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China’s Residential Foreclosures Are Spiking

Chinascope recently reported that 200,000 people in China stopped making their mortgage payments (See:  http://chinascope.org/archives/28823).  On January 14, 2022, Professor Han Fuling from the School of Finance of the Central University of Finance and Economics posted on Weibo, “At the beginning of 2022, the four major banks sued 200,000 owners for defaulting on their mortgages.” Weibo has since removed the posting.  The four major banks are the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, and the Construction Bank.

Since the beginning of 2022, there has been more news about defaults and foreclosures of residential houses in China.

All Foreclosure Auctions are well-known online auction platforms in China.  As of January 30, 2022, 1.72 million court-ordered foreclosures of residential houses were placed on the auction list.

In 2017, the number of foreclosure houses was 9,000; in 2018 it was 20,000; in 2019, 500,000; in 2020, more than 1.2 million. As of mid-December 2021, foreclosure houses in China hit a record high at over 1.68 million.

Among them, Jiangsu Province ranked first with 209,900 units, Zhejiang ranked second with 179,300 units, and Henan, Guangdong, and Shandong ranked third, fourth, and fifth.

While these are cumulative numbers, not net annual increases, an unprecedented spike is happening in foreclosures of residential houses.

Source: Xinhua Daily Media Group, January 17, 2022

http://www.xhby.net/fc/xwzx/202201/t20220117_7388962.shtml

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Economy: 200,000 People in China Stopped Paying their Mortgage

Recently a message was widely discussed on the Internet. On January 14, Professor Han Fuling of the Central University of Finance and Economics obtained some “insider information” and posted it: When 2022 started, over 200,000 people had stopped making their mortgage payments and were sued by the four major banks in China. The next day, Professor Han posted a message from an attorney in Zhengzhou City, Henan Province: “So many people have stopped their mortgage payments. We were exhausted after sending (that many) attorney letters.”

Recently China’s real estate prices in certain cities have dropped. Many people lost their jobs last year. Thus, people may be unable or are unwilling to make their mortgage payments. However, China does not have a way to protest if individuals decide to go bankrupt. If the person defaults on his mortgage payment, he will not only lose his down payment, but he is still responsible for (and thus, has to pay) the financial loss to the bank. If the bank auctions off the house but can’t fully recover the money, then that the person still owes the bank.

Source: Radio Free Asia, January 21, 2022
https://www.rfa.org/mandarin/zhuanlan/jingmaorediansaomiao/econ-01212022154111.html

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Economy: Beijing’s Foreign Exchange Settlement Surplus Is Due to Drop in Chinese Tourists Who Go Overseas

In January 2022, China’s State Administration of Foreign Exchange published data showing that the total foreign exchange settlement in 2021 had a surplus of US $267.6 billion, an increase of $110 billion from the $158.7 billion surplus in 2020.

Epoch Times pointed out that this surplus was mainly due to the drop in Chinese tourists’ spending overseas. In 2020, due to the COVID-19 pandemic, 20 million Chinese traveled abroad, a drop of 87 percent from a year earlier. Chinese tourists’ spending overseas was $116 billion. It was less than what the foreign tourists spent in China.

In 2021, an estimated 25.6 million Chinese went abroad. The total tourists’ spending difference has not been released, but in the first half of 2021, Chinese tourists’ spending overseas was US $44.4 billion less than what the foreign tourists spent in China. Following this trend, the annual tourists spending gap will be around US $100 billion. Therefore, China’s foreign exchange settlement surplus may just come from Chinese tourists spending less overseas.

