Charts This Week #2

Charts and links about China

We paused billing on RCC last week while we reorient the publication. A special thanks to all those who reached out to us to share their support for what we are doing.

---

Charts This Week #2

New homes sales of top 100 developers

A new lower low. Chart from WSJ¹

Local government debt continue to rise, ditto with interest payments

Growth in debt outpacing GDP (btw, should compare with nominal GDP as debt is nominal). Charts from Caixin²

Funding for real estate developers ended 2023 down 13.6%

Express mail volumes remain a bright spot

Well above the pre-pandemic 3-year trend. Very curious what the Gross Values are, whether total values are up with volumes or if only volumes are up (more small packages being delivered).

December cement output was the lowest since Dec-2009

Other down spikes are Spring Festival related.

Confidence & home price increases

Number of cities with YoY home price increases were 20 and 2 cities for new homes and 2nd hand, respectively. Does real estate need to recover for the stock market to turn?

Deflation

Caixin has a good piece on deflation and what can be tried about it.

Rhodium Group on China’s GDP and economy

Great analysis and charts, as usual.

The realities of a still-shrinking property sector, limited consumer spending, falling trade surplus, and battered local government finances mean that actual growth in 2023 was more like 1.5%.

We’ll share some charts here, but go read the full piece if you haven’t already.

Real estate investment

This chart shows the annual change in real estate investment (yoy, trailing 12 month). What’s notable is the high income provinces (blue) bottomed Feb/March of 2023, but medium income provinces continuously got worse and low income provinces may have just bottomed—we’ll see.

Government spending

2023 started with a modest rise in the targeted fiscal deficit, from 2.8% of GDP in 2022 to 3.0%. But falling property activity decimated local government revenues as land sales fell sharply.

If local funds are included in government spending, the year-on-year change has been negative all year.

Consumption

In January 2023, many analysts argued that Chinese consumers had built up savings and were ready to spend.

Not yours truly, by the way, see out pinned post: What’s behind high household net deposits.

In reality, the rise in household deposits did not reflect significant growth in actual savings, but rather households shifting away from risky wealth management products to safer but locked-in time deposit accounts, with most of these transactions occurring among a small share of high-income households. The bulk of Chinese earners faced slowing income growth from zero-COVID disruptions, the property crunch, a crackdown on high-growth technology employers, and weakening export manufacturing activity.

Yes. Many in China would like to get out of this slump and put recent experiences behind them.

Rather than increasing consumption, Chinese households were deleveraging in 2023. At the end of the third quarter, outstanding credit card loans contracted by RMB 130 billion compared to a year ago, and mortgage loans had declined by RMB 600 billion. The national decline in property values continues to weigh on household confidence.

This is the money chart in the piece, in our opinion.

"There are two kinds of disequilibrium: static disequilibrium, where both the prevailing dogma and the prevailing social conditions are rigidly fixed but quite far removed from each other; and dynamic disequilibrium, where both the real world and the participant’s views are changing so rapidly that they cannot help but be far apart." - George Soros

Question for you, dear reader: is China in disequilibrium in some way? If so, is it static or dynamic? Why or why not?

That’s all. We’ll be back after the Spring Festival break. Happy Chinese Near Year to you!

1. China’s Economic Pain Worsens as Real-Estate Sales Plummet | WSJ

2. China’s Local Governments Paid Record $174 Billion in Bond Interest Last Year | Caixin