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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

Chinese E-Commerce Giants Temu and SHEIN Gain Ground in Japan

Chinese e-commerce platforms like Temu and SHEIN have seen large gains in Japan by offering low prices and decent quality. Temu, which focuses on daily essentials, has acquired over 15 million monthly active users in Japan within 6 months of its launch. This figure already exceeds 50% of the average user base of Japan’s top 3 e-commerce sites – Amazon Japan, Rakuten Ichiba, and Yahoo Shopping. Meanwhile, SHEIN has surpassed leading Japanese fashion marketplace ZOZOTOWN with 8.39 million users in January 2024, more than triple the number from a year earlier.

The secret behind behind the business models of Temu and SHEIN is the direct supply chain they have with small and medium manufacturers in China. This allows them to offer competitive pricing without compromising much on quality. Aggressive marketing tactics like heavy discounts and coupons have also helped them to rapidly gain market share.

As growth in the overseas footprint of Chinese ecommerce firms (now including TikTok) continues, they face barriers ranging from national security concerns to consumer rights and competition / IP infringement issues.

Some have voiced concern that the rise of Temu and SHEIN in Japan could threaten existing Japanese players. Moreover, these firms may face issues with the Japanese government over human rights concerns and intellectual property violations affecting the companies’ supply chains. SHEIN is also facing a lawsuit from leading Japanese fashion brand Uniqlo.

In the US, Temu and SHEIN are already in the crosshairs of the US-China Economic and Security Review Commission for links to forced labor in Xinjiang as well as IP theft.

Source: Nikkei Chinese, February 21, 2024
https://zh.cn.nikkei.com/china/ccompany/54870-2024-02-21-05-00-53.html

Foreign Automakers Struggle in China’s Shifting Market

Japanese and Western automakers are struggling in the Chinese market, with steeper sales declines in 2023 compared to the Chinese auto market more broadly.

Honda’s 2023 sales fell 10% to 1.23 million vehicles in China while Nissan’s sales dropped 16% to 790,000 units. Toyota sales were flat at 1.9 million units. Mitsubishi Motors announced in October 2022 that it would cease production in China due to poor sales. Within about two months Mitsubishi’s dealership in Guangzhou was replaced by an outlet for a Chinese auto brand.

Volkswagen’s 2023 sales in China rose 2% to 3.23 million while sales of GM’s Buick brand fell 20% and Cadillac sales dropped by 8%.

Sales in China of electric and plug-in hybrid passenger vehicles increased by 30% in 2023, with Chinese automaker BYD expanding its selection of electric car models. China’s market for gasoline passenger vehicles shrank 7%, while the broader market for passenger vehicles (including electric vehicles) grew 4% to 21.92 million units.

Japanese brands Honda and Nissan lagged in electric vehicle sales even as their gasoline models face fierce price competition from Chinese brands. Japanese automakers face hard choices on where to focus limited resources. They face stiff price competition from Chinese manufacturers, though sales in China remain high enough to warrant continued competition in the electric vehicle segment. The plug-in hybrid segment may get less attention going forward.

Fierce price competition has spread to affect gasoline car models, and major foreign brands have cut prices substantially. Japanese brands offered steep discounts, with discounts on new Hondas averaging $3,500 and Nissan discounts averaging $3,200. Meanwhile, the average discount on BYD vehicles averaged just $750.

Source: Nikkei Chinese, February 22, 2024
https://zh.cn.nikkei.com/industry/icar/54748-2024-02-22-05-00-31.html

CNA: China’s Parenting Costs Near Highest in the World

The cost of raising a child to age 18 in China is 6.3 times greater than China’s per-capita GDP, according to a recent report by primary Taiwanese news agency Central News Agency (CNA). By comparison, the cost of raising a Child in Australia is only 2.08 times Australia’s per-capita GDP. The costs in France, Sweden, Germany, the United States and Japan were (respectively) 2.24 times, 2.91 times, 3.64 times, 4.11 times, and 4.26 times each country’s per-capita GDP.

The CNA article cited the “China Childbirth Cost Report, 2024 Edition,” published by Chinese think tank Yuwa Population Research. Yuwa specializes in population and related public policy issues. The Report said that the cost of parenting is one of the most important factors affecting families’ willingness to have children. According to a 2017 survey by China’s National Health and Family Planning Commission, the top three reasons why women of childbearing age abstain from having children are: heavy financial burden (77.4 percent), age (45.6 percent), and lack of a caretaker for the child (33.2 percent).

China’s population shrunk in 2023 for the second consecutive year after peaking in 2021. The number of Chinese newborns in 2023 has dropped to about half of the level seen in 2016.

Source: CNA, February 21, 2024
https://www.cna.com.tw/news/acn/202402210348.aspx

Xinhua: National Data Administration Launches Survey on Data Resources

A recent Xinhua article reported that, according to China’s National Data Administration (NDA), China has launched a “national data resources survey.” This nationwide survey will investigate the generation, storage, circulation, exchange, development, utilization, and security of China’s data resources. Its goal is to “implement the NDA’s ‘Overall Plan for the Construction of Digital China,’ assess China’s baseline of data resources, accelerate the utilization of data resources, and better leverage the value of the data element.” The survey will be jointly conducted by the NDA, the Office of the Central Cybersecurity and Information Technology Commission, the Ministry of Industry & Information Technology, and the Ministry of Public Security.

The survey targets the following organizations: provincial data management agencies, industry and information technology departments, public security departments (bureaus), provincial key data collection and storage equipment vendors, consumer Internet platform and industrial Internet platform companies, big data and artificial intelligence technology companies, application companies, data exchanges, central-government-owned enterprises, industry associations, chambers of commerce as well as the National Information Center.

Source: Xinhua, February 21, 2024
http://www.xinhuanet.com/20240221/3e499e3361d947619b117cfc4b9c9a9b/c.html

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

China Daily Editorial Advocates French “Strategic Autonomy,” Collaboration with China

China Daily published an English-language editorial on French-Chinese relations titled “France’s insistence on strategic autonomy means it’s immune to bloc confrontation.” The editorial advocates for France and other European countries to collaborate with China and not go along with U.S. attempts at isolating China. Guangming Daily also published a Chinese-language commentary on the editorial.

Here are some excerpts from the China Daily piece:

“This year marks the 60th anniversary of the founding of diplomatic relations between China and France.”

“Thanks to France’s strategic independence, as well as the two countries’ common commitment to multilateralism, Sino-French relations have demonstrated stability and sustainability amid the global volatility. Despite the attempts of the United States to drive a wedge between them, they continue to seek to explore the potentialities of new areas of cooperation.”

“In the 25th China-France Strategic Dialogue … in Paris on Tuesday, “the willingness and openness the French side expressed to continue to deepen the already broad and productive pragmatic cooperation with China was a clear dismissal of the ‘security concerns’ the US has been hyping up with regard to cooperation with China. The green economy, clean technology, nuclear energy, artificial intelligence and aerospace are all ‘sensitive fields’ that the US seeks to exclude China from.

“That, along with the stable bilateral cooperation between China and other major EU members, including Germany and Spain … should serve to prove to the decision-makers of the European Union the necessity of upholding the bloc’s strategic autonomy in handling relations with China, as well as the rationality of providing a fair, transparent and sound business environment for Chinese enterprises. Doing so can help avoid the EU footing the bill for the US’ geopolitical gambling.”

Sources:
1. China Daily, February 21, 2024
https://global.chinadaily.com.cn/a/202402/21/WS65d5eb9fa31082fc043b85dd.html
2. Guangming Daily, February 22, 2024
https://world.gmw.cn/2024-02/22/content_37160410.htm

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