China on brink of deflation as prices plunge

[dbc]

I think a slow decline is manageable.

Is it though? if my principal and interest is much higher than the worth of my property - I’d declare bankruptcy. But the ONLY option available to the Chinese home owner is mortgage delinquency. But then the bank takes the hit, and the contagion spreads through the whole system.

The stimulus I had in mind was state funded mortgage refinancing scheme, reducing the debt burden on homeowners surely this is the only way to encourage consumption and improve birth rates?

 

[JSCh]

Are they hoping to repeat the 2008 stimilus of 4 trillion again?

Is that why Yellen is visiting, get China to buy US treasury?

Fool me once shame on you. Fool me twice shame on me.

 

[letsrock]

If there is demand, then it’s an inflationary system. WTF is going on in this thread?

Price of an item goes down when people cannot afford to or intend to buy that item at its current price.

Price is a function of supply and demand - you dolt. Not just demand alone. Aslo there is no problem with demand other than housing - which is a good thing anyway.

 

[Mista]

Our real estate prices and transaction volumes have stabilized and the biggest economic bomb has been successfully defused.

Well, depends how you define 'successfully defused'. The threat of a property bubble bursting is lower than last year, but the Chinese property market is still grossly expensive in the big cities.

In Singapore, the annual median household income can buy you around 21.95 sqm of housing area (HDB).

In HK, the annual median household income can buy you around 1.94 sqm of housing area.

In Beijing, the annual median household income can buy you around 2.69 sqm of housing area.

In Shenzhen, the annual median household income can buy you around 1.77 sqm of housing area.

People are complaining about housing affordability everywhere in Singapore, and yet in Chinese first-tier cities housing affordability is like 10x worse. It's pretty obvious the Chinese real estate is in a huge bubble. You know it's a huge social issue when affordability is 10x worse than densely populated Singapore, and you can see why their fertility rate is only ~0.8 in the cities.

Our economy has also begun to return to its normal growth rate, with GDP expected to increase by 7.6% to 8% in the second quarter.

Err, China grew only 1% in 2022Q2. So on average for the past 2 years, China grew around ~4-5%. Still faster than developed countries, but slower than other East Asian economies at similar stage of development. Probably around Poland/Malaysia levels of growth.

Is it though? if my principal and interest is much higher than the worth of my property - I’d declare bankruptcy. But the ONLY option available to the Chinese home owner is mortgage delinquency. But then the bank takes the hit, and the contagion spreads through the whole system.

The stimulus I had in mind was state funded mortgage refinancing scheme, reducing the debt burden on homeowners surely this is the only way to encourage consumption and improve birth rates?

Well, the decline is not that bad and the decline is not uniform across cities. What's more I read that some developers are restricted to sell below a certain price lol.

 

[Mista]

Is that why Yellen is visiting, get China to buy US treasury?

If you believe there is a lack of buyers when the US is raising interest rates, I have a bridge to sell you.

 

[MH.Yang]

Well, depends how you define 'successfully defused'. The threat of a property bubble bursting is lower than last year, but the Chinese property market is still grossly expensive in the big cities.

In Singapore, the annual median household income can buy you around 21.95 sqm of housing area (HDB).

In HK, the annual median household income can buy you around 1.94 sqm of housing area.

In Beijing, the annual median household income can buy you around 2.69 sqm of housing area.

In Shenzhen, the annual median household income can buy you around 1.77 sqm of housing area.

People are complaining about housing affordability everywhere in Singapore, and yet in Chinese first-tier cities housing affordability is like 10x worse. It's pretty obvious the Chinese real estate is in a huge bubble. You know it's a huge social issue when affordability is 10x worse than densely populated Singapore, and you can see why their fertility rate is only ~0.8 in the cities.



Err, China grew only 1% in 2022Q2. So on average for the past 2 years, China grew around ~4-5%. Still faster than developed countries, but slower than other East Asian economies at similar stage of development. Probably around Poland/Malaysia levels of growth.



Well, the decline is not that bad and the decline is not uniform across cities. What's more I read that some developers are restricted to sell below a certain price lol.

In 2022 we are in an epidemic blockade and if you want a two-year average growth rate, yes, we are really only at the level of Malaysia.

But in 2023 we are recovering at a good rate and we are not going into deflation.

There's no chance of a hard landing in our real estate market anymore, you know that.

 

[Zsari]

Well that is exactly what prominent Chinese economist and top government advisors are asking for…

Bloomberg - Are you a robot?

 

[Zsari]

China is teetering on the brink of deflation amid mounting concerns about the health of the world’s second largest economy.

Consumer price inflation (CPI) fell to zero in the year to June after a sharp fall in pork prices. The official figure was the weakest reading since February 2021 and below economists’ estimates of a 0.2pc annual rise in CPI.

Producer prices also fell by 5.4pc in June, marking the ninth straight monthly decline and the steepest fall since the end of 2015.

China has struggled to break out of an economic malaise caused by draconian zero-Covid policiesthat were only scrapped at the end of last year.

Heightening tensions between Beijing and Washington have also weighed as Western companies increasingly shift investment away from China.

Youth unemployment in the country stands at 20.8pc as record numbers of graduates struggle to find jobs.

Duncan Wrigley, chief China economist at Pantheon Macroeconomics, said: “Insipid consumer inflation is an indication of the soggy consumer spending recovery, especially for goods, as well as excess production capacity.”

Several of China’s internet giants reported disappointing sales figures at a major shopping event earlier this month.

Economists expect the People’s Bank of China to respond to the country’s weakening economy with cuts to interest rates.

Analysts at Barclays said in a client note: “We think the more challenging deflation environment and sharp slowdown in growth momentum support our view that the PBOC has entered a rate-cutting cycle.”

Some economists believe Beijing will have to supplement rate cuts with tax reductions or increased spending to boost activity.

However, Mr Wrigley said Beijing was unlikely to be forthcoming with a massive fiscal stimulus.

He said: “So far the public information points towards a targeted, limited stimulus, which will largely be funnelled into support for industry, technology upgrades and private firms, rather than a significant consumer handout.”

Looming deflation in China stands in sharp contrast to continued bouts of inflation seen elsewhere in the world.

Britain’s inflation rate stood at 8.7pc in May, forcing the Bank of England into its most aggressive round of rate rises in decades.

China on brink of deflation as prices plunge

Beijing risks slipping into a low growth rut

www.telegraph.co.uk

Does anyone bother to look into the breakdown of the CPI? The ones in the negative are housing and the real big one (-4) is in transportation, thanks to cheap oil and country moving away from oil, the other index are in the positive, with food, medical, services, and recreation up around 1%.