Chinese Economics Thread


Overlord

Junior Member
Registered Member
The real estate industry doesn't have to be destroyed. The idea that house prices always go up and that an apartment is the best possible investment needs to be destroyed. It started with Evergrande 2 years ago. By now, most people should have got the message that real estate is not risk free and prepayment for an unfinished property is risky. Maybe a little bit more pain to reinforce the message would be good, as long as it doesn't cause an actual crisis

But of course the developers can't be allowed to all go bankrupt. That would cause prices to jump as supply disappears.
Real estate price must fall and controlled otherwise CCP 2&3 child policies will fail , because most of the couple told that housing prices is the reason why they don't want more kids or even get married, both marriage rate and birth rate are falling very quickly and too much rise of real estate prices is one major problem.
 

Jiang ZeminFanboy

Senior Member
Registered Member
Is not back to the table. We just need to slow down real estate collapse. Too fast and it could create systemic risks for the Chinese economy. For example -45% YTD decline is absolutely dangerous. Even -25% is stretching things. IMO the "safe" level is annual -10/15% decrease of sales.

-45% and next thing you know you could have a collapse of local government property taxes. So better to try slow down the decline
China's local government revenue already collapsed with the local government's land sales. Real estate is back because there is no other way. They should try to aim to keep the sales and prices stable and wait until wages and inflation reduce the real price of the real estate. The collapse of real estate = no money

China Budget Deficit Keeps Widening Under Covid, Property Crisis​


China’s broad fiscal deficit widened to a fresh record in the first eight months of the year as land sales continued to drop while efforts to contain Covid outbreaks added to the spending burden.

The deficit in the budgets for all levels of government was 6 trillion yuan ($857 billion), according to Bloomberg calculations based on data from the Ministry of Finance
Please, Log in or Register to view URLs content!
Friday. That is a new high for any comparable period and compares with a shortfall of 1.1 trillion yuan in January-August last year and a gap of 4 trillion yuan at the same point in 2020.

1664505965784.png




The data show the fiscal strain faced by the government is yet to ease, even though the dent in income from this year’s massive tax breaks has started to taper while the economy showed some
Please, Log in or Register to view URLs content!
in August. The imbalance could lead governments at different levels to cut expenditure and limit their ability to spur economic growth.

Covid lockdowns over the summer and
Please, Log in or Register to view URLs content!
have forced factories, restaurants and shopping malls to shut, weighing on tax revenue generation. Income from land sales continued to drop as a property market crisis
Please, Log in or Register to view URLs content!
.

In the meantime, spending needs are rising as China
Please, Log in or Register to view URLs content!
Covid curbs in the run-up to the 20th Communist Party congress, a once-in-five-years meeting where President Xi Jinping is due to secure a precedent-breaking third term in office. For instance, local governments have been asked to test residents regularly for coronavirus, regardless of infection levels.

AUG.JULYJUNEMAYAPRILMARCHFEB.
YEAR-TO-DATE2022202220222022202220222022
BILLION YUAN
Augmented fiscal balance-6,020-5,245-5,052-2,970-2,056-1,250309
General public budget balance-2,713-2,177-2,367-1,232-664-155798
General public revenue13,80412,49810,5228,6747,4296,2044,620
General public expenditure16,51814,67512,8899,9068,0936,3593,823
Gov. fund balance-3,306-3,068-2,686-1,738-1,392-1,095-488
Gov. fund revenue3,9983,3382,7972,1951,7571,384916
Gov. fund spending7,3046,4065,4833,9333,1492,4791,404
Note: A positive number for balance means surplus, while a negative figure indicates deficit. Source:
Please, Log in or Register to view URLs content!


Income from general public and government funds combined came in at 17.8 trillion yuan in January to August. General public revenue fell 8% from a year earlier, slowing from a 9.2% drop in the first seven months. It would have risen 3.7% had it not been for the tax rebates, the finance ministry said.

The government doled out more than 2.3 trillion yuan in tax breaks in the first half, nearly 90% of the relief planned for this year, according to Bloomberg calculations based on MOF
Please, Log in or Register to view URLs content!
.

