Money Flows

The Center and various cities are continuing to loosen controls on property purchasing to try to revive the market, and there are those who say the market will be in much better shape next year as the impact of policy measures becomes apparent and the cycle turns back to positive. But it feels unlikely right now. The FT had a story saying state banks had only disbursed 1 percent of the funds they had been told to get out into the market to boost property because of weak demand and the difficulty of finding projects to invest in that won’t turn into NPLs. It makes sense—anyone thinking of buying an apartment today in just about any part of China has to face the possibility that the value of that property could be lower in a few years time than it is now. And if that is true, what’s the point of buying? Moody’s this week changed its rating of the China property sector from stable to negative and there were reports which indicated that the long-planned but never implemented property tax has once again been shelved. It can’t be done in a weak market even though it is essential to stabilize local government finances. Behind the property tax debate, the shadow of the Boston Tea Party in 1773 is evident if you look hard enough—no taxation without representation, as the Americans said to London.

Meanwhile, the outflows of foreign money from China’s stock markets continued and stats indicated that foreign investment is shifting quickly from China projects to India. It will take quite a few years for anywhere else to match China’s advantages as a manufacturing and logistics powerhouse, but the process is very much in train. HP announced it is shifting all its PC manufacturing from China to Thailand and Mexico.

Meanwhile 2, Mr Xi did not go to G20 in New Delhi, but instead visited Harbin and the northeast. Just across the border around the same time, Mr Putin was meeting Mr Kim, and Joe Biden was talking to Vietnam’s leaders in Hanoi. The world is re-arranging itself in strange ways.

Have a great weekend.