’ direct investment in Mainland China hit record high last year.

Advanced economies across the globe have raised interest rates even as China has been cutting rates to stimulate its economy. Thus international companies are increasingly incentivized to store their cash overseas, outside of China, where they can earn more interest.

Source: Mingpao, February 20, 2024
http://tinyurl.com/3xx4p6r2

Briefings | | |   Economy/Resources Geo-Strategic Trend

Beijing Demands Banks Lend Financial Support to Real Estate Projects

To help the Chinese real estate sector, which is facing a daunting crisis as companies run out of capital to complete construction projects, Beijing recently ordered its banks to provide financial support to a massive list of real estate projects. This is another case of the Chinese Communist Party attempting to control markets via state power.

On January 5th, 2024, China’s Ministry of Housing and Urban-Rural Development and its National Administration of Financial Regulation jointly issued a “Notice on Establishment of Coordination Mechanisms for Urban Real Estate Financing.” According to the notice, cities at the prefecture level and above are required to establish “coordination mechanisms” for urban real estate financing “with the team leader being the responsible comrade of the city government who is in charge of housing and urban-rural development.” These coordination mechanisms will present financial institutions with lists of real estate projects eligible for financing support within each given administrative region. Financial institutions are to assess the lists and will fast-track credit/financing approval for projects that are in good shape. For projects facing “temporary difficulties” but whose long-term financial outlooks are balanced, financial institutions are instructed to “provide support through extension of existing loans, adjustment of repayment arrangements, and issuing new loans” rather than “blindly withdrawing, suspending, or pressuring existing loans.”

The Xinhua state news agency published an article on February 18 stating that the National Administration of Financial Regulation “held two special meetings to deploy and implement work related to the urban real estate financing coordination mechanism” following initial release of the notice. “By now, most cities have established the coordination mechanism. They have proposed ‘white lists’ of real estate projects and forwarded them to banks.”

According to Xinhua, preliminary data collected by Financial Times (China) showed that 15 commercial banks, including the six major state-owned banks and several joint-stock commercial banks, have engaged financial support for nearly 13,000 projects. The Industrial and Commercial Bank of China (ICBC) has worked on over 2,000 projects, Agricultural Bank of China on over 2,700 projects, and China Construction Bank on over 2,000 projects.

Source:
1. China’s Government Website (Gov.cn), January 5, 2024
https://www.gov.cn/zhengce/zhengceku/202401/content_6925683.htm
2. Xinhua, February 18, 2024
http://www.xinhuanet.com/money/20240218/0688b047bcf246c18b117a962c4a217c/c.html

Briefings | | |   @CS Economy/Resources Government/Politics

Beijing Says Restrictions on Sales of Stocks Do Not Count as Market Intervention

To force an upward trend in stock market prices, Beijing is taking measures to restrict major institutional investors from conducting net sales of stocks during the opening and closing phases of stock market trading in China. Additionally, Beijing has prohibited institutions from shorting A-share stocks via stock index futures.

On February 22, the China Securities Regulatory Commission (CSRC) responded to reports on the restrictions published by foreign media. The CSRC stated that the regulatory authorities “do not intervene in normal market transactions.” They said that their actions are a measure to “fulfill regulatory responsibilities on trading, and they do not represent a restriction on selling [stocks].” Rather the restrictions are to “crack down on illegal activities such as market manipulation and insider trading.”

Sources:
1. Radio Free Asia, February 22, 2024
https://www.rfa.org/mandarin/Xinwen/10-02222024151556.html
2. Xinhua, February 23, 2024
http://www.xinhuanet.com/money/20240223/d1c45ad547734c3ab892fac1aab2d3cd/c.html

Briefings | | |   @CS Economy/Resources Government/Politics

A Local Government Urged its Employees to Buy Homes, Help Prop Up Struggling Housing Market

The government of Chikan District in Zhanjiang City, Guangdong Province, China, issued a letter on February 19th urging government employees and state-owned enterprises to buy homes in order to boost the struggling local real estate market. The initiative comes as China’s housing market slump continues and governments at all levels have introduced policies to try to stabilize the property sector.

