Day in day out, flows of negative news from China seems to be worsening.
China’s property ownership restrictions may partly have influenced the unfolding weaknesses in China’s real estate markets.
From Bloomberg,
Shanghai last year started limiting locals to owning two homes, while families among the city’s 9 million non-local residents were capped at one. Unmarried non-locals, who had been able to buy as long as they proved a year or more of tax payments, are now being frozen out altogether after the city toughened implementation of the curbs following Chinese Premier Wen Jiabao’s vow in July to “unswervingly” contain prices.
Chinese males are expected to own a home before they approach their would-be wife’s family for approval to wed. In rural parts of the country, parents extract most of the family’s wealth to build houses for their sons ahead of the marriage; in cities, securing an apartment is the equivalent.
New-home prices in China fell for nine straight months through May as government restrictions achieved the goal of cooling the market, according to SouFun Holdings Ltd. (SFUN), the country’s largest real estate website owner. In July, values bucked the trend, posting the biggest gain in more than a year, SouFun said Aug. 1.
“China’s property policies will definitely focus on those first-tier landmark cities,” said Alan Jin, a Hong Kong-based property analyst at Mizuho Securities Asia Ltd. “If all the current curbs are not working, the government may have to be more hawkish in the second half. Their bottom line is to stop prices from rebounding.”
After stricter implementation of its curbs, Shanghai’s new home sales fell 16 percent in July from a month earlier to 7,025 units, according to data from Century 21 China Real Estate, the country’s second-biggest property brokerage. Sales had surged 24 percent to 8,365 units in June, the highest in 17 months.
“The policies did have some impact on the market,” said Huang Hetao, Shanghai-based researcher at Century 21.
China’s second-largest city by population, Shanghai had about 23 million residents at the end of 2010, about 9 million of whom were non-locals, according to the nation’s statistics bureau. An influx of construction, information technology, and other workers almost tripled the cost of homes in Shanghai in the past 10 years, according to government data.
Foreign investors has also exhibited signs of apprehensions over China’s economy as reflected by the recently released figures on Foreign Direct Investments (FDI)
From another Bloomberg article,
Foreign direct investment in China fell to the lowest level in two years in July, fueling concern that waning confidence in the nation’s growth prospects may restrain any economic rebound
Investment declined 8.7 percent from a year earlier to $7.58 billion, the eighth drop in nine months and the smallest inflow since July 2010. The Ministry of Commerce released the data at a briefing in Beijing today.
Chinese financial institutions sold a net 3.8 billion yuan ($600 million) of foreign currency last month, indicating capital is flowing out as property curbs and weakness in exports slow growth and the yuan weakens.
China’s slowdown may extend into a seventh quarter after export growth collapsed in July and industrial production and lending missed economists’ forecasts. The nation reported a $71.4 billion capital account deficit in April-through-June, the biggest quarterly shortfall in data going back to 1998…
“In the second half, China’s foreign trade and export situation will be more grim, there will be more difficulties, harder tasks, and the pressure of achieving the full-year target will be bigger,” Shen Danyang, spokesman for the commerce ministry, said at today’s briefing. The country aims for 10 percent growth in trade this year.
Contrary to the traditional reactions where negative news would equate to negative sentiments as reflected on deteriorating markets, the constant flow of seemingly adverse developments have instead bolstered expectations of a soon to be implemented grand bailout from the Chinese government and or her central bank.
Such expectations are being fed by politicians, media and steroid starved asset markets participants.
From another Bloomberg article,
Chinese Premier Wen Jiabao said easing inflation allows more room to adjust monetary policy and positive signs are emerging in the economy, expressing confidence after July data showed a further slowdown in growth.
“We have the conditions and capabilities, and will be sure to fulfill this year’s economic and social development targets,” Wen said during a two-day inspection tour to the eastern province of Zhejiang, the official Xinhua News Agency reported yesterday. He said downward pressure on the economy remained “relatively large,” according to state radio, and state television reported him as saying there’s “growing room for monetary policy operation.”
The comments may bolster speculation China will cut banks’ reserve requirements or benchmark interest rates again after inflation slowed to a 30-month low in July, export growth collapsed and new yuan loans trailed estimates. Zhejiang, an export base, is among the hardest-hit regions by the economic slowdown.
China’s politicians have increasingly resorted to the talk therapy in attempting to manage the sentiments or the ‘animal spirits’ of the markets. Yet this, for me, are signs of the ongoing political deadlock as China’s election seasons nears and a highly fragile environment.
Promises have been meant to be broken is the convention when it applies to politics.
Thus relying on promises from politicians can be dangerous and costly to the health of one’s portfolio.
Be careful out there.
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