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Dragonbeat is off this week, but will return with some thoughts on Tuesday October 27.

By Rosealea Yao and Tom Miller

Rosealea Yao is Dragonomics’ research manager and a guest contributor to Dragonbeat blog this week

Just how expensive are Chinese homes?

The standard measure of housing affordability compares average house prices with average household incomes. In developed country markets, prices are generally considered expensive if they exceed four times average annual household income.

The house-price-to-income ratio in most Chinese cities has been well above eight for years, and reaches an eye-watering 14 in the priciest cities. The cost of housing in China looks scarily high.

Yet China’s housing market continues to roar upwards. Despite the government’s best efforts to cool the property fever in 2007, the market adjustment that followed in 2008 now appears but a blip: house sales in the first half of 2009 matched the frenzied buying of 2007, and prices look set to follow.

By Tom Miller

China is rightly proud of being the home of tea, the world’s most popular drink. Celebratory cups of cha were sipped when China recently regained from India its historical position as the world’s pre-eminent tea producer and consumer after a 100-year hiatus.

But the country’s failure to produce a single internationally recognised tea brand is a source of frustration for cheerleaders of the native Camellia sinensis leaf.

Both at home and abroad, Chinese tea brands struggle to compete with foreign competitors. In China, Unilever’s Lipton brand has a market-leading share three times that of its closest local rival.

“Why is Lipton more powerful than 70,000 Chinese tea companies?” lamented a recent article in a Beijing newspaper.

By Will Freeman and Tom Miller

For years, China’s domestic carmakers have languished in their foreign competitors’ slipstream. Strip out the legion of blue trucks and white minivans that crisscross the hinterland, and Volkswagen, GM, Toyota and Honda are the vehicles of choice on the country’s 3.8m km of highway.

But sales of Chinese brands are accelerating: four out of every 10 cars bought in China in the first half of 2009 were domestic brands, led by BYD, Chery and Geely.

Dragonbeat is off this week, but will return with some thoughts on Tuesday September 8.

Dragonbeat is on a trip through the tea plantations of northern Hunan and will be off for two weeks, but will return with some thoughts on Tuesday August 11.

By Tom Miller

They may not be as sexy as their Martini-sipping namesake, but bonds are important. A properly functioning bond market helps allocate capital efficiently and allows central bankers to set appropriate interest rates.

But the stunted Chinese bond market has long been a weak link in China’s bank-dominated financial system.

Two years ago, when Beijing ditched a quota system that limited annual corporate bond issuances to Rmb100bn and required that all bonds be underwritten by state-owned banks, hopes were high that the corporate bond market would spark into life. The new regulations were expected to give a new funding avenue to listed companies with weaker links to the state, and provide all listed companies with access to cheaper credit.

After a good start, however, corporate bond issuances, or gongsi zhai, fizzled this year: issuance in the first four months was a round, fat zero.

But there are signs that the bond market is picking up elsewhere – namely under the guise of medium-term notes, or zhongqi piaoju. Mid-term note issuance reached Rmb280bn in January to April, 60 per cent more than total issuance in 2008.

Dragonbeat is off on a tour of the Pearl River Delta this week, but will return with some thoughts next Monday.

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