Economy/Resources - 20. page

Nikkei Chinese Edition recently reported that Japanese automaker Honda plans to cut in half its production capacity at its engine factory in Guangzhou, Guangdong Province, China. This will represent a reduction in engine manufacturing equivalent to 30 percent of the volume of all engine-equipped Honda cars that are sold in the Chinese market.

The report stated that Japanese automakers are facing difficulties in the Chinese market. Honda’s production cut will become the largest among Japanese automakers in China. The production capacity of the “Dongfeng Honda Engine” joint venture between Honda and China Dongfeng Motor Group will be reduced from 520,000 units per year to half of that figure. A production line will be suspended by the end of March.

Honda’s sales in China have declined steeply in recent years. Sales volume in 2024 amounted to 850,000 units, a 33 percent decrease from 2023. In response to these challenges, Honda China is “advancing its transformation to solely producing electric vehicles.” In 2024, Honda’s first electric vehicle factory in Wuhan City will start production. Dedicated EV factories have also been opened in Guangzhou, ensuring a production capacity of 240,000 EVs per year.

Honda is also accelerating its software development in China, with a focus on driving assistance and entertainment capabilities based in artificial intelligence, aiming to improve the competitiveness of their electric vehicles.

Source: Nikkei Chinese, March 11, 2025
https://cn.nikkei.com/industry/icar/58240-2025-03-11-09-22-52.html

On February 27, multiple Chinese photovoltaic (solar power) companies simultaneously released their 2024 performance reports. Three leading companies in the industry—Trina Solar, JinkoSolar, and Daqo New Energy—reported a combined non-GAAP net loss of 8.8 billion yuan (US$1.2 billion).

• JinkoSolar Holding Co., Ltd. reported total revenue of 92.62 billion yuan in 2024, a year-on-year decrease of 21.96 percent, with a net loss of 1.012 billion yuan.
• Xinjiang Daqo New Energy Co., Ltd. recorded total revenue of 80.33 billion yuan, down 29.15 percent from the previous year, with a net loss of 2.638 billion yuan. Its basic earnings per share (EPS) stood at -1.59 yuan, a 162.35 percent decline year-on-year.
• Trina Solar Co., Ltd. reported revenue of 74.11 billion yuan, a 54.62 percent drop year-on-year, with a net loss of 5.199 billion yuan. Its EPS was -1.27 yuan, reflecting a 147.04 percent decline.

According to Huaxia Energy Network’s report on March 1, the ten companies in the photovoltaic industry with the most losses collectively reported losses exceeding 50 billion yuan. Many companies blamed their losses on falling solar panel prices. Source: Epoch Times, March 2, 2025
https://www.epochtimes.com/gb/25/3/2/n14448431.htm

A Chinese media Guancha.cn reported on February 22, economist Lu Ting discussed China’s real estate market during the “Economists’ Recommendations for China’s 2025 Economy” dialogue. He stated that China’s real estate market does not operate on an immediate transaction basis where payment and property delivery happen simultaneously. (Editor’s Note: China’s real estate sales are rather pre-sale in nature where buyers may end up paying mortgage for multiple years while waiting for the real estate company to finish building the property.)

Lu Ting further explained: “Many people assume the real estate market functions like typical markets, where an oversupply means developers have built too many unsold homes. But that’s not the case. The real estate market is more like a futures market due to our pre-sale system.” He noted that before this round of real estate contraction, “90 percent of new homes were pre-sold; customers paid but did not receive their homes.”

Thus, “(t)he key problem (in real estate) now is not that developers have built too many unsold homes, but rather that they have sold too many homes that they haven’t finished building.”

In May last year, China’s central bank announced a 300 billion RMB policy bank loan program for affordable housing to help local governments purchase projects from financially distressed developers. However, Lu remarked that it wouldn’t resolve the developers’ problem since they were looking for finished homes.

Source: Epoch Times, February 25, 2025
https://www.epochtimes.com/gb/25/2/23/n14443475.htm

On February 14, China’s State Administration of Foreign Exchange released data on the country’s balance of payments for 2024, showing that net Foreign Direct Investment (FDI) inflows amounted to just $4.5 billion – dropping to the lowest level in 33 years. Net FDI inflows peaked in 2021 at $344 billion, meaning that FDI has plunged by 99 percent.

Source: Nikkei, February 17, 2025
https://cn.nikkei.com/politicsaeconomy/investtrade/58036-2025-02-17-09-03-37.html

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that, China Index Academy, a professional research institute of real estate in China, just released a report pointing out that new home sales and second-hand home prices in 100 cities in China continued to decline in January. The sales of the Top-100 real estate companies in China fell by 16.5 percent year-over-year this January.

The January average price of second-hand residential properties in 100 cities fell by 7.22 percent year-over-year and 0.51 percent month-over-month. Since September last year, the Chinese government has successively introduced policies to boost the housing market, including introducing purchase subsidies and supporting state-owned enterprise financing. Analysts surveyed by Reuters expect home prices and sales to continue to fall this year, but the decline may be lower than in 2024.

Source: Lianhe Zaobao, February 1, 2025
https://www.zaobao.com.sg/news/china/story20250201-5815606

According to 2024 fiscal revenue data recently released by the Chinese Ministry of Finance, total fiscal revenue of local Chinese governments amounted to 21.97 trillion yuan (US$ 3.03 trillion) in 2024, representing a year-on-year growth of only 1.3 percent, significantly lower than the 6.4 percent increase in 2023. Revenue from taxation accounted for 17.497 trillion yuan, marking a 3.4 percent decline compared to the previous year. Revenue from local government land sales dropped by 16 percent year-on-year, with the decline attributed to weakness in the Chinese real estate sector. Non-tax revenue saw a sharp increase, totaling 4.473 trillion yuan, a 25.4 percent year-over-year growth.

Many local governments have faced severe funding shortages in the past year. Chinese media have been flooded with reports of local governments resorting to various means to generate revenue so as to sustain their operations. Some have retrospectively audited up to 30 years of private enterprises’ financial data, forcing them to “repay taxes” based on old records. Some local governments have dispatched police to other regions to arrest entrepreneurs, coercing them into paying money. Some have even resorted to “criminalizing debt,” where debtors use police intervention to detain creditors, forcing them to settle debts in exchange for their freedom. A more widespread approach among local governments has been to leverage their administrative powers to impose arbitrary fees, directly levying charges to fill their coffers.

According to Voice of America (VOA), “These measures may have temporarily increased local governments’ revenues, but they have severely damaged business confidence and will lead to further economic weakening.”

Source: VOA, January 25, 2025
https://www.voachinese.com/a/china-2024-fiscal-revenue-growth-shrinks-non-tax-income-jumps-20250124/7948819.html