Source: Epoch Times, January 25, 2022
https://www.epochtimes.com/gb/22/1/25/n13529285.htm

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Chinese Real Estate Developer Aoyuan Announced USD Bond Default

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that China’s Aoyuan Group, the 25th largest real estate developer in China, announced in advance that it will default on its U.S. dollar based bonds. It will not pay the interest in the next few years for its over US$1 billion U.S. Dollar debts. The announcement somewhat caught the market and investors by surprise. Not only did it not initiate any tender offer for the dollar bonds due this week, but it also announced a default before the expiration date. This practice is obviously different from other real estate companies. After the official announcement of default, Aoyuan will enter the stage of debt restructuring. In its announcement, Aoyuan stated that it is working with advisors (including legal, financial and other advisors) to evaluate its capital structure and liquidity and to conduct due diligence. In terms of operations, affected by the tight liquidity, the performance of Aoyuan has continued to be sluggish. Aoyuan said that the continued downturn in the market has dampened consumer confidence and made it difficult for the Group to realize inventories and sell assets on reasonable terms. The company pointed out that the management team of the group, including the senior management, remains stable and is committed to improving the firm’s operations.

Source: Sina, January 20, 2022
https://finance.sina.com.cn/stock/s/2022-01-20/doc-ikyamrmz6322579.shtml

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China’s Population Sees the Slowest Growth in Decades

According to the National Bureau of Statistics, the total population in mainland China, excluding foreigners, was 1.41 billion people as of the end of 2021, an increase of 480,000 people compared to 2020.

There were 10.62 million newborns and 10.14 million deaths. The natural population growth rate was therefore 0.034 percent for 2021.

Analysts in China observed that the number of newborns in China in 2021 was the lowest since 1949, and the birth rate was the lowest on record.

A moderate forecast for the future trend of China’s population assumes China spends 1 to 3 percent of its annual GDP on incentivizing women to have more children, which is the average spending rate of developed countries. In that case, China’s newborns will drop to below 10 million in the next two or three years, down to 773,000 in 2050 and 306,000 in 2100. Currently, China’s newborns are half that of India. The rate will be one-third of India’s by 2050 and less than one-quarter of India’s by 2100. According to this moderate forecast, China’s newborns will be overtaken by the United States in 2083 and will be two-thirds of the United States in 2100. While China’s total population is more than four times that of the United States, the number of newborns will be overtaken by the United States in two generations, showing the population’s rapid depletion.

Sources:
China National Bureau of Statistics, January 17, 2022
http://www.stats.gov.cn/tjsj/zxfb/202201/t20220117_1826404.html
iFeng.com, January 17, 2022
https://tech.ifeng.com/c/8CssztQSfpL
Caixin, December 14, 2021
https://opinion.caixin.com/2021-12-14/101817400.html

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CCP Published its Propaganda about Xinjiang in Times Square, in Europe, and in Japan

On January 6, Xinhua News Agency posted an article that China has broadcasted “Discover Shihezi (a city in Xinjiang)” in Chinese and English on the electric billboard “China Screen” at Times Square in New York, 48 times a day for 7 consecutive days. In addition, on January 7, the Chinese Communist Party’s (CCP’s) propaganda machine posted the same video on the websites of the Paris-based Nouvelles d’Europe newspaper and Japan’s AFPBB News and its social media. The videos were in Chinese, English, French, and German. The videos claimed that Shihezi’s present-day “prosperity” is the result of more than 70 years of development under the CCP’s leadership.

A commentator called this the CCP’s global propaganda. It involved lying to Western audiences and to politicians by claiming a place where the CCP forcibly-immigrated Han people and committed genocide was actually a “beautiful” and “green city.” He also criticized Times Square’s  electric billboard and other Western companies for giving up moral standards in exchange for the CCP’s money.

in July 2011, Xinhua News Agency rented the biggest and best-located billboard at Times Square, a 60 inch by 40 inch screen, . Media said the rent could be US $300,000 to $400,000 per month.

Source: Radio Free Asia, January 12, 2022
https://www.rfa.org/cantonese/news/timesquare-01122022113703.html

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In the Past Three Years, Huawei Invested In Vain in 56 Chip Making Companies

Epoch Times reported that, right before the U.S. issued sanctions against Huawei, Huawei set up Hubble Investment, which, in the past three years, has invested in 56 chip companies. The entire country of China had also set off a vigorous movement to build chips at the same time, but it all ended in vain.

