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By Andy Rothman, Matthews Asia

China’s housing market is one of the most important parts of its economy, and also one of the most misunderstood. This sector is important because residential real estate together with construction last year accounted directly for about 10 per cent of GDP, 18 per cent of fixed-asset investment, 10 per cent of urban employment and more than 15 per cent of bank loans. It is also misunderstood because few observers appear to grasp the structure of China’s residential market. Continue reading »

China stepped up its efforts on Tuesday to transform doomsday scenarios for its domestic property market into merely another round of déjà vu. The central bank reinforced efforts to boost mortgage lending by banks, building on the small but significant turnaround that beyondbrics noted in mid-September.

The new policies allow buyers who already own one home but have paid off their mortgage to be considered as first-time buyers, thus qualifying for a mortgage downpayment of 30 per cent of the cost of the loan. Previously, they would have been considered as second home buyers and had to pay a downpayment of at least 60 per cent. Continue reading »

Official statements on bad loans in Chinese banks come with a health warning: analysts widely believe they understate the real level of delinquency by a wide – though unknowable – margin.

Nevertheless, official statistics can be helpful in assessing whether the problem is deepening or alleviating. In that context, an analysis published on Thursday by EY, the accounting firm, shows stress levels rising rapidly among China’s top banks. Continue reading »

A closely-watched indicator of economic activity in China is showing an unexpectedly robust reading for September, according to an announcement on Tuesday. But is a real growth rebound underway, following several signs of a slowdown in the third quarter so far?

Hong Kong stock market investors appeared to reserve judgement, allowing the Hang Seng index to slip 0.49 per cent, or 118 points on Tuesday to 23,837. Economists and other survey-based indicators of Chinese economic activity reinforced the skepticism. Continue reading »

By Alastair Campbell and W. John Hoffmann, Exceptional Resources Group

The “rule of law” is set to dominate China’s key Communist Party plenum in October, Xinhua, the official news agency, has said. The rule of law is a “must” if the country is to attain “economic growth, clean government, cultural prosperity, social justice and a sound environment”, Xinhua added.

Many observers would agree. Some may even believe that China is about to embrace a Western-style system in which all actors – the government, institutions, companies and individuals – become subservient to an independent legal code. But what, in practice, is the renewed focus on rule of law likely to mean for China’s development? Continue reading »

There is more gloomy news for the world’s second largest economy. A comprehensive official survey of Chinese households, businesses and banks finds demand for loans slackening further in the third quarter, suggesting scant prospects of a reprieve from the credit slump seen in August and July.

Some 3,100 banks interviewed by the People’s Bank of China (PBoC), the central bank, reported a significant easing in loan demand among all three categories of firms – small, medium and large – for the third quarter, which ends at the end of September.

The loan demand index fell to 66.6 per cent, down from 71.5 per cent (see chart). The muted demand for loans is set to create headwinds for the PBoC’s initiative this week to boost economic growth by injecting Rmb500bn ($81bn) into the five largest state-owned banks, economists said. Continue reading »

China’s plan to spread the wealth of coastal cities into poorer interior regions is starting to pick up speed, with better transport infrastructure in particular likely to accelerate the process, according to HSBC Global Research.

While China’s coastal regions have seen breakneck growth – the nominal GDP of seven coastal provinces has increased nearly 200 times since 1978 – its vast inland areas, remote and undeveloped, have lagged behind. Per capita income in the coastal regions of China is twice as high as in inland provinces. Continue reading »

Headline statistics on the Chinese property market continue to relay a picture of virtually unrelieved gloom. However, in one small but important area, market pressures appear to be easing.

All year long Chinese banks have tightened up on mortgage lending to both first time buyers and purchasers of second homes, withdrawing discounts on mortgage loans and restricting loan growth – and thereby depressing buying activity.

However, this changed in August, with banks switching course to offer softer terms on mortgage loans, research companies said. Continue reading »

A huge bonfire of the brands awaits auto manufacturers in China as some 90m car owners prepare to disregard loyalty when they chose their next model.

A survey of some 2,400 car owners conducted by the Boston Consulting Group (BCG) found an itch to switch brands among 83 per cent of respondents who drove domestic Chinese brand cars. Of these, only 30 per cent said they would drive another domestic brand as their next car, while a full 40 per cent said they planned to plump for a Volkswagen.

The findings suggest that the next big trend for auto manufacturers in the Chinese market – which has expanded tenfold since 2000 to register annual sales of around 20m units – may not be so much concerned with chasing growth as with inculcating brand loyalty. Continue reading »

Wealth is not necessarily translating into health for China’s growing cohort of millionaires, many of whom complain of eating disorders, too much alcohol and an average of just 6.2 hours of sleep a night (see chart).

Fast living is blamed for a variety of ailments, with around a third of millionaires (those with a personal wealth of Rmb10m or US$1.6m, £1m) suffering from insomnia, headaches, fatigue and memory loss while smaller proportions endure hair loss, immune problems, numb limbs and smokers’ coughs, according to a survey by Hurun Research Institute released on Friday.

Such conditions underpin a burgeoning demand among wealthy Chinese for products, treatments and lifestyle choices that are thought to confer health. “There is a clear trend among the Chinese millionaire class towards exercise, eating more carefully and generally taking better care of their bodies,” said Rupert Hoogewerf, chairman of the Hurun Report. Continue reading »

China’s leading credit rating agency will soon begin to provide English language ratings for local Chinese debt in the latest sign of a growing desire on the part of international investors to access the country’s highly restricted domestic debt markets.

“Dagong is making preparations to release ratings for onshore debt in English early next year,” the company’s chairman, Guan Jianzhong, told beyondbrics. “There are more international investors looking at Chinese debt.” Continue reading »

By Rafael Halpin, China Confidential

For a sector regularly called “the most important in the universe”, there is a remarkable lack of consensus over the Chinese housing market. Much of the debate boils down to whether China is currently under- or over-supplied with homes.

The absence of any comprehensive data on just how many houses there are in China, has led to wildly divergent views. But, as we will seek to demonstrate in this article, despite the lack of any solid data on the total number of homes in China, it is still possible to present a strong statistical case that the market is currently under-supplied with modern housing.  Continue reading »

In another unhappy turn for Pakistan, China’s president Xi Jinping postponed a state visit to the country on Saturday after three weeks of anti-government protests. Moody’s, one of the three big international credit rating agencies, warned this was a credit negative for the country because it would delay “Chinese aid and a host of deals between the countries”.

Such deals with China, Pakistan’s largest trading partner, are reported to be worth $34bnContinue reading »

By Andrew Colquhoun, Fitch Ratings

Does China invest too much? The country has been investing about 48 per cent of its GDP annually since 2010, which is unprecedented for any decent-sized economy, post-war. This investment is funded by a stock of leverage that will reach about 230 per cent of GDP in 2014 on Fitch’s estimate. Everyone has heard about the ghost towns and empty airports, leading some analysts to conclude China must be heading for a reckoning.

But you do not have to look far for evidence that China remains an underdeveloped country. Its rail network is only 13 per cent as extensive as Japan’s and only 64 per cent of its roads are paved, according to the World Bank. Almost exactly four years ago, one of the country’s main arteries, Highway 110, saw a 60-mile, 10-day traffic jam. Continue reading »