The economic news this week continued to be gloomy, and the property sector feels ever more like it is descending into a deep hole from which there is no easy way out. There are indications that the Center is planning measures to keep the market alive, including changes to hukou registration requirements for some smaller cities in order to encourage people to move in and buy apartments, thereby speeding up urbanization and soaking up empty real estate. But why anybody would take out a mortgage to buy an apartment as yet unfinished anywhere in China today is beyond us. The reason this is important is that the property market is central to China’s economy, and almost all of personal wealth held by Chinese citizens is in the form of the long term leases that they hold on apartments. There are serious implications to the value of property across China falling, and while there is nothing other than anecdotal evidence at the moment, it would appear that to the extent that there is any liquidity in property markets across the country, the going rate is dramatically lower than what it was.
In other news, it was reported that Chinese M&A into the United States so far this year has totaled a paltry $221 million, compared to more than $3 billion at this point in 2022. Whether this is money being re-directed to investments elsewhere, or whether it is a sharp drop in investment outside of China overall, as a result of cash export controls, it is not clear. But at the very least, this is just another indication of how deep and complete the decoupling processes could be between China and the Western world
And lastly, major floods in the Beijing area. The videos of cars floating along the roads were extraordinary. The heavens just opened up, and the floods were the greatest in that part of China for well over a century. But weatherwise, the rains have gone and the sunny beaches of Beidaihe beckon for the leadership.
We wish them and you a pleasant weekend.
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