This morning has brought us up to date with our leading indicator for the Chinese economy. So let me hand you over to the National Bureau of Statistics of China.
Second, the real estate market has become more active recently. All regions and departments have adapted to the new situation of major changes in the supply and demand relationship in the real estate market, implemented policies based on the city, actively adjusted and optimized real estate policies, and did a solid job in ensuring the delivery of houses to support rigid and improved housing demand.
You may note that house prices do not get a mention although the issue of activity could not be avoided.
In the first half of the year, the sales area and sales volume of newly built commercial housing in the country decreased by 19.0% and 25.0% year-on-year, respectively , and the decline rate narrowed by 1.3 and 2.9 percentage points compared with January – May ; the decline rate of newly started housing area and funds in place of real estate development enterprises also narrowed.
Is the change in the decline rate significant? You could easily argue it is only a minor change. At the end we do get something of a reference to house prices.
Of course, we should also see that current real estate-related indicators are still declining, and the real estate market is still in the process of adjustment and transformation.
The South China Morning Post was not so reticent.
The aggregate price of new homes across 70 cities on the mainland fell by 0.7 per cent in June from a month earlier…..June’s prices of lived-in homes dropped 0.9 per cent from a month earlier, at a slower pace than May’s 1 per cent, the data showed.
That is the thirteenth monthly fall and the annual rate of fall rose to 4.5%. We can stay with the SCMP as it then highlights why this is especially important.
The property sector and related industries such as home appliances and construction materials account for about a quarter of China’s economic output.
It was not so long ago that places were suggesting it was more like thirty per cent. But the central point is that the boom was a big deal in the Chinese economic story and thus so will any bust be.
Retail Sales
It is hard not to think of the factor above as we note this from the official release.
In June, the total retail sales of consumer goods increased by 2.0% year-on- year and decreased by 0.12% month-on-month.
We see an actual monthly decline and what is for China a very slow rate of annual growth.If we look for more perspective we see that in Chinese terms it was a disappointment overall in the first-half of this year.
In the first half of the year, the total retail sales of consumer goods reached 23596.9 billion yuan, a year-on-year increase of 3.7%
Whilst we need to note that retail sales is an erratic number the June reading will be a concern as it feeds into several economic themes. One is the central banking argument of wealth effects or in this case potential reverse wealth effects from the house price falls. This rather slides into the issue of domestic demand being insufficient as the previous effect makes it weaken further. That is associated with the issue below.
Mortgages
The previous situation was that you borrowed as much as you could because rising house prices were like a tide which floated all boats. But look at this from the SCMP on the 18th of June.
Celine Jiang, a university teacher in Guangzhou, is trying to sell her two-bedroom flat as quickly as possible to pay off the loan for a bigger unit she purchased at the end of 2022 for 12 million yuan (US$1.65 million).
I have presented this for a couple of years as a change in psychology and that could not be much clearer here.
“Like most ordinary Chinese people, I used to think housing prices and the economy would always go up. But now, the housing market has taken a sharp turn, and prices are continuing to fall,” Jiang said. “For me, the mortgage interest rate is too high, and I don’t have better investment options, so why not pay back the mortgage?”
The crucial point here is that repaying a mortgage is in the first instance a fade for the housing market but it also rolls into consumption as well.
A research note from Guotai Junan Securities on June 6 said that the nation’s early-repayment rate of mortgages hit a historic high of 37 per cent in April, reflecting residents’ rising interest in freeing themselves of the financial burden faster than they had planned.
Mortgages have gone from “free money” ( house prices rises will cover it) to a “burden”.
Inflation
Many around the world would welcome the price stability in China.
In the first half of the year, CPI rose by 0.1% year-on-year , and remained flat in the first quarter, with overall stable operation.
Chinese workers and consumers will welcome this bit in particular.
In the first half of the year, food prices fell by 2.7% year-on-year ,
Especially if they like these foods.
the prices of fresh fruits and fresh vegetables fell by 7.8% and 2.7% respectively , which together affected the CPI by about 0.24 percentage points; the prices of beef, mutton, eggs and poultry meat fell by 2.0% -9.9 % , which together affected the CPI by about 0.16 percentage points;
The only issue here is whether this is another signal of weak demand.
Comment
We can now switch to the economic growth figures.
From the perspective of economic growth, China’s GDP in the first half of the year was 61.7 trillion yuan, a year-on-year increase of 5.0% . For an economy of such a large size, it is rare to achieve a medium-to-high-speed growth of about 5% .
The words of the spokesman for the National Bureau of Statistics rather avoided the latest quarter leading to the next question opening with it.
The GDP growth rate declined in the second quarter.
Meaning we then did get some detail from the reply.
Judging from the situation in the second quarter, the GDP grew by 4.7% year-on-year, and the growth rate has slowed down compared with the first quarter.
In fact the quarterly growth rate was 0.7%. The sort of number the UK might produce which gives a perspective. But it is another slowing as we note the Chinese taking a guide from the playbook of us western capitalist imperialists.
extreme weather and frequent rain and waterlogging disasters.
But to my mind the spokesperson rather inadvertently reinforced my themes with this.
From 2013 to 2023 , the economy achieved a medium-high growth rate of 6.1% per year , ranking among the top major economies in the world, and its average annual contribution to world economic growth exceeded 30% . In 2023 , the total economic volume exceeded 126 trillion yuan, an increase of 92.4% over 2012 at constant prices , accounting for about 18% of the world economy , an increase of about 7 percentage points over 2012 , and firmly ranked second in the world.
The much slower rate now returns us to the theme sung about by The Vapors.
I’m turning Japanese, I think I’m turning Japanese, I really think soTurning Japanese, I think I’m turning Japanese, I really think soI’m turning Japanese, I think I’m turning Japanese, I really think soTurning Japanese, I think I’m turning Japanese, I really think so
Spain
Congratulations to Spain who had rather a triumph via the victories of Carlos Alcaraz and their football team.