Newsletter 125 - July 31, 2022
Welcome to the 125th edition of Trade War.
China’s property market crisis is not going away
Is decoupling really happening?
Politburo meeting disappoints on economic policy
US-China ties sour further over Taiwan
Jeep pulls out of China. Foreign investors face record losses. And the latest Politburo meeting is cold comfort for companies hoping for an end to Zero Covid and an economic boost.
The U.S. Congress passes the $280 billion CHIPS and Science Act, with $52 billion for chip companies that set up shop in America. China cracks down on corruption in its semiconductor industry. Biden and Xi have fifth call amidst growing tensions over Taiwan.
And on a lighter note, in the Stand Up! podcast this newsletter author talks about how a home Zendō or meditation hall and book of Chinese philosophy, helped convince a Montana kid to pursue a career in China.
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‘The timing couldn’t be worse’
To begin, here are my quick thoughts on China’s serious housing market problems, a crisis which shows no signs of going away - from an interview (Swedish) I did with Dagens Industri’s Johan Nylander.
Q: The mortgage boycott and demonstrations outside banks are coming just months before Xi Jinping’s important party congress. Is this a political problem for Xi and the party?
DR: The timing couldn't be worse. Every party congress is a time of high political sensitivity and this particular one, the 20th, is even much more so given Xi's plan to stay on for an unprecedented third term.
Q: How do you think the government might react?
DR: The government will try to find ways to appease upset apartment buyers who are still waiting for their homes to be finished. There are already reports that officials may allow those Chinese with mortgages but still waiting for their apartments to be delivered, to temporarily stop monthly payments, without facing a hit to their credit rating.
At the same time Beijing is telling local governments to find a way to ensure cash-strapped developers get access to continued funding and so are able to eventually finish construction of the many apartments they have promised. The last thing the CCP and Xi need is an angry middle-class protesting as they move into the homestretch before the fall party congress.
Real estate market w/ 90% sales in unbuilt projects
And here is more on the unfolding property market crisis, from an interview I did with RFA Chinese’s Grace Guo.
Here is the text version (Chinese). Watch the video below, in Chinese but with my comments in English (with Chinese subtitles) extending well beyond the snippet here:
“I don’t think that a real estate market should be based on the fact that 90 percent of sales are happening in projects that have never been built,” I say to RFA Chinese.
“I think the government is right that they have to deleverage the property sector. And they have to start to, longer term, end this sort of implicit promise, that prices will continue to go up.”
Jeep pulls out of China
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