In the steady drip feed of anecdotes about China’s property market, Patrick Chovanec’s blog post earlier this month rounding up a series of first-hand, second-hand and media reports made for some fascinating reading. Chovanec now has a story on Foreign Affairs which builds on this theme, including this summary of why it’s such a big deal:
Understanding how this came to pass means parsing the host of distortions and mind games that characterize China’s real estate market. Residential real estate construction now accounts for nearly ten percent of the country’s total GDP — four percentage points higher than it did at the peak of the U.S. housing bubble in 2005. Bullish analysts have long argued that large-scale urbanization and rapidly rising incomes warrant such an extraordinary boom. Read more
The bearish-on-China is going all mainstream on us. Or at least, more prominent. For example, 12 per cent of economists in a Bloomberg survey last week believe the country’s growth will fall below 5 per cent.
Well, a more convincing rebuttal to this than a Chinese State Council official comes from Standard Chartered’s chief China economist Stephen Green. Read more
This China decoupling thing was never really going to take off, was it?
From Bloomberg: Read more
By any account, last month was not a good time to sell a Chinese bond backed by its railways.
A local cash crunch had already limited the pool of available buyers, while concerns about the country’s local government debt problems persist. And that was before Saturday’s fatal train crash in Zhejiang province, which killed at least 40 people and is now being censored by the government. Read more
After the weekend’s Chinese data indicating both slowing imports and rising inflation, came this on Tuesday:
BEIJING, July 12 (Xinhua) — China’s foreign exchange reserves rose 30.3 percent year-on-year to hit 3.1975 trillion U.S. dollars by the end of June, the People’s Bank of China (PBOC), or the central bank, said Tuesday. Read more
You wouldn’t want to be a Chinese local government official, just now:
(Reuters) - China will link local officials’ performance appraisals to the level of debt held by local governments, state media reported Monday, an apparent move to cap borrowing and address worries that possible defaults could damage China’s economy. Read more
The big holes in Chinese local government balance sheets are back — and bigger than first thought, according to Moody’s.
As widely reported this morning, the rating agency reviewed the National Audit Office’s report on local government debt and concluded that it underestimates banks’ NPL exposure. Read more
Moody’s says China’s local government debt burden may be Rmb3,5oobn ($54bn) larger than auditors estimated, which could threaten banks’ credit ratings. Reuters reports that Moody’s assessment of the estimate by China’s state auditor last month that the country’s local governments have chalked up Rmb10,700bn of debt, Moody’s said it found more potential loans after accounting for discrepencies in figures given by various Chinese authorities. The ratings agency said this could put the non-performing loans ratio as high as 8 to 12 per cent. The additional debt was extrapolated from comparing different assessments of debt levels from the country’s auditor and bank regulator. Bloomberg notes a Bernstein report this week estimated that China’s largest publicly-traded banks could withstand credit losses of up to 27 per cent on their loans to local governments.