A wise man once said that the preconditions for a stable and prosperous society are diversity, transparency and rule of law. China has a dynamic relationship with all three.
This week featured an extraordinary report saying that two organizations which have provided regular monthly statistics on housing sales numbers had been told to cease making their data public. The problem with withholding that kind of data from the market is that everyone of course assumes the worst. Which may well be justified.
The property market has been core and foundational to China’s economy for 30 years, but has been slumping now for several years with no end in sight, and the much-touted new economic forces are not going to replace it fully. The rows of empty apartment buildings are present in just about all second tier, third tier and below cities across the country. They can’t be sold. No one will buy them. Who were they even built for, is a question that springs to mind as they drift past the traveler.
So we can extrapolate that housing sales are down even more. But the capacity of the system of absorb this kind of downturn is truly remarkable. Except there is usually a moment when rubber hits the road even in such controlled circumstances as we have here.
A case in point is a piece of news today about an obscure bank, the Yanbian Rural Commercial Bank in Jilin province, which missed a scheduled Nov. 22 interest payment on a RMB 300 million ($42.4 million) 10-year bond issued in 2017. Neither the bank nor the underwriter of the bond, Donghai Securities, made any announcement about the failure to make the payment. A factor in the bank’s financial woes for sure is the state of the property market, but it’s again another transparency problem. Shareholders and depositors would no doubt be interested in the development. It was revealed or unearthed by the excellent Caixin news service.
Anyway, have a weekend full of clarity…