Revenue from the sale of land dropped 28.5% on year in the first eight months of 2022 to 3.4 trillion yuan, compared with a 31.7% slump in January-July.

Total spending was 23.8 trillion yuan. It includes 16.5 trillion yuan in general fiscal expenditure, which covers education, healthcare, defense and scientific research. That was up 6.3% on year, compared with a gain of 6.4% in the January-July period. Expenditure under the government fund budget rose 23.4%, down from a 29.8% jump in the first seven months.

Other highlights of the MOF release:

  • Income from deed taxes, which are paid when a property is bought or sold, fell 28.7% on year in January-August
  • Tax revenue from vehicle purchases slumped 30.5% in the period, as a policy to halve the levy paid on some new passenger cars continued to cause an impact
  • Revenue from taxes on corporate and individual income gained 2.5% and 8.9%, respectively
  • State-owned land use right transfer expenditure, a part of which is invested in infrastructure, fell 12.2% to 3.9 trillion yuan
Please, Log in or Register to view URLs content!

China’s fiscal woes highlighted as local authorities turn to fines, traffic tickets to boost revenues​

Please, Log in or Register to view URLs content!

China’s Fiscal Stimulus Exceeds 2020 Levels, Barclays Says​

China’s fiscal stimulus this year now tops the amount issued in 2020, according to Barclays Plc., as the government boosts spending, especially on infrastructure, to bolster a faltering economy.

Barclays estimates the shortfall on the broadest measure of the budget -- known as the augmented fiscal deficit -- amounts to 9.2% of gross domestic product this year, compared with 8.4% in 2020.

“This suggests aggregate fiscal policy supports have already exceeded the stimulus seen in 2020,” the Barclays analysts wrote.

China’s been counting on an expansion of government spending to support economic growth this year as business confidence has been hit by Covid curbs and other headwinds. That, coupled with massive tax breaks it offered to business at the expense of government income, resulted in the ballooning deficit, which Beijing hopes should add more to aggregate demand in the economy.

The broad fiscal deficit had already
Please, Log in or Register to view URLs content!
to 6 trillion yuan ($833 billion) in the first eight months of the year, a fresh record, and 50% bigger than the 4 trillion yuan recorded in the same period in 2020, according to Bloomberg calculations based on Ministry of Finance data. The shortfall was 1.1 trillion yuan in January-August last year.

Please, Log in or Register to view URLs content!


China has announced several support measures this year to shore up growth as Covid restrictions and a property crisis take their toll on the economy. Much of the stimulus has been focused on boosting infrastructure investment, such as 1 trillion yuan
Please, Log in or Register to view URLs content!
in August.

Andrew Polk at consultancy Trivium earlier this month pegged the size of China’s fiscal stimulus in 2022 at nearly 10 trillion yuan, or roughly 7% of GDP.

Barclays economists led by Jian Chang said in the report they don’t expect any “new big fiscal stimulus” for the rest of the year, adding the “focus of fiscal policy now is implementation rather than new stimulus.”

The government is borrowing more to fund the spending, with more than
Please, Log in or Register to view URLs content!
of bonds expected to be sold in the fourth quarter, according to Bloomberg calculations.

Premier Li Keqiang this week said the final three months of the year would be
Please, Log in or Register to view URLs content!
to the nation’s economic recovery, according to a report in state media. He said many already announced policies are expected to have greater impact in that period.
Please, Log in or Register to view URLs content!
 

Minm

Junior Member
Registered Member
Real estate price must fall and controlled otherwise CCP 2&3 child policies will fail , because most of the couple told that housing prices is the reason why they don't want more kids or even get married, both marriage rate and birth rate are falling very quickly and too much rise of real estate prices is one major problem.
Absolute prices don't matter, the mortgage to income ratio matters. Chinese salaries are increasing at almost 10% a year, so stable house prices are fine and less disruptive than falling prices. So 2 years of constant prices mean housing is ~20% cheaper. You wouldn't want prices to fall to rapidly so that young couples who bough recently have to sell because they can't afford the mortgage payments and are then unable to have a child

Please, Log in or Register to view URLs content!
 

mossen

Junior Member
Registered Member
The entire model where land sales prices make up a big chunk of local government revenue was broken a long time ago and it should have been reformed. It wasn't reformed because it is politically very difficult and painful - and why rock the boat when times were good? Well, that inaction is now coming back to bite CCP in the ass.