In May 2019, the United States banned Huawei from importing products if at least 25 percent of the components they contained were made in the U.S. On May 15, 2020, the U.S. escalated its sanctions. Any companies, including non-U.S. companies, should not sell any chips produced with U.S. technology and equipment without U.S. approval. Afterward, TSMC, the world’s leading dedicated semiconductor foundry, completely stopped supplying its chips  to Huawei

A month before the first U.S. sanction, Huawei established a wholly owned subsidiary, Hubble Investment, with registered capital of 700 million Yuan (US $110 million) in Shenzhen.

According to a market research company PitchBook Data, Hubble Investment has invested in 56 chip companies. The Chinese media Semiconductor Today reported Hubble is like a “wolf” in its chip investment, investing at a rate of nearly one company per month. Its aggressiveness escalated after the second time the U.S. issued sanctions against Huawei. Huawei increased Hubble’s registered capital to 1.7 billion yuan (US $268 million) in January 2020 and Hubble invested in 25 semiconductor-related companies in 2020 alone.

Hubble Investment also moved up the industry chain.

For example, in May 2019, Hubble invested in Radrock (Shenzhen) Technology, focusing on high-performance 4/5G RF front-end chips and WiFi PA products. In July 2019, Hubble invested in 3PEAK, producing high-performance, high-quality integrated circuit products. In August 2019, Hubble invested in SICC Co, producing silicon carbide substrate materials; and in October 2019, Hubble invested in TankeBlue Semiconductor Co., producing third-generation semiconductor SiC wafers.

Topology Research Institute reported that Hubble Investment covers the third-generation semiconductors, wafer-level optical chips, power management chips, clock chips, RF filters, and many other areas, where Huawei relies on the U.S. supplies.

However, there has not been much of a result from Huawei’s chip producing capability. By 2021, it had gradually run out of its chip storage. Hisilicon, which used to supply the high-end Kirin 9000 chips to Huawei, couldn’t do it anymore. Huawei introduced its P50 series mobile phone this year, with some phones equipped with Qualcomm’s Snapdragon 888 processor due to the lack of Kirin 9000 chips. Also, a lack of 5G RF equipment rendered the phones, even with the Kirin 9000 5G SoC installed, still unable to support 5G.

In 2020, not only did Huawei heavily invest in chips companies, but the entirety of China also had a chip investment wave. Chinese semiconductor companies raised nearly US $38 billion through public offerings, private equity, and asset sales, more than double the total for 2019. In the same year, more than 50,000 Chinese companies registered semiconductor-related businesses, four times the total of five years ago. These companies included those with no connection to chips at all, such as real estate developers, cement makers, and restaurants – all of which branded themselves as “chip companies” because the government promised tax breaks and funding for the chip industry.

However, there was no result from these investments. According to statistics from Chinese media in October 2020, six high-profile Chinese semiconductor projects with budgets each over ten billion Yuan (US $1.58 billion), Including Wuhan Hongxin and Jinan Quanxin, were stopped within a little over a year. Some never even produced a single chip.

Source: Epoch Times, January 15, 2022
https://www.epochtimes.com/gb/22/1/15/n13506884.htm

Briefings | | |   Economy/Resources US-China Relations

The Paper: Evergrande Moved out of Its Shenzhen Headquarters Building

The Well-known new Chinese news site The Paper recently reported that the Evergrande Group has moved out of its Shenzhen Headquarters building and the “Evergrande Group” sign at the building has also been removed. According to sources familiar with the matter, Evergrande withdrew from the building in December 2021. Most of its working staff at the headquarters has moved back to Guangzhou to work. Sources revealed that, in order to cut costs, Evergrande completed the lease cancellation procedures quickly. However, based on the registration and filing information of commercial entities at the Shenzhen Market Supervision Bureau, Shenzhen remains the registered city for the Group. Evergrande officially moved its headquarters from Guangzhou to Shenzhen in mid-2017. At that time, its headquarters campus ground sat in the Shenzhen Bay Super Headquarters Base. The location was in the Hongshuwan luxury residential area, which occupies the central area of the city of Shenzhen. By sales, the China Evergrande Group is the second largest property developer in China . It ranked 122nd on the Fortune Global 500.

Source: The Paper, January 10, 2022
https://m.thepaper.cn/newsDetail_forward_16219349

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