The letter was sent out by the Chikan District 2024 Lunar New Year Activities Preparatory Committee Command Office. It refers to the current sluggish state of China’s real estate market and says that the Chikan District government has been working on multiple fronts to revitalize the sector, including entering negotiations with real estate firms to offer benefits and discounted “one-price special offer housing” to residents.

The stated goal of the letter was to encourage civil servants and state employees to “take the lead in consumption” and “be the role model” in home-buying so as to revive the real estate industry and restore market confidence. From February 21 to 23, the district will hold a real estate and home decoration exhibition focused on providing preferential housing to potential home buyers, offering deep discounts and concessionary policies.

The letter urges all government organs, enterprises, and institutions to fully mobilize their staff to seize this “favorable opportunity” and proactively purchase housing according to their needs. It also asks them to promote Chikan District to their friends and relatives and encourage them to live in and buy homes in Chikan, sharing in the district’s economic development.

Source: Central News Agency (Taiwan), February 20, 2024
https://www.cna.com.tw/news/acn/202402200334.aspx

Briefings | | |   Economy/Resources

HK01: MSCI Removes 66 Chinese Companies From Indices

HK01, a popular Hong Kong-based online media network, recently reported that finance company MSCI removed 66 Chinese stocks from its benchmark China Index and its All Country World Index during the latest MSCI quarterly review. The move by MSCI comes as Mainland China and Hong Kong stock markets plummeted, losing trillions of dollars in market value from their peak in 2021.

Most of the removed companies are in the real estate, pharmaceuticals, internet, and aviation sector. Specific names removed including famous companies such as Weibo, China Southern Airlines, Ping An Healthcare and Technology, as well as real estate developers Gemdale Group and Greentown China. The number of Chinese companies removed was the greatest seen in at least two years. The removals will be effective from the close of trading on February 29, 2024.

China’s weight in global investment portfolios has fallen significantly as China’s real estate industry sinks further into crisis, Chinese consumer spending continues to weaken, and alternative emerging markets such as India continue to perform well. Some experts expressed that MSCI’s stock removals highlight how money is moving out of Chinese equities as investors reduce their exposure. Such investor behavior is largely due to recent weakness in Chinese market fundamentals, ongoing financial instability, regulatory uncertainty, and concern over national-level risks.

Source: HK01, February 14, 2024
http://tinyurl.com/5t2te57y

Briefings | | |   Economy/Resources US-China Relations

Guangming Daily Editorial: “The Economic Landscape in China Is Most Uniquely Beautiful”

Xi Jinping delivered a Lunar New Year address on February 8, comparing China’s economy last year to a beautiful landscape: “the [economic] scenery here [in China] is uniquely beautiful” (“风景这边独好”).

On February 10, Guangming Daily published an editorial propaganda piece titled “Living Better Days!” aiming to substantiate the idea that China’s economic “scenery” in the best in the world. Here is a key paragraph from the piece:

“You see, we decisively implemented a transition from the COVID-19 epidemic prevention and control  phase [to an open society]. The bustling streets and the prosperity of markets tell us that we have come through that difficult period. Agricultural production has again reached new highs: the rumbling of machinery and the reaping of silver sickles proclaim that we have achieved twenty consecutive years of abundant harvests. The vitality of strategic emerging industries can be seen in [the country’s] continuous breakthroughs in technological innovation, in the rapid formation of new productive forces, and in the total export of the “three new industries” (electric vehicles, lithium batteries, and solar cells) having surpassing one trillion yuan (US$ 140 billion). Despite the continued global economic downturn, we have still sent out 17,000 China-Europe freight trains and generated 126 trillion yuan in total economic output. ‘The economic scenery on China’s side is uniquely the best’ – this is the declaration that we have sent out to the world.”

Source: Guangming Daily, February 10, 2024
https://news.gmw.cn/2024-02/10/content_37142995.htm

Briefings | | |   @CS Economy/Resources Government/Politics