You wouldn't want prices to fall to rapidly so that young couples who bough recently have to sell because they can't afford the mortgage payments and are then unable to have a child


Yes, you do. Prices need to fall 70% - minimum. How many young Chinese couples cannot even have ONE child because of the nose-bleed level prices? Forcing them to live on much smaller space than you can raise a family on and sometimes even living separetly.

When it comes to a major housing correction, you cannot protect everyone at the same time so you must make priorities. Just like in medicine with triage. The insane real estate prices in China is a key impediment to family formation. It's not the only one, but it's a big one.

People should look at price-to-income ratios in Tier 1 cities in China vs USA. The prices in the US are downright cheap by comparison. Frankly the land prices/real estate nexus is one area where CCP fucked up the most. I think they get very high marks on R&D, innovation etc. But on housing affordability, they just completely dropped the ball.
 

Jiang ZeminFanboy

Senior Member
Registered Member
Singapore has cheap state provided houses and tfr is miniscule. The prices of real estate is not a big factor for TFR, modern life/culture is.

And so what tier 1 cities have high prices? How many people live there compared to the whole country? On average Chinese Real Estate is not that expensive, however is not cheap.

This is the average Chinese city, where the average Chinese person lives, and what the price of average real estate is? 6k rmb/m2


One plus no one mention of the bubble is the rent. In not the top areas of the cities, you can rent and live crazy cheap.

Please, Log in or Register to view URLs content!
 

vincent

Grumpy Old Man
Staff member
Moderator - World Affairs
One plus no one mention of the bubble is the rent. In not the top areas of the cities, you can rent and live crazy cheap.
Have you ever live in one of the tier 1 cities? Have you been to the marriage corner of People’s Square in Shanghai? Every single ad for husband there listed owning an apartment as a requirement.
 

Petrolicious88

Junior Member
Registered Member
The entire model where land sales prices make up a big chunk of local government revenue was broken a long time ago and it should have been reformed. It wasn't reformed because it is politically very difficult and painful - and why rock the boat when times were good? Well, that inaction is now coming back to bite CCP in the ass.




Yes, you do. Prices need to fall 70% - minimum. How many young Chinese couples cannot even have ONE child because of the nose-bleed level prices? Forcing them to live on much smaller space than you can raise a family on and sometimes even living separetly.

When it comes to a major housing correction, you cannot protect everyone at the same time so you must make priorities. Just like in medicine with triage. The insane real estate prices in China is a key impediment to family formation. It's not the only one, but it's a big one.

People should look at price-to-income ratios in Tier 1 cities in China vs USA. The prices in the US are downright cheap by comparison. Frankly the land prices/real estate nexus is one area where CCP fucked up the most. I think they get very high marks on R&D, innovation etc. But on housing affordability, they just completely dropped the ball.
In some cases, you are required to pay 70% as down payments in some tier 1 cities vs. the standard 20% in the U.S. First time buyers often qualify for down payments as low as 5% in the U.S.
 

Petrolicious88

Junior Member
Registered Member
China's local government revenue already collapsed with the local government's land sales. Real estate is back because there is no other way. They should try to aim to keep the sales and prices stable and wait until wages and inflation reduce the real price of the real estate. The collapse of real estate = no money


Please, Log in or Register to view URLs content!

China’s fiscal woes highlighted as local authorities turn to fines, traffic tickets to boost revenues​

Please, Log in or Register to view URLs content!

China’s Fiscal Stimulus Exceeds 2020 Levels, Barclays Says​


Please, Log in or Register to view URLs content!
I think China will see continued sequential growth in the 4th quarter. Zero Covid will prob ease somewhat as the government shifts focus to economic recovery after the Party Congress. External demand based on export growth will remain good. Prob see growth of 3-4% in the 4th quarter if covid policies can be relaxed. Overall annual growth can still be around 3%. Not too bad.
 

Top